BeZero’s Victoria Harvey looks at why companies are flocking to the nascent carbon removal sector
The climate case for carbon removal is made time and time again. By mid-century, a billion tonne-scale sector comprising both natural and engineered removal methods will be needed to meet the 1.5C climate target and prevent irreversible damage to both people and the planet. This mammoth task will require unprecedented financial resources to implement at scale, and the private sector must play a critical role in catalyzing and creating a market for engineered removals.
Carbon removal suffers from a chicken-and-egg problem. Funding is needed now to reduce costs and increase carbon removal supplies in the long term. But to do that, private companies must invest today in what is essentially a declining asset — one that will become cheaper over time as it develops. It’s not an easy sell. You wouldn’t expect a stock market investor to buy a stock whose value is expected to plummet over the next decade. Despite this, companies are flocking to participate. A question raised in a recent BeZero Carbon report, The first engineswhy?
First, early-stage investment can reduce the future cost of buying into this much-needed sector. These removal technologies need to be deployed to demonstrate success and accelerate their development to subsequently reduce costs. Investments now can contribute to this cost reduction, which is critical for some hard-to-reach industries, such as aviation, which will rely on these loans in the long term.
Second, investing in this nascent sector opens up new business opportunities. The removals market is developing, but the availability of credit and support mechanisms is currently limited. Therefore, companies that choose to help build this nascent sector by creating new offerings or tools that can help the market grow will reap financial rewards.
Third, recent public sector consultations in the UK and EU highlight the increasing likelihood of integrating engineering removal credits into existing regulatory markets. Participating in exports now can help align with regional regulatory requirements and proactively position investors as climate regulation emerges that includes more exports.
Fourth, with growing corporate commitments to voluntary standards such as the Science-Based Targets Initiative, investments can position companies ahead of these standards beyond minimum climate requirements. As with regulated markets, incorporating removals into voluntary standards is a future possibility, and investing now is a proactive opportunity to comply.
Fifth, investment is now entering the pioneering community that is developing the knowledge and niche networks that will be central to the future of this billion-dollar sector. The insights gained from the initial actions provide new social commercial benefits.
Finally, and importantly, action at this early stage positions investors as climate leaders in their sector and beyond. This is according to the BeZero Carbon survey 87 percent people are supported by businesses investing in carbon removal. Thus, there is a strong public relations opportunity to be exploited.
Some actors have already entered the role. Tech giants Shopify, Stripe, and Microsoft have become household names in the decarbonization space, creating new business propositions focused on decarbonization, reaping financial benefits and a host of other commercial opportunities. Airbus leads the aviation sector thanks to major credit purchases earlier this year. Klarna, Swiss Re and Bank of Montreal are blazing a trail in the financial sector.
But despite the existing pioneers of carbon removal, the industry needs to see a further influx of demand if it is to scale billions of tonnes of carbon removal from thousands of tonnes today. So there’s room for many, many other actors to take on that role and benefit.
Whether it’s investing, embedding or borrowing, getting involved in carbon removal now, at this early stage, provides commercial opportunities. The challenge of scaling carbon removal is enormous, but the climate crisis is not going away. Carbon removal is a climate imperative, and opportunities are available for those brave enough to move first.
Victoria Harvey is a Carbon Removal Analyst at BeZero Carbon