NZAOA Calls for Asset Owners to Finance CO2 Removal Technologies

Investment must be accompanied by further efforts by policymakers to resolve barriers to carbon pricing. 

To successfully mitigate the effects of climate change and align with a 1.5°C temperature pathway, asset owners must rapidly invest in carbon dioxide removal (CDR) and negative emissions solutions. This is according to a new position paper published by the UN-convened Net Zero Asset Owner Alliance (NZAOA).

CDR and negative emissions technologies offer important solutions for capturing any carbon emissions already in the atmosphere and future emissions that cannot be prevented between now and 2050, NZAOA said.

These solutions need to be “scaled massively and rapidly” in order to achieve the NZAOA’s recommended global removal of 0.5-1.5 gigatons (Gt) of CO2 every year by 2025, and 6-10Gt per year by 2050, compared to global emissions of 42Gt of CO2 in 2020, the paper noted. This requires investment in companies working on solutions, the paper added.

“Investment in these solutions, both integrated into and external to production processes, needs to reach much higher levels,” said Günther Thallinger, Board Member of Allianz and NZAOA Chair.

Currently carbon capture, utilisation and storage (CCUS) technologies are being developed and used by companies, but have yet to be grown at scale.

At the end of this year, the European Commission will be publishing a policy paper on the sustainable management of the carbon cycle, which will outline a certification scheme to encourage negative emissions from carbon-intensive industries.

However, the NZAOA also warned that investors and asset owners should not “over-emphasise” the role of negative emissions when supporting net-zero 1.5°C pathways compared to the overall reduction of emissions in and outside of value chains. They should be careful to not perpetuate “a carbon-intensive global economy”, the paper said.

Nonetheless, by ensuring investee companies are measuring and reporting generated emissions and methods used to remove emissions, asset owners should be able to “track progress against their net-zero goals and ensure accountability such that the employment of CDR does not deter or detract from decarbonisation efforts and/or ambition on a wider scale”, the paper said.

Policy prioritising carbon pricing

Asset owners also require strong policy support to ensure the continued development of CDR, negative emissions technologies and carbon markets, the paper added.

Ahead of COP26 in November, the NZAOA has called on policymakers to provide further support and financial incentives through carbon pricing, subsidies or tax rebates. “Carbon markets need to be scaled up and quality of carbon credits must be ensured,” Thallinger noted.

Policymakers are already doing work towards introducing carbon pricing. For example, the European Commission’s long-awaited proposal for an EU carbon border adjustment mechanism (CBAM), which would impose a carbon price on imports, was published as part of its ‘Fit for 55%’ climate action strategy.

Barriers to effective carbon pricing need to be addressed as a matter of “priority” by policymakers, NZAOA noted, adding that it would continue to support voluntary carbon markets, which nonetheless require a “significant quality boost”.

The Voluntary Carbon Market Integrity (VCMI) initiative has proposed guidelines on companies’ claims around the voluntary purchase of carbon credits, but also calls for further support from policymakers in this area.

This follows an NZAOA discussion paper in July which proposed a hybrid “carbon-pricing corridor” scheme between emissions trading and carbon taxes or levies. This would provide companies and investors with more certainty as to future price levels of carbon, thus creating a more stable environment for entrepreneurs, consumers and other stakeholders to adopt and develop low-emission technologies.

“We believe that the ‘incentives + mandate’ approach must also be applied to the development of CDR technologies and deployment of nature-based solutions,” said Thallinger.

With over 40 members representing more than US$6.6 trillion in assets under management, members of the Alliance have committed to net-zero greenhouse gas (GHG) emissions by 2050, and interim carbon reductions for their portfolios every five years.

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