Is It Time for Carbon Removal?

Each year, humans emit around 35–40 billion metric tons of CO₂. Over the past few decades, a lot of effort has gone into slowing down that output. But slowing it down might not be good enough. Now, hundreds of companies are trying not just to sequester that carbon but to remove it from the atmosphere entirely.

What’s Happening with Carbon Removal?

Innovation is occurring across all fronts, including technology, funding and investments, and major project developments.

Beginning with the technology side, biochar and bio-oil show lots of promise. Biochar is a soil enhancer that, when added to earth, removes CO₂ from the atmosphere and locks it up for several decades. Bio-oil works similarly.

Natural strategies like tree restoration and agricultural soil management are also gaining steam, as are hybrid strategies, like enhanced root crops. Other nature-based carbon removals include things like reduced emissions from deforestation and degradation, reforestation, and regenerative agriculture. Far-off practices like ocean-based carbon removal could have a future, too.

One of the more exciting technological developments is in direct air capture, a category that includes processes designed to absorb and lock up CO₂ from the air. Direct air capture is a broad term, and there are various technologies under this umbrella. Even though numerous companies work in this space, the methods they use are based on slightly different approaches.

Carbon Engineering, for example, employs liquid solvent technologies using hydroxides. Climeworks and Global Thermostat focus on sorbent amine and temperature swing technologies. Early-stage technologies like electric swing sorbent processes, moisture swing sorbent processes, and other ionic and electric-chemical processes are coming from companies like Mission Zero, PSI, Infinitree, and Carbon Collect.

Direct air capture is a very young technology, and despite its undeveloped economics, it has drawn the support of the U.S. government.

The Economics of Carbon Removal

The Inflation Reduction Act (IRA) includes provisions to purchase carbon removal credits at $180 a cubic ton, which is more than the current market rate of $85 for carbon capture and storage but less than the break-even point for many carbon removal companies. Right now, costs for those companies can range between $500 and $700, although those prices are expected to come down as the technology matures and more projects come online. Outside the U.S., the Norwegian government is looking at a reverse tax credit for direct air capture for around 2,000 Norwegian krona per ton of CO₂. That’s about 180 euros, or around $200 a ton.

Clearly, the economics need to mature, and one or two project developers have put out some very detailed numbers of cost breakdowns from their pilots and demonstration projects. The first iterations are quite expensive, but as these companies move forward, the expectation is for costs to fall by between 20% and 40% from those initial figures.

In addition to the Biden administration’s IRA legislation, the U.S. Department of Energy has set aside $3.5 billion to develop four direct air capture hubs in the United States, the first of which has been announced for Louisiana. Another is likely headed to the Permian Basin. This sort of project work marks the second important innovation to watch in the carbon capture and carbon removal space. As more large-scale projects come online, the costs for developing and operating the technology will come down.

What’s Funding Carbon Removal Technologies?

Voluntary carbon credit markets are another recent innovation. The lion’s share of the capital for carbon removal comes from compliance markets and government investment, but a surprising amount is coming through voluntary markets. These markets are growing quickly because many notable companies want to quickly hit their own net zero carbon goals, and they’re willing to work with carbon capture, storage, and removal organizations to achieve them. The list of organizations paying for carbon credits includes Patch, Microsoft, Shopify, Stripe, and Zendesk.

There are three different ways these companies can fund carbon removal projects. They can turn to brokers, resort to marketplaces, or make direct payments to the climate removal companies. The last of these methods is becoming popular.

The biggest purchasers in the carbon removal market used to be brokers like Bluesource, South Pole, 3Degrees, or Evolution Markets. These days, some of the biggest purchasers are the marketplaces themselves. Companies like Patch, Puro.earth, Pledge, Single.Earth, and Nori buy up these voluntary credits and pass them on to customers through marketplaces. The total volume in the voluntary market is only $1 billion a year, but that could grow to $10–$25 billion by 2030.

Even though the voluntary markets are small compared with compliance markets, the amount of innovation in investing and project development makes it an interesting area. These voluntary markets will probably become high growth and involve several companies, making them highly investible as well.

Taken in their totality, these three elements of innovation — project developments, technology developments, and the voluntary markets — serve as good indicators of where the market for carbon removal is headed.

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About Michael Blakemore

Michael Blakemore is Owner and Director at his own consultancy, Michael J. Blakemore. Michael has more than 25 years’ experience in the energy, resources, chemicals, and infrastructure sectors, and his recent energy transition projects include carbon capture and storage, direct air capture, blue hydrogen (SMR, ATR), and turquoise hydrogen (pyrolysis). Previously, Michael was also a Senior Advisor at Westwood Global Energy Group; Director, Global Advisory at KBR; and Senior Advisor at Boston Consulting Group. Michael also has operational experience with BP and ExxonMobil in refining and specialties operations as well as supply, sales, marketing, and trading.

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This article is adapted from the GLG Teleconference “Carbon Removal Technologies and Markets.” If you would like access to this event or would like to speak with experts like Michael Blakemore or any of our approximately 1 million industry experts, contact us.