Talks of “Carbon Pricing” have been going on increasingly over the past decade. The impact of our greenhouse gas emissions on our planet is increasingly apparent, and the environmental and social are impacts increasingly dooming. The fact of the matter is, at present, Carbon emissions and their consequences - or externalities if we want to use the correct terminology - are incorrectly priced, and this lack of pricing is driving the lack of action against Carbon emissions.
“If economists ruled the world, carbon prices would drive most of the action on climate change.” - The Economist, 23/05/2020
However, carbon pricing is increasingly being introduced by public policy around the world. There have been multiple attempts in the US to introduce carbon taxes over the past twenty years, bills that were introduced and championed across the aisle by Democrats and Republicans, however, they all failed after extensive lobbying campaigns by various industries. The EU has recently introduced ambitious plans to reduce carbon emissions on the continent, driven by comprehensive carbon pricing plans which even take into account the delocalisation of the continent’s carbon emissions by introducing a Carbon Border Adjustment Mechanism; an instrument extensively studied by think tanks such as the Jacques Delors Institute.
An approach that is increasingly being used by companies around the world, big and small, to reduce carbon emissions is the carbon offsetting principle. The theory behind the principle relies on the fact that global warming is indeed global, and so carbon emissions. In practice, it means that a company will assess its carbon emissions and fund programs that are aimed at capturing emissions, usually through reforestation and afforestation (forest recovery and forest creation programs).
Enter Climeworks. Climeworks is a Swiss Company which specialises in carbon sequestration programs using new technologies. Climeworks develops and operates air capture machines. Air Capture Machines capture CO2 directly from the air through a series of specialised filters. The ambient air is drawn through a “collector”. Once the filter material is full of carbon dioxide, the collector is closed and the temperature is increased to 100ºC. The heating process releases the carbon dioxide inside the collector, separating it from the Nitrogen and oxygen, which are then expelled. The result of the process is the collection of pure, highly concentrated carbon dioxide. The CO2 is then stored through a mineralisation process.
Climeworks has joined forces with Carbfix, an Icelandic company specialising in carbon mineralisation and geothermal energy. The result of this partnership is a closed-loop approach which produces energy from the mineralised carbon. The CO2 is mixed with water and pumped underground. It then reacts with basalt and mineralises over time. Within a few years, carbon dioxide is essentially turned into stone. The reaction produces heat - i.e. energy - which is used to power the direct air capture machines through a geothermal plant. The process is, therefore, entirely carbon negative and has a close to 100% efficiency.
This solution seems terrific, and it is. The historical CO2 emissions are captured and sequestered underground. Essentially, the Carbon we removed through our use of fossil fuels is returned to its origin. We can therefore not only achieve carbon neutrality but an actual carbon-negative budget, returning to pre-industrial levels of atmospheric carbon. The solution is open to both businesses and private citizens. If you are concerned with your carbon footprint, you can pay a small fee to permanently remove more carbon than you produce each year from the atmosphere.
However, one major issue remains in this solution. The issue that seems to make the world turn: money. The consensus amongst environmental economists about the price of carbon externalities is around 30€ to 50€ per ton of carbon emitted. The price is already considered rather high: the OECD recommends a 30€ per tonne of carbon produced. The European Green Deal, which still needs to be approved by the Parliament and the Council of the EU, plans to set up a 25€ tax on each tonne of carbon. Climeworks’ solutions are priced way above these figures. Impossibly above actually: the price of carbon dioxide removal through Climeworks’ direct air capture technology is roughly 1€ per kilo of carbon removed.
We do not doubt that this price can be reduced by scaling up the technology, the pricing structure is already regressive as it is today. However, can this technology be scaled up to the extent that it becomes attractive enough to companies that want to avoid paying a carbon tax? Can Climeworks scale up to such a level to allow a price of carbon capture reduction from roughly €900 / €1000 per ton down to €20?
Only time can tell. Until then, Stay safe, Live well and Live Green!