Climate change fears spur investment in carbon capture technology – Financial Times
In the foothills of the Swiss alps, a giant set of industrial fans whirring loudly on the roof of a waste incinerator hardly resembles an invention that could save the planet.
But these machines — designed to pull carbon dioxide out of the air — have become one of the hottest areas of climate-related investment in recent months.
Venture capital groups and global resources companies including BHP Billiton, Chevron and Occidental Petroleum, have poured tens of millions of dollars into “direct air capture” technology this year, at a time of growing concern over climate change.
While the exact technology varies between the three start-ups that are operating these DAC facilities, they all share the basic concept of giant fans pulling air across a contact surface that binds with the CO2 molecules. The contact material is then heated to unbind the CO2, so that it can be collected.
The trio of start-ups have attracted more capital and attention since global emissions hit a new high last year, despite the high cost and limited commercial markets for the technology.
“Three years ago, people were like, you are investing in pixie dust and unicorns,” said Julio Friedmann, a researcher at Columbia University’s Center for Global Energy Policy and founder of Carbon Wrangler, a consultancy that advises DAC start-ups.
“It has changed because companies now recognise that climate change is a threat, and they see this as an essential mitigation tool,” Mr Friedmann added.
Last Thursday, Canada-based Carbon Engineering, backed by Microsoft co-founder Bill Gates, closed a $68m fundraising round, with investors including BHP, Chevron and First Round Capital.
In Switzerland, DAC start-up Climeworks has raised a total of SFr50m ($50.1m) and has 14 plants operating around the world.
Jan Wurzbacher, its co-founder, has lofty ambitions. “Our vision is to capture 1 per cent of global emissions. That requires a lot of capital,” he said.
Meanwhile, New York-based Global Thermostat, which previously raised $42m in three rounds from 2010-17, is in the middle of a new $20m fundraising round.
The chemical process to extract CO2 is not new — it was even used during the second world war where CO2 scrubbers helped maintain breathable air in the confined space of submarines. However, as an environmental strategy, the concept of DAC was largely dismissed until recently, largely because of the cost of building the machines and the energy required to run the process.
Now, an increasing number of scientists believe pulling CO2 out of the atmosphere — once considered an improbable long-shot — will be part of the answer for limiting global warming.
“Our ignoring the climate change problem for so long has eliminated our other options,” said Klaus Lackner, a professor at Arizona State University and director of the Center for Negative Carbon Emissions. “The problem, left to itself, only gets bigger.”
Last October a report from the UN Intergovernmental Panel on Climate Change found that some form of CO2 removal would be needed to limit global warming to 1.5C compared with pre-industrial times, even if the world started cutting emissions immediately. It forecast that between 100bn-1,000bn tonnes of CO2 will need to be removed during this century.
However, the report is not optimistic that this will happen.
“CO2 removal deployed at scale is unproven, and reliance on such technology is a major risk in the ability to limit warming to 1.5C,” it said. The level of CO2 removal that the UN panel forecast (at the midpoint of 550bn tonnes) is equivalent to more than a decade’s worth of CO2 emissions at today’s levels.
While there are many ways to remove CO2 from the atmosphere — including planting more trees, storing carbon in soils or the ocean, and capturing the CO2 produced by burning wood — DAC has the advantage of taking up less space than other options.
The most common way of capturing CO2 has been at its source, for example, by scrubbing it out of the flue gas from a power plant. This reduces emissions but does not lower the level of the gas in the atmosphere.
But even as more funding flows into direct air capture start-ups, the technology is still far from mature.
“The challenge is cost,” said James Mulligan, an associate at the World Resources Institute who specialises in negative emissions. “We need better materials, better system designs, we need to innovate across the whole thing.”
The process also requires energy — scrubbing just 1 per cent of man-made CO2 from the atmosphere would use the equivalent of 7 per cent of all US energy produced in 2050, according to WRI calculations.
Even more problematic is the fact that there is a limited market into which to sell the CO2 that is produced by these plants.
