In this article, we break down why carbon capture is essential, explain how the technology works, highlight a few companies at the forefront of innovation, and explore ways the market environment can evolve to better support scaling of this technology.
Key takeaway: Companies have not aggressively pursued carbon capture due to the complexity of the technology, long path to economic benefits, and limited policy support, but much of this is changing as leaders recognize its necessity in getting to net zero emissions.
Earlier this year, Elon Musk announced he was funding XPRIZE’s largest competition ever - $100M for the best carbon capture technology. Why has his biggest philanthropic donation to-date been to something seemingly unrelated to his other grandiose business ventures? We’ll cover this and more in this deep dive.
Why carbon capture is essential in our fight against climate change
First, let’s clear the air on carbon. If we are so fixated on “capturing” carbon, does that mean all carbon is bad? No!
Carbon as an element is ESSENTIAL for life. In fact, carbon is the fourth most abundant element in the universe by mass. Its properties make it easy to bond with other elements, so it serves as the chemical backbone of millions of different compounds. If you look around, carbon is everywhere - in the food you eat, the clothes you wear, the carpet on the floor, the paint on the wall, the plastic in your grocery bags, in every cell in your body, and in the diamonds you may hope to give one day to a loved one.
Now, when we talk about carbon capture, we’re really focused on excess carbon that’s trapped in the atmosphere, as opposed to the four other spheres of the earth (hydrosphere, biosphere, cryosphere, and lithosphere). That’s because excess carbon (usually in the form of carbon dioxide) in the atmosphere traps heat, causing global temperatures to rise and triggering negative effects on biodiversity, sea levels, natural disasters, weather patterns, etc.
So as governments and companies have rapidly been making net zero pledges, a lot of the conversation to date has been focused on emission reduction - reducing the amount of greenhouse gases (i.e., carbon dioxide and methane) emitted into the atmosphere. But climate math makes clear that simply reducing our emissions, or even getting to net zero emissions, is not enough. Scientists generally estimate that for us to reach a safe level of global warming — limiting rise in temperatures relative to 1900 levels to 1.5℃ — the world must stabilize atmospheric concentration of carbon dioxide at around 350 parts per million.1 This year, we reached 410 ppm. So to create a secure climate for future generations, we need to suck CO2 out of the atmosphere to create “negative emissions”.
Bill Gates describes this well with a bathtub analogy in his latest book, How to Avoid a Climate Disaster. “The climate is like a bathtub that's slowly filling up with water. Even if we slow the flow of water to a trickle, the tub will eventually fill up and water will come spilling out onto the floor. That's the disaster we have to prevent. Setting a goal to only reduce our emissions - but not eliminate them - won’t do it.”
It’s worth noting that carbon dioxide removal (CDR) can be done naturally through planting trees or improving carbon storage in soil through more sustainable farming practices, such as crop rotation or improved cattle management. Both planting more trees and improving our farming practices need to be part of the basket of solutions we deploy, but these approaches won’t be sufficient because of geographic and resource limitations (trees need lots of land and water!). We’ll need something that can provide scale carbon reductions in the next 10-20 years. This is where carbon capture technologies come into the picture.
How carbon capture actually works
At a high level, carbon capture is focused on sucking out carbon from the air and then doing something with it that is less harmful than the alternative of having it sit in our atmosphere.
There are the three main steps in the carbon capture process2:
- Capture: CO2 is separated from other gases produced in industrial processes, or captured directly from the air
- Transport: CO2 is compressed and transported via pipelines, roads, or ships
- Utilization/storage: CO2 is either re-used or stored away permanently
The combination of these steps is often referred to as CCUS (carbon capture, utilization, and sequestration or storage).
Step 1, capturing the carbon, is a lot easier to do at the source of emissions than directly from the air due to the higher concentration of carbon particles. But both have advantages and disadvantages.
Capturing at the source of emissions, such as at a fossil fuel power plant or steel/cement factory, is not new. Oil & gas companies have been doing this since the 1970s. Today, there are 26 large-scale CCUS commercial projects around the globe where carbon dioxide is taken out of factory emissions.3
Capturing directly from air (“direct ai
r capture”, or DAC) costs about 50x more but gives us a way to work towards cleaning up the existing mess we’ve made, as opposed to only reducing future emissions.
