GHG-Removal Could Be the Biggest Market of the 21st Century

GHG-removal is a $10trln annual market opportunity that is yet to be tapped by new investors, innovators and entrepreneurs.

It would be fair to admit that there have been some positive signals in the GHG-emissions problem resolution recently.

European climate law increased the EU-goal to cut emission by 55% by 2030 (compared to 2005) instead of former 40%. US Inflation Reduction Act aims to raise almost $800bln towards things like energy security and climate change programs over the next ten years. There’s an increasing global adoption of the Carbon Boarder Adjustment Mechanism that would touch almost all the countries that want to trade with the US, EU, Canada, or Japan. The list goes on…

But UN says that despite all the changes, humanity is still missing the set targets, even those that governments set themselves (like Nationally Determined Contributions).

Even if we were on track to meet the targets set, it would still be not enough to prevent the environmental catastrophe.

Unfortunately, it seems, the situation is even worse.

The point is that all the targets focus on preventing the new emissions, that are being produced each year, that, after showing a slight decrease by 6,4% (or 2,5bln tons) in 2020 (the largest-ever historical decline as the pandemic halted global economic activity) – stroke a new record this year (reaching 58 gigatons (GT)).

But what about the GHG-emissions, that have already accumulated in the atmosphere? That are not dissipating on their own due to the exceeded natural abilities of Earth of doing it itself?

According to World Economic Forum (2022.11.20) - the atmospheric CO2 concentration increased 2.5 parts per million (ppm) in 2021 and is projected to increase by around 2.5ppm in 2022, resulting in global atmospheric concentrations of 417.2 ppm on average for the year. This represents an increase in atmospheric CO2 of around 51%, relative to pre-industrial levels.

But what exactly are the preindustrial levels? Climate.gov (2022.06.23) states that before the Industrial Revolution started in the mid-1700s, atmospheric carbon dioxide was 280 ppm or less. That means that currently there's an 137.2 ppm excess.

So, how does this figure compare to the emissions we produce every year? To calculate this we'll need to use the conversion formula from the Carbon Dioxide Information Analyses Center - each part per million of CO2 in the atmosphere represents approximately 2.13 gigatonnes of carbon, or 7.82 gigatonnes of CO2.

That means that the overall excessive amount of the CO2 accumulated to this moment is 137.2 * 7.82 = 1 072,904 gigatons of CO2 (so, about 20 times more, that we've produced only this year).

What's more, according to Our World in Data – In 2016 CO2 was accountable only for 74,4% of total GHG-emissions worldwide (the others being: methane – 17.3%; nitrous oxide – 6.2%; and other emissions (F-gases – HFCs, CFCs, SF6) – 2.1%). Using this proportion we could add 34,4% on top of the CO2-emissions to approximately calculate the overall amount of accumulated GHG-emissions – 1 442 gigatons of CO2 equivalent (CO2e).

To understand even further how big the problem is, let's use the most common tool to do it - money.

The price of emissions

There are different ways to calculate the carbon price, but most usually the price, used in the emissions trading systems is used. The price of emissions allowances (EUA) traded on the European Union's Emissions Trading System (ETS) was 85.22 euros per metric ton of carbon dioxide on December 1, 2022. The highest carbon price during 2022 was on August 19, at 98.01 euros per metric ton. A study published by Nature (2022.09.01) found that the USA's value of one tonne of carbon dioxide should be $185 – almost four times the current cost of $51.

So, if we use these figures to calculate how much we need to pay to remove all that excessive GHG-emissions out of the air we'll get $73,55 - $266,78 trillion dollars needed to do this (again, so that you can imagine how big these figures are, compare it to the global GDP – in 2022 it is predicted to be $103.86trln.

So, it seems to be impossible to remove all those GHG-emissions in an instant, but we still understand that we have to do it till 2030, or at least 2050 (to prevent the catastrophe). If we choose the latter, then the average annual price (market volume) would be from $2,63 to $9,53 trillion dollars.

What about the future?

Carbonbrief.org (2018.08.27) predicts that by 2050 CO2 levels will reach 550ppm in a business as usual scenario and Climate.gov (2022.06.23) estimates that by 2100 we could reach even 800ppm levels.

If current economic growth, demography, and emissions intensity trends continue, the level of annual emissions will continue to rise, reaching 62 GT by 2030.

Why bother?

Global GDP could drop by 18% over the next 30 years in the case of non-action on climate change, according to Swiss Re. 200 of the largest global companies estimate that they will collectively incur $1T in climate change-related costs if they do not take measures to address it at present.

But that's only if we don't do anything, and we are doing a lot of things, at least something, right? Like renewable energy, forcing the main pollutants to abate their emissions, at least partially, with taxes and limited carbon allowances, increasing the regulatory scrutiny with reporting and etc?..

Well, yes, of course. But those things have their limits. For instance, the share of U.S. power generation from renewables is going to increase only from 21% in 2021 to 44% in 2050. Plus, there are “hard-to-abate” industries that account for more than 30% of global emissions.

