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2024 will be a huge year for the carbon capture, usage and removal sector

Scientists agree carbon removal technology is necessary to mitigate the climate crisis — but it needs more investment.

A graphic of a fan removing carbon dioxide from the air

Sophia Davirro/GreenBiz

As the COP28 climate summit ended, nations finally reached a non-binding deal to phase down the burning of fossil fuels. But it's clear that decreasing or even halting all emissions from fossil fuels is no longer enough to stop climate change — carbon removal technology is officially an essential component, according to a recent report by scientists from the United Nations.

Carbon capture, usage and storage (CCUS) technology "is as necessary as tripling renewables, it is as necessary as electrifying vehicles, and home heating," confirmed Julio Friedmann, chief scientist at Carbon Direct. "It is as necessary as clean steel. It is as necessary as every other thing that’s necessary."

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This is one of a series of articles looking ahead to the trends, innovations, opportunities and challenges that will define the business of sustainability in 2024.   

By 2030, global investment in carbon removal capacity is predicted to reach between $100 billion and $400 billion, according to a recently released McKinsey report titled "Carbon removals: How to scale a new gigaton industry." It states that to reach net zero by 2050, at least $6 trillion of investment is required, beginning with a minimum 2030 investment of half a trillion. To date, global carbon removal capacity has received only $13 billion.

In the private sector, as company budgets refresh in 2024, decisions on whether to invest in carbon removal technology — for both internal company emissions and as a profit-making external investment — depend on the vitality of the sector in the coming years. 

According to Friedmann, 2024 is poised to set a high bar.

Direct air capture is expected to grow globally

"Direct air capture (DAC) is going to continue to grow, quickly and strenuously," Friedmann told GreenBiz. He listed a number of projects expected to begin operations in the new year, such as the Stratos project in Texas, expected to capture 500,000 tons of carbon from the atmosphere annually.

"We are going to see Mammoth turn on in Iceland, [from] Climeworks," he said of the plant expected to capture 36,000 tons of carbon each year. "Heirloom is just getting going this year with a 1,000-ton [carbon capture] project, but they already have a 30,000-ton project in development."

The potential for carbon removal lies far beyond massive carbon capture plants, Friedmann explained. "The most important of these demands is coming from Asia," said Friedmann, "most notably Korea and Japan, but also from countries like Denmark that have very strenuous climate obligations." Denmark passed the 2020 Climate Act, which pledges the country will reduce emissions 70 percent by 2030, compared with 1990 levels.

Diversification of techniques lowers risk in the marketplace, according to Daniel Pike, a principal in RMI’s climate-aligned industries team. He cites capturing carbon, "in biomass … with minerals … and then there’s a whole set of more engineered synthetic methods. All of it is worth exploring at this stage."

The goal of limiting the rising global temperature from 1.5 degrees Celsius to 2 degrees is increasing global demand for carbon use technology, as well as low-carbon products, according to the newly released Pitchbook report, "Emerging Sustainable Investing Opportunities: Carbon Utilization." It also highlights the continued rise of favorable legislation in the face of climate change.  

Mark Patel, senior partner at McKinsey and one of the report’s authors, agrees that policy needs "to be in place to support long-term adoption," referring to the Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL).

Policy paving the way

Legislation such as the IRA and the BIL are "definitely creating momentum," according to Patel. In 2023, Swiss carbon removal and storage company Climeworks announced its plans to open two direct air capture facilities in Texas and Louisiana after receiving $1.2 billion from the Department of Energy’s Regional DAC Hubs program — funded by the BIL.

The IRA — and its "45Q" carbon capture tax credit (named after a section of the tax code) — was a catalyst for Project Bison, a joint DAC program between climate tech company CarbonCapture and carbon storage developer Frontier Carbon Solutions. Project Bison is set to permanently remove 5 million tons of CO2 annually by 2030. "With the passage of the Inflation Reduction Act, the proliferation of companies seeking high-quality carbon removal credits, and a disruptive low-cost technology, we now have the ingredients needed to scale DAC to megaton levels by the end of this decade," said CarbonCapture CEO/CTO Adrian Corless in the project’s press release.

U.S. federal funding for direct air capture is the main market driver. "The U.S. is positioning itself as a world leader in carbon capture," said John MacDonagh, senior analyst at Pitchbook. "2023 already saw substantial federal funding for DAC hubs, with additional hub announcements expected."

CCUS can scale

This year, U.S. funding comprised the bulk of global venture capital investment, contributing $718.1 million of the $1.07 billion global total so far, according to Pitchbook data. "Changes to CCUS-related tax credits provide significant ongoing support for the industry," explained MacDonagh.

More changes are likely to come in 2024. On Dec. 11, a letter was sent to Congress from more than 50 carbon capture organizations, companies and industry groups requesting adjustments to the 45Q credit for the upcoming year. Signatories — including United Airlines, Heirloom and Carbon Capture Coalition — called for changes that account for inflation, and parity between financial credits that reuse captured carbon and credits for the storage of captured carbon.

"These enhancements, coupled with the historic investments made in research, development and deployment under the Bipartisan Infrastructure Law, now form the most forward-looking portfolio of federal policy support for these technologies in the world," said Carbon Capture Coalition executive director Jessie Stolark in a press release. If regulation increases the compensation of each ton of carbon captured in line with rising inflation, the marketplace will remain competitive and financially lucrative.

"I’m feeling hopeful about 2024," said McKinsey’s Patel about the sector. "These early stages have proven that things can work, and even better, that they can scale." 

Friedmann agrees. "Not only do I expect 2024 to be a watershed year for [carbon capture and storage], I expect it to be part of a growing wave of announced projects and deployment."

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