Testing Negative
What’s hot in the climate investment world at the moment? Battery tech? Renewables? Electric cars? The tantalising prospect of clean, flying taxis in the form of EVOTLs?
According to an article released this month, the answer is negative emissions technology (sometimes called “NETs” but which I feel deserve the catchier moniker: ‘negtech’).
We’ve all heard the analogy - when it comes to climate change, we urgently need to both turn off the carbon tap and drain the bathtub. Negtech focuses on the drain - via technological (e.g. direct air capture) and biological (e.g. afforestation) solutions that remove greenhouse gases from the atmosphere and lock them away.
Negtech is on the rise but still largely new, and now a wall of investment money will test how effective these solutions really are.
To provide a flavour of the investment influx - in December, direct air capture providers Carbon America secured $30m in Series A funding. Earlier in 2021, Elon Musk (the subject of so many blogs, including my last one) put $100m into carbon capture start-ups via the XPrize. Kicking off February 2022, Bill Gates was among investors giving over $80m to Verdox in a move similar to his investment in Canada-based Carbon Engineering last year, another carbon capture and storage firm. Even seaweed start-ups (think ocean-based reforestation) saw their funding double to $168m in 2021.
But will this negtech investment trend continue, or will the air be sucked-out of it just when we need carbon removal the most? I’m going with ‘continue’. In 85% of 2 degree scenarios, more than 300 Gt CO2 needs to be removed - that increases to 500 Gt for 1.5 degree scenarios. For reference, a 1 hectare forest in the UK will remove about 300 tonnes of CO2 over its lifetime.
Corporates are increasingly setting net zero targets, and the more stringent science-based targets are on the rise (as they should be). Actually achieving these targets will see demand for high-quality negtech projects rocket, with prices heading in the same direction (something highlighted by BNEF in January).
However, the current market for carbon removal is proving challenging to navigate. Microsoft rejected over 98% of all carbon capture schemes that tendered for its business last year, based on a strict set of quality standards (conveniently available here). With a keen eye on their reputation, and a keener eye on forthcoming regulation and growing liabilities, how does a company ensure that the carbon capture schemes it invests in will actually result in achieving net zero targets in the required timeframes?
Kita is here to help. We’re developing insurance for a broad spectrum of high quality carbon removal schemes, and are focused on helping both buyers and sellers meet their carbon delivery targets and net zero promises by de-risking the projects and technologies of the new negtech market. We’re not doing this because the market is hot. We are doing it because the world is too hot, and enabling more high quality negtech projects is a critical part of the solution.
