This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.
Author: Nasim Pour, Lead, Carbon Removals and Market Innovation, World Economic Forum
/
Engineered carbon dioxide removals (CDR) are not only crucial to offset the hardest to abate emissions but also reverse the buildup of historical emissions.
So far, advance purchases for ~4.8 million tonnes of CDR credits have been made, with members and implementation partners of the First Movers Coalition (FMC) making up more than 80% of the purchases.
Here, we highlight key actions the FMC members take in this decade to help catalyze the CDR market.
Following years of insufficient climate action, it is becoming increasingly evident that the Paris Agreement to limit global warming to well below 2°C and pursue all efforts to limit it to below 1.5 °C could be in jeopardy.
While society must do all it can to limit emissions in the first place to avoid setting off climate tipping points carbon dioxide removal (CDR), especially scalable and durable options that can lock away CO2 for over 1000 years, is increasingly seen as a critical decarbonization tool to offset the hardest-to-abate (last 10% of) emissions, safeguard against Earth’s feedback loops in a warmer climate, and eventually reverse the accumulation of historical emissions.
As a result, up to 10 billion tonnes of CDR per year is expected to be needed by 2050, according to the median estimates of scenarios considered by the IPCC.
Understanding what efforts have been successful is critical to accelerating change. So far, the high cost of scalable and durable CDR due to the technology’s nascent nature, lack of mature measurement, reporting and verification (MRV) standards, and low support from policy-makers has been limiting CDR uptake.
The First Movers Coalition’s (FMC) CDR sector leverages the collective purchasing power of companies to send a clear demand signal to scale up emerging decarbonization technoogies critical to the net-zero transition. By stimulating sufficient demand, the FMC aims to help accelerate the commercialization of these technologies and ultimately drive down their cost. A group of 10 leading companies from various sectors, including technology, finance, heavy industry and professional services, have committed to the FMC’s CDR sector.
Here are three ways these firms have helped drive CDR offtake and further investments – and our lessons learned for others looking to make change happen.
Approach 1: CDR credit direct deal-making
CDR purchase credits refer to measurable and verifiable greenhouse gas (GHG) emissions reductions purchased by individuals, businesses, or organizations from certified projects that capture CO2 from the atmosphere and lock them away for a sufficiently long time.
Many different pathways can be used to remove CO2 from the atmosphere. Scalable and durable “engineered” options include biochar, biomass with carbon removal and storage (BiCRS), drect air capture with carbon storage (DACCS), enhanced rock weathering (ERW), etc. A single unit of CDR credit purchased equals 1 tonne of CO2 equivalent removed from the atmosphere. After an organization or an individual has bought a carbon credit from a CO2 removal project, the credit is permanently retired so others can’t reuse it.
In May 2023, Microsoft signed an offtake agreement with Ørsted to purchase around 2.7 million tonnes of durable CDR credits over 11 years, representing one of the largest carbon removal offtake deals by volume to date. The agreement was part of the “Ørsted Kalundborg Hub”, where ~430,000 tonnes of biogenic CO2 per year (from 2026) will be captured and stored. Given the nascent nature of this industry, Microsoft’s contract and Danish state subsidies were critical for Ørsted to make this project viable.
In a separate deal, in September 2023, Microsoft signed a long-term contract to purchase up to 315,000 tonnes of CDR over a multi-year period from Heirloo, representing one of the largest DAC deals to date and providing predictable cash flows for Heirloom to enable project financing of their upcoming facilities. Also on DACCS, in June 2023, the Boston Consulting Group (BCG) signed a five-year offtake agreement with CarbonCapture to purchase 40,000 tonnes of CDR credits, representing the largest DAC deal in the professional services industry.
Discover
How is the World Economic Forum facilitating the transition to clean energy?
Approach 2: Participation in a buyers’ club
To drive change, many are pursuing collaborative procurement to pool their demand and drive offtakes.
A key advantage of collaborative procurement for CDR is that it enables multiple purchasers to come together to distribute risks and costs of innovative new projects, achieve larger scales to reduce per-unit costs, as well as share expertise and learnings that can inform future projects. In practice, this has meant participating in buyers’ clubs such as NextGen andFrontier, which act as intermediaries between CO2 removal project developers and CDR credit purchasers by offering them standardized and accelerated deal-making. For example, NextGen, a joint venture between South Pole and Mitsubishi, started with FMC members BCG, Mitsui O.S.K. Lines (MOL), and Swiss Re as founding buyers.
NextGen’s ambition is to purchase over 1 million CDRs by 2025. In April 2023, it kickstarted this process by purchasing 200,000 CDR credits spread across three projects, including 1PointFive’s DACCS project in Texas, Summit Carbon Solutions’ BiCRS project in the US Midwest, and Carbo Culture’s biochar project in Finland.
Similarly, Frontier, an advance market commitment to buy more than $1 billion in durable CDR between 2022 and 2030, has FMC member Alphabet as a founding member. In 2023, they made advance purchases of 120,000 CDR credits across 15 companies, with the largest deal being with Charm Industrial on BiCRS at 112,000 CDR credits. Each CDR credit purchase represents a tonne of CO2 equivalent removed from the atmosphere for all these instances.
Approach 3: Knowledge sharing
Given the developing nature of the CDR market, questions, including the evolving regulatory landscape, MRV standards, and the structure of offtake agreements, remain top of mind for market participants.
To create clarity and improve confidence in the sector, FMC members and implementation partners also openly share their lessons learnt, including how they see the space evolving.
Insights include:
Best practices, like the importance of a diversified carbon removal portfolio and market engagement options to gain market experience, signal commitment to CDR suppliers, and support near-term climate change mitigation efforts.
How to characterize high quality CDR, such as through the principles of additionality, carbon accounting/MRV, durability, and leakage, among others.
The importance of transparency (including the role of digital technology) in today’s evolving carbn market to safeguard reputation, minimize financial risks, ensure project quality, enhance market efficiency, and prepare for emerging regulations.
Looking ahead
While the examples highlighted above show progress, the sobering reality remains that advance purchases for engineered CDR are only at a total of ~4.8 million tonnes today, so a minuscule fraction of the 10 billion tonnes per year needed by 2050.
Also, the set of buyers is relatively concentrated, with Microsoft alone representing ~64% of the purchases and the top 10 buyers combined representing ~92%, demonstrating the need for many new participants to join the space to deliver on the 2050 needs.
The FMC’s CDR sector currently consists of 10 members, each committed to a contract for 50,000 tonnes – or $25 million worth – of durable and scalable CDR by 2030, representing at least 500,000 tonnes of atmospheric CO2 removed. With collaborative action, incentives for the market and knowledge sharing, it’s hoped these efforts canspark further progress across this decade of action.
Sumit Verma, Climate & Sustainability Consultant, Boston Consulting Group (BCG), contributed to this article.
