In May 2020, online financial services company Stripe announced it would pay four startups using various technologies between $75 and $775 per ton to remove carbon dioxide from the atmosphere.
The move was Stripe’s first step toward making good on its negative emissions commitment, a pledge to eliminate more CO2 from the atmosphere than it contributes. As part of that pledge, the Irish-American company said it would pay "any price" for the removal and secure long-term storage of CO2. This month, it agreed to fork over $6 million more to four more carbon removal startups, bringing the total to $15 million in purchases from 14 companies.
For the young businesses working on direct air capture (DAC) and other carbon removal technologies, the "any price" part of Stripe’s commitment is huge. Just a few years ago, many viewed DAC as a costly fantasy unlikely to scale to the point where it’d be worth the investment. However, demand for carbon removal from a select but growing cadre of companies willing to pay big bucks to reach net zero or beyond — along with a promised influx of cash from the federal government — represents a potential driver for growth that seemed to come, well, out of thin air.
"It feels just years ahead of where it was even a couple of months ago," Noah Deich, president of the nonprofit Carbon180, told GreenBiz. "You have companies making these really big purchases of carbon removal and paying a lot for it."
DAC is the most advanced among a slate of technologies that pull CO2 from the ambient air. The carbon is then sequestered underground or sold to end buyers that use it to make stuff, including building materials, jet fuel, plastic and carbonated drinks. These technologies differ from carbon capture and storage (CCS) — also known as "point source" carbon capture — which catches emissions from power plants and other industrial smokestacks before they are belched out into the atmosphere.
Just a few years ago, many viewed DAC as a costly fantasy unlikely to scale to the point where it’d be worth the investment.
A handful of first-generation carbon removal companies, notably Climeworks and Carbon Engineering, are reaching commercial scale with DAC technology, funded largely by private sector investment and, increasingly, carbon credit buyers such as Stripe, Microsoft and Shopify.
Zurich-based Climeworks recently won the race to open the world’s first large-scale commercial DAC facility — its Orca plant went online in Iceland in September. Located outside Reykjavik, the plant will capture roughly 4,000 metric tons of CO2 per year and permanently store it deep underground in basalt rock formations. Orca is the 19th DAC facility in the world, according to the International Energy Agency; the other 18 are small-scale plants operating in Europe, the United States and Canada.
Climeworks was one of the four startups that sold carbon removal credits to Stripe back in May 2020. The company paid $775 per ton for the removal of 322.5 tons of CO2, or roughly 10 percent of Orca’s first year of capacity. Since then, Climeworks’ list of corporate buyers has steadily grown. In November, the tech company Square (which just rebranded itself as Block, Inc.) signed a nine-year carbon removal agreement with the Swiss company; and Liechtenstein-based private bank LTG, Boston Consulting Group and Swiss RE have all recently signed 10-year agreements with Climeworks, which offers carbon credits to both businesses and individuals.
Vancouver-based Carbon Engineering, meanwhile, has joined forces with BeZero Carbon to offer individual and corporate customers a platform to pre-purchase carbon removal by DAC facilities yet to be built. Shopify was Carbon Engineering’s first customer, pre-purchasing the removal of 10,000 metric tons of CO2. Most recently, BMO Financial Group in November said it had pre-purchased 1,000 metric tons of CO2 from the Canadian company.
"We're very early in this, but we are seeing it grow very quickly," said Colin McCormick, chief innovation officer at Carbon Direct, which invests in carbon removal projects and advises businesses on buying such services. "And it is looking like the business model for direct air capture, more and more, is going to be selling carbon removal offsets on the voluntary market."
Uncle Sam wants DAC
Climeworks’ technology sits at the high end of the cost range for carbon removal, but as with any new technology, costs can decrease over time. The company has a long-term price target of $100 to $200 per ton, and Stripe is betting the cost will decrease relatively quickly as more companies prepurchase credits.
One reason that bet may not be as overly optimistic as one might think: the United States government. For the first time, the federal government is throwing some serious cash at direct air capture, in an effort to scale the sector and reduce the cost.
In November, the Department of Energy said it aims to remove gigatons of CO2 from the atmosphere and store it for less than $100 per ton.
Less than two weeks later, President Joe Biden signed the bipartisan $1 trillion infrastructure bill, which allocates $3.5 billion to building four regional direct air capture facilities, each with the capacity to remove at least 1 million tons of CO2 from the atmosphere annually. Roughly $5.1 billion more will go to point-source carbon capture, infrastructure for transporting C02 (a.k.a. pipelines) and commercial large-scale sequestration projects.
A deal with the devil?
Bringing the cost down as quickly as possible is important because leading scientific agencies, including the United Nations Intergovernmental Panel on Climate Change (IPCC), say that even if the world manages to seriously slash emissions, it won’t be enough to avert a climate catastrophe. A variety of scientific models have estimated anywhere from 1.3 billion tons per year to 29 billion tons by 2050 to hold global warming at 1.5 degrees Celsius. A 2017 U.N. report estimated that keeping the planet from heating past 2 degrees C will require removing 10 billion tons annually by midcentury.
