One such trend was the explosion of interest in carbon dioxide removal, (CDR), which are technologies that suck carbon dioxide from the atmosphere and store it elsewhere. In recent years, the world has failed to achieve the steep reductions in greenhouse gas emissions required to limit global warming to internationally agreed levels. It has become clear that in order to meet these global warming targets, future emissions reductions must therefore be accompanied by large amounts of CDR, in order to make up for extra emissions.
Many CDR technologies exist or have been proposed, ranging from the tried and true, like planting trees, to the experimental, like sprinkling alkaline rock dust on the ocean surface to alter the water’s chemistry. No one is sure what combination of technologies will make the most sense to deploy, but scientists agree that some combination will need to be deployed at a massive scale, with no time to waste. This has made for a tremendous amount of buzz about CDR, taking it from a fringe-at-best topic a few COP’s ago, to a major one at COP28. In some sectors of COP28, like the Ocean Pavilion, the discussion around CDR was dominant.
This dominance might be because the focus on solutions gives COP-goers something positive to talk about, a welcome change from the necessary but sobering conversations about devastating climate impacts and challenging socioeconomic trade-offs. It might be because there’s a lot of money to be made in budding markets for carbon credits. It might just be because there’s a lot to be sorted out. Regardless of the reasons, CDR was all the rage at COP28.
Questions About CDR
There are many important questions being asked and answered about CDR right now among scientists, policymakers, and the nonprofit sector. Some are about the governance, permitting, and testing. Who is allowed to do what kinds of CDR and where? Who is responsible if something unforeseen happens? How confident do we have to be in a technology’s safety and effectiveness before we can start using it on a large scale? From an economic standpoint, though, another big question is on the mind of businesses looking to do CDR, which will become increasingly important as portfolios of CDR methods are compared and deployed on larger and larger scales. That question is how cost-effective CDR technologies are.
Climate economists are obsessed with a number called the Social Cost of Carbon. This is the amount of damage, in US dollar terms, that a ton of carbon dioxide emitted into the atmosphere is responsible for. Estimates of the social cost of carbon vary a lot depending on different assumptions and uncertainties, but a best estimate is something like $185 (£145) per ton according to a 2022 study in Nature. In principle then, if a CDR technology can remove a ton of carbon dioxide from the atmosphere at a cost of less than $185 a ton—say $100 (£78) a ton—then the world should be spending as much as it can on that technology, because every $100 spent saves $185, right?
If only it were that simple. One challenge is that climate change is a global problem, so even if $185 is saved, those savings are spread over the whole globe – who’s supposed to pay the $100? Thankfully, even if it’s not easy, this is the kind of problem that the international political community can work out. A bigger challenge is that most businesses and governments all have their own estimates of the social cost of carbon, which tend to be lower than climate economists’ estimates. To boot, at the moment they mostly aren’t willing to pay the full cost for carbon dioxide removal, because the technologies aren’t proven, and also because their incentives to pay for removal are pretty weak. So, the true value of removing one ton of CDR might be $185, but you might be able to get someone to pay you $80 (£63) for it at best. Let’s call this the market price of carbon. What do you do then if your technology costs $100 a ton to operate?
CDR Viability
One answer is of course to lower your costs. Because many CDR technologies are in their infancy, high costs are an issue for many; these often exceed the market price of carbon, and sometimes the social cost of carbon as well. On the whole, the industry is betting that technological improvements and economies of scale will bring these costs down, as they usually do in other sectors. However, the lowest costs a technology could theoretically achieve are even sometimes uncomfortably high. Some companies are therefore looking at approaches which yield other financial benefits. For instance, Equatic, a start-up run by University of California, Los Angeles professor Gaurav Sant, has patented a technology that captures carbon dioxide from seawater, and in the process also generates hydrogen gas. The hydrogen gas can be sold, which effectively reduces the operating cost of the CDR. Prof. Sant believes this hydrogen gas bonus is what makes the difference between his company’s CDR being below the market price of carbon. Going forward, expect a lot of emphasis on creative financial strategies to make CDR technologies viable in ways like this.
The other answer is to bring the market price of carbon up closer to the social cost of carbon. In other words, how do we close the gap between how much damage is done by putting carbon dioxide into the atmosphere, versus how much businesses and governments are willing to pay to take it out? This gap can be closed by increasing the amount that businesses are taxed for emitting carbon dioxide, known as a carbon tax. Carbon taxes currently cover just under half of carbon dioxide emissions. However, these taxes are pretty low—often much lower than the market price of carbon, even. Increasing these taxes to reflect the actual costs of emitting carbon dioxide would be a great way to bump up the market price of carbon, fairly and easily. Another solution, which was the focus of much of the conversation at COP28, is on improving monitoring, reporting, and verification of actual carbon dioxide capture and storage. If we can demonstrate that a technology actually does what it says it does, then businesses and governments will be willing to pay more for it.
Important Considerations
There are other important aspects to consider, though. One is how long the carbon dioxide is stored for. Some technologies store it for a decade, or up to a few decades; one good example is changing agricultural practices to increase carbon retention in soils. Others store it forever, effectively, such as if the carbon is sequestered into rocks, or injected into storage containers. This means the time that the CDR technology stores the carbon for is an important part of the cost-benefit analysis of its deployment as well. (In a recent paper (Cael et al. 2023 Environmental Research Letters), we derived a simple formula to account for this.) In other words, not all CDR technologies are created equal; it’s not only their price that matters. Another critical factor is the side effects, both positive and negative of the technology. For instance, techniques based on fertilizing the ocean with iron are hypothesized to have impacts on future fisheries’ yields, because extra plankton growth in one place can mean less plankton growth later down the line somewhere else. But the same techniques might also reduce the natural emissions of nitrous oxide, another potent greenhouse gas, by changing the amount of nutrients that make it to nitrous oxide-producing regions of the ocean. These additional factors will have to be factored in when doing a proper accounting of the costs and benefits of different CDR technologies.
Clearly, there’s a lot left to figure out about CDR, but it’s absolutely critical that this is done if CDR is going to be a part of the international community’s toolkit for addressing climate change. Over the coming years, CDR is expected to become a big part of the world’s answer to mitigating climate change. As CDR grows as an industry, these economic questions will be central to its evolution. How much will it cost to capture carbon dioxide? To know that it’s actually been captured. To store it for a certain number of years. How will these prices be changed by secondary products and side effects? How much will governments be willing to tax emissions? We will just have to wait and see.
Dr. B.B. Cael is a Principal Scientist at the National Oceanography Centre (NOC). His areas of research include climate change mitigation and dynamics, ocean biogeochemistry and ocean circulation.
