Written by Peter Henderson, Susannah Tweedale and Simon Jessop
SAN FRANCISCO/LONDON (Reuters) – Demand for credits reflecting the artificial removal of carbon dioxide from the atmosphere will rise as market-friendly incentives draw buyers from sectors as diverse as technology, finance, chemicals and aviation. In some cases, the number is expected to increase sharply.
Many scientists believe that using nature and technology to extract billions of tons of carbon dioxide (CO2) from the atmosphere each year is an option set out under the United Nations Paris Climate Agreement to curb climate change. I believe it is the only way to achieve my goals. It's happening fast enough.
To address this challenge, small startups are introducing new technologies to absorb global warming gases and generate tradable carbon removal credits that companies can purchase to offset their emissions. It's in the early stages. So far, it has taken years to roll out and costs much more than traditional methods of generating credits, such as projects that protect forests or finance renewable power projects.
Despite skeptics' claims that carbon removal could encourage companies to continue polluting and is unlikely to scale up anytime soon, the U.S. Inflation Control Act has helped boost the market through tax incentives. It aims to accelerate financially and attract buyers from various sectors. The European Commission is also proposing a framework for certifying carbon removal produced in Europe.
According to data from industry tracker CDR.fyi, approximately 4.6 million tonnes of credits were purchased from various engineered removal projects in 2023, of which approximately 118,000 tonnes were delivered and received certification from external certification companies that carbon has been removed. Checking shows that it was backstopped.
So far, a small group of companies have created standards for evaluating credit. Companies like Nasdaq-owned market leaders Puro Earth and Isometric are hoping to give buyers more confidence in their investments.
“We need a reliable monitoring, reporting, and verification system that generates high-quality carbon removal credits…This will increase the speed of private investment and It's a way to bring out scale.” Carbon 180.
According to CDR.fyi, the majority of credits provided in 2023 (approximately 93%) will be for biochar, a scientifically simple method to reduce carbon emissions by converting agricultural waste into charcoal. It is a simple process, and most of the certifications are provided by Puro.
Puro now plans to set standards for more exotic man-made techniques, such as “advanced weathering” of rocks to help absorb carbon and the use of chemicals to suck carbon out of the surrounding air. . Meanwhile, Isometric has done something similar with its “bio-oil,” which turns waste into a liquid that can be injected into the ground.
Overall, Puro currently accounts for approximately 80% of certified artificial removal credits. Officially recorded waste when credits are used to offset a company's emissions almost doubled to 65,026 tonnes in 2023.
CEO Antti Vihavainen said Puro expects to reach 400,000 certifications this year. “Over the next three years, the compound average growth rate will be 100%, or close to 100%,” he said.
Companies that will phase out the credit in 2023 include German chemical company Bayer, Finnish airport operator Finavia, Microsoft, Swedish telecoms company Telia and US financier JPMorgan, according to Puro data.
high cost
Big technology companies have paid more than $1,000 per tonne to help grow the market, such as for more nascent “direct air capture” (DAC) technology, but prices remain too high for many buyers. It is.
Biochar credits are cheaper at about $140 per ton, while bio-oil credits cost about $600 per ton. Both are more expensive than traditional carbon offsets, which represent emissions reductions from projects such as renewable energy, and can cost less than $10 per ton.
Some see the regulator's involvement as a sign that the carbon removal credit market can survive.
“Given the structure of the IRA and other regulatory proposals under consideration, this is a good sign that investments in carbon removal will be made,” Taylor Wright said. It should help support.” He leads JPMorgan Chase's carbon management team and purchases Puro certified credits.
Peter Reinhardt, CEO of Charm Industrial, which turns agricultural waste into bio-oil, said he was also seeing more buyers participate.
“It definitely started in technology and then moved into finance, and we're seeing it expand a little bit into air travel and some other industries,” said Reinhardt, who works with Isometric. Ta.
For example, German-listed airline Lufthansa announced last month that it had entered into a long-term strategic partnership with direct air recovery project developer ClimeWorks, but did not provide details of the deal value.
Bill Goldie, senior carbon advisor at environmental markets group Redshaw Advisors, said airlines were likely to remain a small market for artificial removal for now.
“Typically in compliance markets, large emitters seek to comply at the lowest cost, so it is unlikely that airlines will seek to use artificial removal to meet all their requirements,” he said. Ta.
(Edited by Anna Driver)
