Long-term agreement aimed at scaling up capture and storage capacity, while supporting net-zero operational emissions objective.
Swiss Re is to use carbon dioxide air capture technology as part of efforts to reduce its operational emissions to net zero by 2030.
The Swiss insurance group has signed a purchase agreement for direct air capture and storage of CO2, worth US$10 million over ten years, with Climeworks, also headquartered in Switzerland. Swiss Re is the world’s largest reinsurer and has US$110 billion in assets under management.
The firm removes carbon from ambient air in Iceland using geothermal energy, dissolves it in water and pumps it underground where it reacts with surrounding basalt rocks to form stable carbonate minerals. Climeworks’ operations were recently featured in an episode of the BBC radio documentary series ’39 Ways to Save the Planet’.
Swiss Re said the Climeworks deal was the world’s first such long-term agreement, which would provide it with “early access to the new carbon removal risk pools and asset classes”.
The companies also plan to develop risk management knowledge and risk transfer solutions, and will “explore future investment and project finance opportunities”.
Swiss Re’s plan to be net zero by 2030 follows a ‘Do our best, remove the rest’ approach which involves the use of a diminishing number of offset and removal solutions over the next decade, also balancing any residual emissions through removal after 2030.
Swiss Re currently uses multiple offset and removal services from a range of providers and aims to increase the share of removals in its compensation mix from 10% in 2021 to 100% by 2030. The firm has also set an internal carbon price structured to rise from US$100/t of CO2 to US$200/t by 2030.
Separately, the firm has targeted 2050 to achieve net-zero financed emissions by decarbonising its insurance and investment activities, partly through membership of the Net-Zero Asset Owners Alliance and Net-Zero Insurers Alliance, both supported by the United Nations. In March, Swiss Re said it would reduce CO2 emissions in its investment portfolio by 35% by 2025 and exit thermal coal insurance by 2030 in OECD countries and 2040 elsewhere.
Swiss Re estimated the price point for the Climeworks solution at “several hundred dollars per tonne of CO2 removed”, making it one of the more expensive options currently available.
“Larger, more economical air-capture and storage facilities can only be realised if customers are committed to long-term purchasing agreements. They guarantee a future revenue stream to the developers, making new projects fundable,” the firm said.
According to a recent Swiss Re Institute report, the insurance sector is well positioned to support the development of carbon removal and related climate solutions through long-term purchase agreements, by providing insurance capacity for evolving risk pools, and by investing in new asset classes.
The voluntary carbon market has so far struggled to provide credible and scalable offset and removal solutions, with a number of schemes adopted or planned by large corporates attracting criticism on grounds they delay investment in and transition to low-carbon processes.
In particular, investors have been advised to carefully scrutinise companies’ net-zero schemes that rely heavily on large-scale tree planting as these often create more problems than they attempt to solve. Alberto Carrillo Pineda, managing director of the Science Based Targets initiative, recently told ESG Investor that offset and removal schemes should be regarded as complementary to firms’ emissions reduction efforts, rather than an alternative.