Is Carbon Capture The Next Trillion Dollar Business?

The ‘big thing’ in investment circles and financial markets is currently the gradual international legalisation of the cannabis. But there is a growing school of thought that there is another new industry that could be worth far more – carbon capture. Global warming is accepted by the scientific community as nearing the point of no return and stopping it reaching tipping point can be strongly argued as the greatest challenge to have faced the modern history of humanity.

It is calculated that stabilising the global climate means an atmospheric concentration of carbon dioxide at no more than 350 parts per 1 million. But this year we have already hit 410 parts per million (ppm). Which means there is already too much carbon dioxide in the atmosphere. And despite a belated attempt to mobilise the international community, the short term financial interests of some actors means that the kind of unity a genuine and sharp drop in emissions would require looks increasingly unrealistic. Emissions are, in fact, still rising.

Even if some parts of the world, particularly Europe, are managing to reduce their harmful emissions, they are rapidly increasing elsewhere – particularly from large, developing economies where growing middle classes are reaching comparable levels of consumption as in developed economies. China is now taking steps to reduce its pollution levels, a real problem with the air quality in its big towns and cities among the worst in the world. But there are doubts how much that is a genuine commitment to a broader move to lower emissions and how much is simply moving things around in an attempt to improve air quality in densely populated regions and create some good PR in international circles. The U.S. is regressing under the climate change-denying Trump administration.

The long and short of it is that CO2 emissions are still rising, not falling. And if there is to be a solution it will be one realised through new technology advancements. And not only new technology that reduces emissions. There is not a single model used by the Intergovernmental Panel on Climate Change (IPCC) that offers hope that achieving a safe level of atmospheric carbon dioxide concentration can be achieved by reducing global emission levels alone. And, as we’ve seen, there is little realistic hope of that being achieved.

So what is the answer? It looks like we’re going to have to develop technology that is capable of sucking CO2 out of the atmosphere. And a lot of it. Models created by the IPCC are based on different emissions scenarios – more significant drops relatively quickly to less significant drops taking more time to be achieved. But the closest estimate by consensus seems to be that to avoid global temperatures rising by more than 2C, 800 gigatons of CO2 emissions will need to be avoided over the next 30 years. In the most optimistic models for the extent and pace or reductions, we will still have to suck between 120 and 160 gigatons of CO2 out of the atmosphere by 2050.

An article on the topic published in VOX puts that volume of CO2 into context:

“by 2030 humanity needs to be compressing, transporting, and burying an amount of CO2, by volume, that is two to four times the amount of fluids that the global oil and gas industry deals with today”.

Source: priceofoil.org

Within a decade, infrastructure and systems on two to four times the scale as those of today’s oil and gas industry, need to be in place to handle the volumes of CO2 that need to be sucked out of the air. The biggest obstacle to that happening is that no one pays anyone to suck CO2 out of the atmosphere. There’s no business model and without an economic incentive it’s difficult to see how the technologies to make the process more efficient and cheaper will be developed.

We’ll have two choices of what to do with the carbon captured. One is to dispose of it safely in the way we do with other ‘waste products’ – most likely underground in saline aquifers. The process of carbon capture and underground ‘sequestration’ is referred to by the acronym CCS. The other is to convert carbon dioxide sucked out of the air into useful carbon-based materials. It’s the latter that could prove to be big business in future years as well as offering the business model needed to get a colossal industry moving. But if companies operating carbon capture technology were able to sell the carbon captured – there’s hope. And carbon is a potentially valuable commodity.

Uses of Carbon Dioxide

There are quite a few products that use or are based on CO2 including fuels, carbonated beverages and feedstock in industrial processes. Currently, these industries use CO2 that is a byproduct of fossils fuels processes. So contribute to atmospheric CO2 levels. But there is no good reason why they couldn’t, instead, replace that with CO2 sucked out of the air. The term for using carbon sucked out of the atmosphere in products and processes is CCU – carbon capture and utilisation. Some ways CCU carbon is used are long term – such as using it in bricks that buildings that could last over 100 years are made from. Others, such as using it in new biotech fuels, are shorter term. But even the uses that again see the carbon released back into the atmosphere relatively quickly mean that new carbon is not being taken out of the ground and adding to levels.

Source: Royal Society

CCU is not a silver bullet to the emissions problem. Unless the industry explodes taking demand with it, CCU demand will be limited in a way that will leave plenty of carbon to be sequestered underground. But some estimates still put it as a new sector that could be worth $1 trillion by 2030.

Investment In Carbon Capture

It’s still early days for a future CCU industry but there have been several recent significant investments made in start-ups in the space. Mining giant BHP has this month taken a ‘strategic stake’ in Cemvita Factory, a Houston-based start-up developing biotechnology designed to improve the metabolic capacity of environmental-friendly photosynthetic microorganisms for CO2 utilisation. These microorganisms may also be used for different purposes including the treatment of heavy metal or acidic contamination, utilising and sequestering carbon dioxide in the process.

Earlier this year BHP also made a $6 million equity investment in Canada’s Carbon Engineering Ltd. Carbon Engineering are behind the development of Direct Air Capture, which removes carbon dioxide directly from the atmosphere. The entire round saw Bill Gates-backed CE raise $68 million from investors.

Source: World Coal Association/FT.com

The coal industry more broadly has been one of the biggest investors in CCU technology. Coal21, an industry body, has recently announced a $360bn investment from its members into developing carbon capture technology that will capture CO2 emissions at source as they are produced at coal power plants. The World Coal Association describes the technology as showing:

“a proven 90 per cent capture rate of the CO2 produced from the use of fossil fuels in electricity generation and industrial processes”.

There is criticism that the cost of introducing such technology into coal power plants makes them more expensive that renewable energy alternatives so defeats the purpose. We won’t get into that argument here but the investment that ‘dirty’ industries are making into carbon capture technology will hopefully lead to developments that will benefit a future CCU industry.

 Julio Friedmann, a researcher with the Centre for Global Energy Policy and founder of Carbon Wrangler, a consultancy advising carbon capture start-ups, is quoted in the Financial Times as saying:

“Three years ago, people were like, you are investing in pixie dust and unicorns. It has changed because companies now recognise that climate change is a threat, and they see this as an essential mitigation tool”.

Swiss start-up Climeworks already has 14 carbon capture plants in operation around the world and has raised over $50 million from investors. The company’s founder has stated his ambition is for Climeworks to capture 1% of all global emissions and that “for that we need a lot of capital”. Presumably, bigger investment rounds are on the horizon. Another company in the space, New York-based Global Thermostat, previously raised $42m in three rounds from 2010-17 and is now in the middle of a new $20m fundraising round. Investment is coming into the industry and its flow is increasing.

It’s still early days for the CCU industry but expect it to be a sector that gains increasing coverage, and investment, over the next few years. One big Silicon Valley deal could be enough to burst the dam. And if CCU really is an industry that could be worth $1 trillion by 2030, a ground breaking investment deal won’t be long in coming.