Carbon removals vital to address temperature overshoot, with 1.5°C remaining “off the table”.
Despite progress on climate policy, slow non-Organisation for Economic Co-operation and Development (OECD) action is dragging timelines and making carbon removals worth considering according to new research by Inevitable Policy Response (IPR).
IPR anticipates the world will overshoot on 1.5°C if climate change is addressed by policy alone, with its latest quarterly Forecast Policy Scenario (FPS) projecting a policy response having a 50% chance of delivering a 1.8°C outcome by 2100.
The climate transition forecasting consortium said that there are “many pathways to an achievable 1.5°C outcome by 2100” but the most likely involves a temperature overshoot that will require significant carbon removals to rectify unless policymakers take “drastic action now”.
One method of carbon removals highlighted by the IPR is direct air carbon capture and storage (DACCS), whereby carbon is removed from the air and either buried underground or used in chemical processes to create plastics or fuels.
The IPR described DACCS as an “ambitious” strategy, which has been criticised over its capital cost, energy and water demand, as well as the material and labour required for its construction.
However, Mark Fulton, Founder of IPR, told ESG Investor that DACCS could have a “significant impact” on carbon removals, and suggested that it could be a “game changer” for addressing climate change.
Waking up to DACCS
Fulton noted that “everyone’s suddenly woken up” to the DACCS. “It’s the word of the year, and I think it’s coming of age”. Due to non-OECD countries taking longer to hit net zero, 1.5°C “still remains off the table” according to Fulton, meaning carbon removal methods such as DACCS may be needed to address a temperature overshoot.
DACCS has the potential to remove up to 339 gigatonnes of carbon dioxide (GtCO2) and scale between 0 and 1.74 GtCO2 a year by 2050, with the IPR estimating that in 2050 carbon removals by DACCS will cost US$100-US$300 per tonne.
According to Fulton, DACCS development is still its “early phases” meaning that capital costs will likely fall as the technology scales and noted that the Middle East could use cheap solar to run DACCS and store carbon removals in oil fields.
Since DACCS extracts existing carbon from the atmosphere, in effect the technology can be used to remove past or historic emissions if deployed at enough scale, Fulton said.
“The OECD could tackle the contentious ‘equity issue’ between the global north and south by removing some of its historic emissions to create more room in the global carbon budget for developing countries,” Fulton said.
“Given China’s emissions levels, it could look to do the same. DACCS can be directly funded and controlled by governments, and we are looking at developing policy frame works around this idea.
“As much as possible governments will have to encourage scale up of DACCS and look at using it to tackle overshoot of 1.5°C as they push down hard on the demand for fossil fuels through policy,” Fulton added.
According to the International Energy Agency, governments and industry are “getting behind” DACCS, with commitments of almost US$4 billion made since the beginning of 2020 to fund initiatives.
The US Department of Energy has committed up to US$24 million for research into DACCS technology, while the UK government has provided £100 million of new funding for research and development of DAC technologies.
Fulton flagged that private and state-owned companies will “start to look at DACCS opportunities”, with private sector investment opportunities being presented by up to US$180 a tonne in carbon subsidies from the US Inflation Reduction Act (IRA).
There has been significant investment in CCS from the private sector, with DACCS one of four technologies being targeted for up to US$1.5 billion in investment by Breakthrough Energy Catalyst, a climate solution platform established by Bill Gates and a coalition of private investors, as well as being an eligible technology for the US$100 million Carbon Removal XPRIZE.
Four companies, including multinational clothing company H&M and financial services firm JPMorgan, are set to spend a collective US$100 million on carbon removal credits by 2030.
A further five companies, including Swiss bank UBS and insurer SwissRe, have agreed to buy almost 200,000 credits on delivery from 2025 through new Mitsubishi-backed group NextGen. The group will source credits from carbon removal projects including an in-development DAC facility from Occidental Petroleum’s subsidiary 1PointFive.
Private equity firm Partners Group also recently announced it would buy 7,000 credits generated by the start-up Climeworks’ DAC facilities.
However, Denmark’s minister for global climate policy Dan Jørgensen, told the Financial Times that CCS, including DACCS, should “not be seen as something we do instead of replacing fossils with renewables” and expressed concern about carbon capture becoming an “excuse” for not driving the energy transformation the world needs.
Developments “in line” with IPR outlook
IPR believes current policy supports its FPS outlook for a 1.8°C outcome, with Fulton noting the US IRA as an example of what the IPR has labelled the ‘Race to the Top in Clean Energy’. He also flagged the EU’s Fit for 55 package and Green Deal Industrial Plan (GDIP), noting that China remains committed on to its green industrial policy.
Fulton noted that GDIP and Fit for 55 establishing rules for the EU’s Carbon Border Adjustment Mechanism and reforms to the emissions trading system, represent key policy developments.
He also highlighted the US emissions standards for vehicles targeting two thirds of new car sales as electric vehicles by 2032, and India’s progress on its voluntary carbon market scheme as other notable policy developments.
“IPR forecasts a 1.8°C outcome and these developments are in line with that,” Fulton added. “Recent policy developments have put the world more on track for a 2050 Net Zero, although more can be done. Land use is critical, deforestation must end by 2030 and afforestation must start in earnest.”