At present, customers for CO2 include bottling plants that use it for fizzy drinks, and greenhouses that use it to help plants grow faster. But in both cases that CO2 ends up being re-released into the atmosphere, cancelling out the climate benefit.
To reduce atmospheric CO2, the captured CO2 would have to be permanently stored underground, or sequestered — and someone would have to pay for that.
“I’m certain that we will always need a public subsidy to do this,” said Mr Mulligan of WRI. “If you do it at scale, you will have to start pumping it underground, that is not a commodity that anyone will want to buy.”
Another possible market for the captured CO2 is to convert it into synthetic fuels, similar to gasoline — an approach that is being pursued by Carbon Engineering. It takes a lot of energy to convert CO2 into a synthetic fuel, but the process can be powered with renewable energy.
“Think of it as you are converting energy from sunlight or wind, and putting it into liquid fuel,” said Steve Oldham, Carbon Engineering chief executive. “You need twice as much energy from the sun or the wind as is contained in the liquid fuel . . . but you are still ahead of the game.”
Despite the challenging economics of DAC, its enthusiasts point out that if there is a global policy move to reduce the level of CO2 in the air, this technology would suddenly be in high demand.
“We will really end up needing 20 or 30 companies all the size of Royal Dutch Shell if we have to pull 5bn-10bn tonnes out of the year [annually]. We need an industry the size of the oil and gas industry, that works in reverse,” said Mr Friedmann.
From the perspective of the fossil fuel industry, DAC also has the potential to allow them to preserve their core business of selling fossil fuels while meeting climate commitments.
BHP, the mining company that recently invested $6m in Carbon Engineering, said that “significant change is required” to meet climate change goals, including CO2 removal measures.
“The time for saying this solution or that solution has gone,” said Fiona Wild, vice-president for climate change and sustainability at BHP. “Given the scale of the challenge, we need all solutions on the table.”
Graciela Chichilnisky, founder of Global Thermostat and a professor of economics at Columbia University, said that direct air capture was one of many elements that are needed to address the rising level of CO2.
“You cannot just continue throwing CO2 into the atmosphere and hope that direct air capture is going to clean it. No,” she said. But added “we are running out of time” and pointed to the recent IPCC report.
The technology is still so immature that many believe the type of DAC technology which ultimately wins out could be very different from the systems being tested today.
“It’s not like, which of these three start-ups is going to win,” said Mr Mulligan. “The technology that scales may look very different from what these companies are doing.”
Start-ups hindered by costs
Bringing down the cost of direct air capture is the biggest challenge facing these start-ups right now, although the exact cost varies between the trio.
For Climeworks, at present it costs about $600 per tonne of CO2 extracted. The company said it would lower that cost to $200 within three or four years.
Meanwhile, a research paper last year based on Carbon Engineering’s technology, found the cost of removal could theoretically be between $94 and $232 per tonne — if the technology is built on a large scale.
“On a cost basis . . . it is hard to know who is ahead,” said Carbon Wrangler’s Mr Friedmann. “The companies all say they can get to below $200 a tonne by 2025.”
The start-ups believe that once the cost of removal comes down, governments will introduce climate policies that will help pay for the process.
One example of how this can work is in California, where the combination of the state’s low carbon fuel standard and a federal carbon capture credit, together create an incentive of about $200 per tonne of CO2 captured. However, no commercial plants have yet been built there.
Mr Wurzbacher at Climeworks said that scaling up their manufacturing process — which currently involves assembling the CO2 collectors by hand in Zurich — will bring down costs dramatically.
“Our guess is that the cost and policy curve will intersect at around $100-$150 per tonne,” he said, explaining that he expects policies to support carbon sequestration at that price.
In the short term, however, before those policies are in place, the niche market for CO2 used in fizzy drinks is the place where several of these companies are getting their start.
Climeworks sells some of its CO2 to Coca-Cola in Switzerland, where it is used to make carbonated water, and Global Thermostat is inking a similar deal with a bottling plant in Mexico.
“Food and beverage is an entry market,” said Mr Wurzbacher. “But it will never reach a global scale that is climate relevant.”