Leaders in DAC include Climeworks AG in Switzerland and Carbon Engineering in Canada (see the image to the left for an artist from Carbon Engineer's rendering of a Direct Air Capture machine). Global Thermostat is the only U.S.-based company that seems to be close to direct air capture at scale, but the company has been plagued by mismanagement and delays in living up to expectations.4
For step 3 - figuring out what to do with the carbon after it’s captured - the ‘greenest’ outcome is sequestration (AKA storage), which keeps carbon out of the atmosphere. Today, sequestered carbon is usually stored in depleted oil & gas reservoirs (rock formations deep underground) or in saline aquifers (porous sedimentary rock with saltwater); both are tested structures that have stored forms of carbon and fossil fuels over millions of years.3
An alternative to sequestration is to re-use the carbon for industrial use cases, which helps to recuperate some of the costs of carbon capture, but does not actually help to “drain the bathtub”.
Carbon can be re-used for a number of purposes. Since CCUS technology took off in the ‘70s, captured carbon has typically been used for enhanced oil recovery (EOR). In EOR, CO2 is pumped into an oil field to increase the amount of oil that can actually be retrieved. Conceptually, this achieves similar outcomes to hydraulic fracturing (AKA fracking), except that instead of creating new fissures in the rock formation, it scrubs out existing oils that do not surface naturally.
As you can imagine, EOR is fairly controversial - critics argue that it is actually increasing the amount of carbon extracted on an absolute basis, negating some of the impacts of the carbon reuse. Today, EOR makes up 88% of global captured CO2 use; the remaining 12% spans use cases including beverage carbonation, (Coke is piloting this in Switzerland), food, and metal products.1
Carbon dioxide can also be used ‘indirectly’ by transforming it via a wide variety of chemical processes into materials or feedstocks to make more fuel, plastics, etc.
What carbon capture solutions are emerging in the market
The world’s leading climate experts agree that carbon capture will be a necessary force in our worldwide quest to limit warming to 1.5 degrees Celsius by mid-century.
Yet very few successful scaled carbon capture applications exist today, and those that do are expensive and not currently viable due to market policies. Orca, the latest and largest direct air capture installation by Climeworks AG, will only capture 4K tons of CO2 per year, the equivalent emissions of 250 U.S. residents.5 It’s targeting 500K tons by 2030, but that’s still a measly figure compared to the 40B tons of CO2 we emit globally per year (~1%).
Bulk purchases for carbon offsets from Climeworks, like those made by Bill Gates, Stripe, and Shopify, are around $600/ton. At this price, Microsoft would need to pay $6.7B to remove all its carbon dioxide pollution for one year. But with institutional funding pouring in, Climeworks believes it can get this down to $200 by 2030.
This is why a range of organizations and individuals, including Exxon Mobil, Microsoft, the U.S. government, and Elon Musk, have invested billions of dollars into helping this technology succeed.
Elon Musk’s $100M XPRIZE competition is actually structured as a four-year competition ending on Earth Day in 2025. To support newcomers, XPRIZE awarded $5M to 23 student teams this year that are focused on carbon removal projects or Measurement, Reporting, or Verification (MRV) of carbon removal solutions.6 The student teams’ projects give you a sense of the variety of solutions that can be deployed to tackle the same problem - sucking carbon out of the atmosphere.
Another example of carbon capture innovation is the proprietary 'mechanical trees' being deployed by Arizona State University and Silicon Kingdom Holdings. These trees allow captured gas to be sequestered or sold for re-use.7
Additionally, it’s worth mentioning that there is a lot of improvement happening with carbon dioxide removal (CDR) solutions that are not strictly classified as carbon capture because they don’t capture emissions at the source or directly from the air. As mentioned earlier, CDR includes techniques like afforestation (planting trees), agricultural practices that sequester carbon in soils, ocean fertilization, and enhanced weathering.
How can the market environment evolve to support scaling of carbon capture technology
While some activists argue that focusing too much on technologies with negative carbon emissions could become a distraction from the work of abating emissions, experts say we’ll need to suck as much as 10 gigatons (1 gigaton = 1B tons) of CO2 from the atmosphere annually to achieve net-zero emissions by 2050. This would come from about 50,000 carbon capture plants, which in total would cost about $10T.7
To get there, the primary catalysts will be investment in technology innovation and infrastructure, combined with strong policy incentives from the government.
