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Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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The $4 Trillion Carbon Capture Opportunity

The consequences of climate change are becoming increasingly visible. Rising sea levels, wild-fires, heatwaves, and extreme weather events are already wreaking havoc everywhere and could cost the global economy a staggering $1 trillion dollars over the next five years in crumbling infrastructure, reduced crop yields, health problems, and lost labor as per the Carbon Disclosure Project (CDP).

A big part of climate change is being wrought by global warming, thanks to rising carbon levels in the atmosphere. Industrial activity has spewed out some 2,200 gigatons of CO2 since the 19th-century industrial revolution and continues to emit another 40 GT every year. At this rate, we could exceed the 2,620 GT limit in just over a decade, leading to irreversible damage to entire ecosystems, economies and communities. 

Yet, despite this very real existential threat, there are few incentives to limit carbon emissions and a dearth of policies that could either encourage or regulate the industry. 

And now one expert says that any hope for averting catastrophic climate change lies in carbon capture, storage, and utilization (CCSU) technologies. Wal van Lierop of Chrysalix Venture Capital and an investor in Canada-based carbon capture startup Svante has proposed creating policies that will make carbon markets not only feasible but profitable.

$4 Trillion Carbon Marketplace

What is the cost of carbon emissions? It depends on whom you ask. 

The Trump administration estimates that a ton of CO2 causes $1 to $7 worth of domestic social damage. 

That seems like a very conservative figure considering that Morgan Stanely estimates that climate change has already cost the world more than $650 billion over the past three years while Moody’s Analytics predicts that 2° C of warming could cost the global economy $69 trillion by 2100.

The true cost of climate change could be closer to at least $50 per ton, while the global social cost is more like $417 per ton.  Related: This Supermajor Is Diving Into The Green Hydrogen Game

Lierop argues that carbon pricing, CCSU technology, and policies need to be such that capturing, repurposing or permanently storing carbon dioxide becomes more profitable than emitting it into the atmosphere. If policymakers were to price CO2 at $100 per ton, the 40 GT of CO2 that the world emits annually represents a $4 trillion opportunity for carbon capture firms. If that figure seems monstrous, consider that it represents just 5% of the global economy and is certainly lower than the nearly $70 trillion in damages that the economy would otherwise suffer in the face of a full-blown climate disaster.

It’s not such a far-fetched idea, either.

Here in the United States, Section 45Q(a)(1) allows a credit of $20 per metric ton of qualified carbon oxide captured by the taxpayer using carbon capture equipment which is originally placed in service at a qualified facility before the date of the enactment of the Bipartisan Budget Act (DOE). It’s essentially a tax code that provides a performance-based tax credit for carbon capture projects that can be claimed when an eligible project has:

- securely stored the captured carbon dioxide (CO2) in geologic formations, such as oil fields and saline formations; or

- beneficially used captured CO2 or its precursor carbon monoxide (CO) as a feedstock to produce fuels, chemicals, and products such as concrete in a way that results in emissions reductions as defined by federal requirements.

Today, 45Q pays $35/ton for using captured CO2 in Enhanced Oil Recovery (EOR) or synthetic fuels and $50/ton for sequestering CO2 in geological storage. A bill under consideration might amend 45Q to pay an even higher credit for direct air capture: $43.75/ton for EOR or fuels and $65.50/ton for geological storage.

Still, that might be too low to encourage carbon capture firms whose breakeven point is higher than $50/ton. Coupling 45Q with a Fee and Dividend system could be a more effective solution. This system is currently under consideration in the U.S. House of Representatives H.R.763. The fees collected under H.R.763 would be distributed as dividends to all U.S. citizens to offset higher gas prices and elevated costs for hydrocarbon-based goods.

Paying for carbon capture

In case you are wondering whether the idea will have any takers, there is already an encouraging precedent. 