Natural solutions, such as reforestation and soil carbon sequestration, can help with some portion of the long-term carbon removal, but carbon capture advocates look at the urgency of the climate crisis and see an all-hands-on deck moment, where no one solution is enough.
For some, this means joining forces with the oil and gas industry.
It feels just years ahead of where it was even a couple of months ago. You have companies making these really big purchases of carbon removal and paying a lot for it.
Carbon Engineering is partnering with Occidental Petroleum’s Oxy Low Carbon Ventures (OLCV) on several DAC projects, starting with the first commercial facility to use its technology, which promises to be the first DAC plant in the world to capture 1 million metric tons of carbon dioxide per year. The captured CO2 will be stored underground in the Texas Permian basin, where construction on the facility is slated to being in 2022; Occidental will also inject some portion of the CO2 into old wells to extract more oil, a process known as "enhanced oil recovery." United Airlines has made a multi-million-dollar investment in the project as part of its plan to become carbon neutral by 2050, although it did not initially provide the details as to how this investment fits into that plan.
Carbon Engineering says it’s ramping up development of more commercial facilities, with a particular focus on DAC plants that capture CO2 and use it to make fuel. The company aims to build facilities in Canada, the U.K., U.S., and Europe.
It has officially announced three projects, two of which are partnerships with OLCV: a DAC facility in Norway, with the capacity to pull between 500,000 and 1 million metric tons of CO2 from the air each year, which will be sequestered offshore beneath the seabed; and one in British Columbia that will capture CO2 to be used to make as much as 26.4 million gallons of fuel annually.
Occidental argues that producing fuels with captured CO2 lowers its carbon footprint, because while making the fuel, they’re also removing carbon dioxide from the air and storing it underground.
But the use of captured CO2 for enhanced oil recovery is where DAC loses some advocates who otherwise support it, including Deich and his colleagues at Carbon180.
Taking our eye off the ball
Indeed, many in the climate movement have long viewed investing in any sort of carbon capture technology as an expensive distraction from the main mission: to rapidly eliminate fossil fuels.
"None of these projects are very useful for helping to solve the climate problem," Mark Jacobson, a professor of civil and environmental engineering and director of Stanford University’s Atmosphere/Energy program, told GreenBiz. "Clean renewable energy is what we really need to focus on. These other distractions can actually cause damage because they divert funding from real solutions that actually help solve the climate and air pollution problems we face. We need to keep our eye on the ball and focus on things that work."
Even proponents agree that carbon removal technologies are not an alternative to cutting emissions or an excuse for delayed action. But they look at it, again, from the all-hands-on-deck perspective.
"What I'm excited about is not any individual company per se, but the fact that there are a dozen new ones," Deich said. "And hopefully, we'll be able to have an ecosystem where it's not the same two companies that we've been talking about for a decade, but a much more robust field. And we can plant more flowers to see what blooms essentially."
Up-and-coming players working on a variety of carbon removal technologies include several other startups that Stripe has invested in:
- Heirloom is building a direct air capture solution that leverages accelerated carbon mineralization to absorb CO2 from the ambient air in days, rather than years, and then extracts the CO2 to be stored permanently underground.
- Project Vesta captures CO2 by using an abundant, naturally occurring mineral called olivine. Ocean waves grind down the olivine, increasing its surface area. As the olivine breaks down, it captures atmospheric CO2 from within the ocean and stabilizes it as limestone on the seafloor. This approach provides permanent sequestration with the potential for very high volume at low cost. Questions remain about safety and viability: to validate coastal enhanced weathering, more lab experiments and pilot beach projects must be performed.
- Charm Industrial has created a novel process for preparing and injecting bio-oil into geologic storage. Bio-oil is produced from biomass and maintains much of the carbon that was captured naturally by the plants. By injecting it into secure geologic storage, they’re making the carbon storage permanent.
- 44.01 turns CO2 into rock, harnessing the natural power of mineralization. Using clean energy, their technology injects CO2 underground, speeding up its reaction with peridotite, an abundantly available rock, to scale permanent CO2 storage.
- Ebb Carbon uses a proprietary electrochemical system to remove acid from the ocean and enhance its natural ability to draw down atmospheric CO2 and store it as oceanic bicarbonate.
Both Climeworks and Carbon Engineering aim to expand rapidly, however, at the moment, demand from companies looking to purchase CO2 removal credits outstrips supply, McCormick noted.
And even with cash coming in from corporate buyers of carbon removal and the boost in government funding, DAC is a tiny sector that still faces a long uphill climb. To put things in perspective, Climeworks’ current goal is to capture 1 percent of global CO2 emissions by 2025. Clearly, that’s a proverbial drop in the gargantuan climate crisis bucket.