We covered some of the innovation that is happening today. Expect to see an uptick in environmentally conscious companies funding innovation in the space. For example, Southwest Airlines just committed $10M to Yale University's Center for Natural Carbon Capture (YCNCC) to research technological advancements and find new solutions to reduce net greenhouse gas emissions.8
Secondly, both the private and public sector have been mobilizing to improve carbon capture infrastructure. Exxon Mobil earlier this month called on the oil & gas industry and US government to collectively raise $100B to turn the 50-mile long Houston Ship Channel into a carbon capture “hub”, which not only captures carbon but also carries it away in pipelines and injects it deep under the floor of the Gulf of Mexico.
Earlier this month, the US Department of Energy (DOE) also announced a bold new plan to make those CDR technologies cost-effective and scalable with the launch of a new “Carbon Negative Shot” initiative. This program aims to get us to remove gigatons of CO2 from the atmosphere and durably store it in geological, biobased, and ocean reservoirs or in value-added products at less than $100/ton.9 And the Biden administration’s bipartisan infrastructure bill includes billions of dollars for new pipelines and $3.5 billion for four direct air capture “hubs” like the one Exxon is pushing for.
On the policy front, better subsidies and a more established carbon cap-and-trade market will help accelerate scale and adoption of carbon capture technologies.
Today, billions of dollars are paid annually in credits or subsidies for electric vehicles, which price a ton of avoided CO₂ at about $500. Carbon removal offers a new opportunity for the carbon credit market at a similar price point. Right now, companies can get credits for avoided emissions or lower emissions. But in a net-zero world, they have to not just lower but remove carbon. Credits work a little differently for carbon capture than electric vehicles, in that instead of going to individual consumers like you and I, they go to corporations like Exxon. Effective carbon removal credits will require stipulations that the captured carbon be sequestered as opposed to re-used for enhanced oil recovery.
A more highly regulated carbon cap-and-trade system is the holy grail of policy innovation because it drives up the price of emitting carbon, which an economist would say more accurately factors in negative externalities. After six years of difficult and technical negotiations, the UN climate talks at COP26 finally gave us a strong playbook for international cooperation through carbon markets. Article 6 of the 2015 Paris Agreement, which determines how countries can reduce emissions through carbon credit trading, was a primary focus of the conference. In the final hours, long-awaited agreements were reached on a set of rules that govern international carbon markets, such as an agreement to crack down on double-counting credits traded across borders by creating a verification system under the UN.10
Carbon capture is not a silver bullet to our carbon emissions problems, but it will be a necessary part of the solution as we look to get to net-zero or net-negative emissions. With the right innovations, infrastructure investments, and government policies, expect carbon capture to play a more prominent role in the fight against climate change.
Sources
1 https://www.vox.com/energy-and-environment/2019/9/4/20829431/climate-change-carbon-capture-utilization-sequestration-ccu-ccs
2 https://www.nationalgrid.com/stories/energy-explained/what-is-ccs-how-does-it-work
3 https://foe.scot/wp-content/uploads/2021/01/CCS-Research-Summary-Briefing.pdf
4 https://www.bloomberg.com/news/features/2021-04-09/inside-america-s-race-to-scale-carbon-capture-technology
5 https://www.bloomberg.com/news/features/2021-09-08/inside-the-world-s-largest-direct-carbon-capture-plant
6 https://cleantechnica.com/2021/11/13/xprize-musk-foundation-announce-23-xprize-carbon-removal-student-award-winners/
7 https://www.cnbc.com/2021/07/23/these-companies-are-sucking-carbon-from-the-atmosphere.html
8 https://www.prnewswire.com/news-releases/southwest-airlines-commits-10-million-to-yale-university-to-support-climate-change-initiatives-301430987.html
9 https://www.energy.gov/articles/secretary-granholm-launches-carbon-negative-earthshots-remove-gigatons-carbon-pollution
10 https://www.spglobal.com/platts/en/market-insights/latest-news/energy-transition/112321-after-cop26-new-questions-arise-over-carbon-trading-as-markets-gain-new-prominence