So, that leaves approximately half of the newly produced emissions by 2050 to be removed, meaning that the emissions removal market is not going to drop at least by 2050.

How much market is already taken? Almost none. Experts say, that, probably, we capture less than 0,1% of GHG-emissions we produce. That leaves a great potential for creative minds, great engineers to focus their attention on tackling these challenges - and that means, innovations, investments and business!

What are the main GHG-removal technologies?

World Resources Institute names the following GHG-removal methods:

• natural strategies like tree restoration and agricultural soil management;
• high-tech strategies like direct air capture and enhanced mineralization;
• hybrid strategies like enhanced root crops, bioenergy with carbon capture and storage, and ocean-based carbon removal
  
  

American University expands it like this:

• planting massive new forests (afforestation/reforestation)
• using no-till agriculture and other practices to increase the amount of carbon stored in soils (soil carbon sequestration)
• creating charcoal and burying it or plowing it into fields (biochar)
• capturing and sequestering carbon from biofuels and bioenergy plants (bioenergy with CCS or BECCS)
• spreading crushed rocks over land to absorb carbon dioxide from the air or exposing them to carbon dioxide-rich fluids (enhanced mineralization)
• building machines that would suck carbon dioxide directly out of the atmosphere and bury it (direct air capture)oceans-based methods, including: spreading alkaline materials, such as lime, over the ocean (ocean alkalinization) fertilizing selected areas of the ocean by spreading nutrients, such as iron, over the surface (ocean fertilization), fertilizing selected areas of the ocean by pumping nutrient-rich waters from the depths to the surface (artificial upwelling), accelerating the transport of carbon to the ocean depths by pumping surface waters downward (artificial downwelling)
  
  

And where do corporations invest?

First, it’s carbon utilization. When carbon is not only removed, but also utilized to some useful purpose – like fuels construction or other made from emissions (i.e. LanzaTech (nearly 2bln valuation) and Solidia (nearly 1bln valuation), Pure Earth (Nasdaq acquired a majority stake. Besides utilization does the direct capture and storage, sells the CO2 removal certificates), Twelve ($200mln of investment)).

And then we have a lot of corporations investing in carbon removal in this or that way.

In April 2022 Stripe launched a Frontier Climate. It’s been funded as well by Alphabet, Shopify, Meta, McKinsey, and tens of thousands of businesses using Stripe Climate. The company has committed to buy an initial $925M of permanent carbon removal by 2030. It has now contracted to buy non "conventional" carbon removal from 14 different start-ups. It’s crucial to notice that it applies an intentionally non-efficient approach to buying carbon removal. On average, Stripe paid a “couple hundred dollars a ton” to remove carbon dioxide, but its purchases ranged from $75 to $2,052 a ton. That’s because they want to help startups to invent new ways with the high scaling potential in the future!

At COP26 there’s was a First Movers Coalition launched. Alphabet, Microsoft, and Salesforce pledged $500 million to new climate tech that’s supposed to pull carbon dioxide out of the atmosphere to keep it from heating up the planet (like the Frontier – through advance purchase commitments by 2030). It aims to tackle hard-to-abate emissions, to decarbonize the heavy industry and long-distance transport sectors responsible for 30% of global emissions. More than 50 companies have joined, including: Amazon, Apple, Airbus, BCG, Bank of America, Delta, Deloitte, Ford, FedEx, Nokia, SAP, Scania, DHL, EY, PWC, Volvo, Western Digital, Bain & Company, Boeing, Schneider Electric and Maersk.

In addition, Microsoft launched a $1B Climate Innovation Fund (that invests in carbon reduction and removal tech). So far, they’ve invested in NCX (planting trees); ReGrow - sustainable agriculture); Moreover, Microsoft has purchased 1.3 millions of metric tons of carbon offsets from 15 organizations in FY 2021, and is going to increase the volume by 5mln gradually by 2030.

Amazon has its own $2Bln Climate Pledge Fund. Has made 20 investments so far, including Pachama (planting trees) and Hippo Harvest - controlled environment agriculture. Additionally, Amazon has a $100M Right Now Climate Fund (that, among others, invests in restoring forests).

Apple has a $200M fund (with Goldman Sachs and Conservation International) to invest in planting forests and other carbon removal initiatives.

Climate tech funding in 2022 represented more than a quarter of every venture dollar invested in 2022 with US$15-20 billion range per quarter. In 2021, start-ups targeting sectors that are responsible for 85% of emissions attracted just 39% of investment. In 2022, start-ups in those sectors attracted 52% of climate tech investment.

But, of course, that’s only the beginning. Investments would have to rise to tens or even hundreds of billions, we’ll see many gigacorns (startups that have a $1bln valuation but at the same time remove 1 gigaton of GHG), and, who knows, maybe even a $1trln company – not an unfair price for saving the world, right? :)