Last year, online payment firm Stripe announced that it will pay $1 million every year for companies to take tons of carbon off the atmosphere. Stripe claims that it already fully offsets its greenhouse gas emissions and plans to invest in green projects that reduce emissions elsewhere. Related: Shale Decline Inevitable As Oil Prices Crash

Microsoft has also set a goal to become carbon negative by 2030, meaning that it plans to remove more carbon dioxide from the atmosphere than it emits. The company's ultimate goal is to remove from the environment by 2050 all of the carbon the company has emitted since it was founded in 1975.

Meanwhile, ride-hailing firm Lyft has committed to full carbon neutrality by offsetting the carbon impact of every one of its rides. In the 12 months to May 2019, the company bought 2,062,500 metric tons of carbon offsets, a costly investment to underpin its green credentials. Further, the company is purchasing renewable energy for each office space, driver hub, and electric vehicle mile on its platform.

Media giant Sky has been carbon neutral since 2006; multinational conglomerate Siemens has pledged to become carbon neutral by 2030 while furniture maker IKEA has targeted ‘carbon positive’ status by 2030.

Sadly, energy companies - some of the biggest offenders as far as carbon emissions go - are conspicuous by their absence in this list of more than 100 companies that have committed to lowering their carbon footprint using carbon capture and other technologies.

By Alex Kimani for Oilprice.com

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  • John Scior on March 03 2020 said:
    The Calculus of CO2 emmissions and the subject of Climate EMERGENCY fascinates me and perhaps this article gives us insight as to the motivational factor behind it. Firstly, one should note that when Al Gore came out with his lecture circuit and movie regarding this topic, his dire predictions did not come true. We are not all swimming in salty sea water some 20 years later. Secondly, the proponents for taking action seem to think that without the additional CO2, that hurricanes and other devastating weather events would not occur. They still would occur and thus it makes it impossible to say how much more incrementally damaging an extreme weather event is because of the additional CO2. Thirdly, it seems that the proponents of CO2 sequestration are attempting to make a profitable industry for themselves by advocating say solar or for some carbon sequestration / reduction scheme that ultimately boils down to a tax on fossil fuels. Its oh so sweet to be day dreaming that all these schemes would make an impact, but ultimately, you are asking people at large to make a lifestyle choice to consume less. Many people see your EMERGENCY when you put it in the context of some astonomical $ 4 trillion EMERGENCY. However, when you ask the question, do you want to pay say 50cents more for gasoline per gallon or an electric bill that is twice as expensive as the one you have, how many hands go up then ? What happened to the Kyoto protocol ? It sets some far in advance goal for CO2 emissions that requires little of the current politicians to lay sacrifice on their present constituents and when the time comes to implement real change, these plans are set aside for the sake of economic development.
  • Lee James on March 06 2020 said:
    Good article that nicely outlines the issues, prospects and options for dampering down CO2 emissions.

    The options for doing something about the problem are high-cost, in dollars and life-style. But we are already paying for the consequences of a faster-changing climate. We will pay -- it's just the form of our payment that is in question.

    Alex Kimani touches on an option that we will likely never do, but it's the least onerous. It seems too obtuse to gain much traction. Here it is:

    Enact a gradually increasing tax (or "fee") on carbon emissions that sends us/consumers a price signal for what burning a gallon of gas really costs, including pollution. Tax fossil fuel where it enters the economy, economy-wide, but -- get this -- return revenue from the carbon fee to consumers monthly or annually. The most vulnerable in our economy will gain a little on the "dividend," on average, by getting back a little more than they actually pay into the system' they burn a little less. All of us can decide to invest in ways to avoid buying slightly higher cost fossil fuel.

    The above is way too simple. We'll of course need to invest in something higher priced, such as nuclear power or carbon capture plants.
  • LEX N on March 10 2020 said:
    Rising sea levels?? Where?? In my part of the world, if you go down to the marina and ask an old sea dog if sea levels have risen in the last 50 years you will get a simple answer: No. And they, unlike those who want a slice of this 4 trillion opportunity, have no reason whatsoever to lie.

    ps. don't forget to factor in the huge increase in crop production and tree growth due to CO2. Global forest cover is up 7%.

    These are such nonsense statistics. Oh, I get it. You are citing CNBC, Guardian etc. You summed it up with the word "oopportunity" - which is really what it is.

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