Why is Big Tech Investing in Carbon Removal?

Published on: 29 June 2022
by KnowESG
GettyImages 1186605531.0

The carbon removal sector is fast expanding, and private money is flowing in from tech giants looking to help early-stage carbon capture and storage startups scale up and reduce prices.

The funding surge comes as the Intergovernmental Panel on Climate Change reiterates the need to remove billions of tonnes of carbon dioxide from the atmosphere, emphasising that emissions-reduction efforts alone will not suffice.

Nan Ransohoff, head of Climate at Stripe, an online payments company that’s invested millions in carbon removal technologies, said: 

"We have to do emissions reduction at a massive scale, at a massive pace period. Full stop. Unfortunately, because we’ve done such a poor job with that to date, we are now also going to have to do carbon removal."

Carbon removal is the process of storing previously emitted carbon dioxide. This is not the same as absorbing smokestack emissions or recycling carbon to create transitory products such as fizzy beverages, polymers, or fuels. Planting trees is one approach, but experts argue it is insufficient to combat climate change.

Stripe joined forces with Alphabet, Meta, Shopify, and McKinsey in April to create Frontier, a project that aims to purchase $925 million in carbon removal by 2030 from emerging carbon removal companies to expedite research and development efforts and cut costs.

The technical options for permanent carbon removal vary greatly, from sucking CO2 from the sky with gigantic fans and injecting it into rocks to changing the pH of the ocean to allow it to absorb more carbon from the atmosphere. 

However, regardless of technique, some subset of these technologies will almost certainly need to scale up swiftly to keep global warming below 1.5 or even 2 degrees Celsius in the coming years.

Eric Toone, technology lead at Breakthrough Energy Ventures, which has made numerous investments in the carbon removal space, said: 

"The scale at which these are going to have to be built out almost defies comprehension. To capture something like 30% of emissions in 2050, you’re talking about building an industry that’s three times to five times larger than the global petrochemical industry today.”

Climeworks and Carbon Engineering are two of the most well-known direct air capture enterprises. They extract CO2 from the air using massive fans and complicated chemical processes or filters. However, there has been no motivation to simply bury that carbon until lately, so they have had to sell it into various markets.

For example, Carbon Engineering has marketed its captured CO2 to oil and gas corporations for "improved oil recovery," which involves injecting carbon dioxide underground to retrieve more oil from petroleum wells. The carbon is trapped, but because the process generates additional oil to burn, it virtually never results in negative emissions and hence is not termed "carbon removal."

It's a great time to be in this industry, but early-stage investments by tech companies and others will only go so far.

“There’s no doubt that if we’re going to do this to try and address climate change, eventually we’re going to have to just capture this CO2 and pump it into the ground and store it for eternity. And to do that, we need carbon markets,” said Toone of Breakthrough Energy.

Approximately 40 countries and over 20 cities, states, and provinces have some sort of carbon pricing, but in many instances, these prices are too low to stimulate carbon removal, even if these enterprises were functioning at scale.

Many business executives expect that the United States will create a federal carbon pricing plan and boost the present tax credit for carbon storage, which is around $35 per tonne of geologically sequestered CO2 and approximately $22 per tonne of CO2 used in a product such as concrete.

Carbon removal does enjoy bipartisan backing in Washington, and the Department of Energy has just initiated a $3.5 billion programme to create four direct air capture centres around the United States, each of which is designed to permanently remove over 1 million tonnes of carbon dioxide per year.

“I think that government management of a market that prices carbon in a way that results in its removal happens when people decide that it’s cheaper to deal with the CO2 than it is to deal with the consequences of the CO2,” said Toone. “And there is absolutely a growing awareness of exactly what the costs of that carbon are.”

Source: CNBC

For more company-related news