The latest IPCC report suggests that all pathways to limit global warming to 1.5°C depend on carbon dioxide removal (CDR)¹. Long term CDR can be both natural solutions, such as sequestering and storing carbon in trees and soil, or emerging technologies, such as direct air capture (DAC)² of CO2 directly from the atmosphere.

However, how quickly can these long term CDR technologies be adopted by the voluntary carbon market (VCM)?

While natural solutions such as agroforestry offer a low cost pathway to impact, costing less than $50 per tonne of CO2³, it has been calculated that to achieve net zero by 2050 using agroforestry methods, this would require at least 1.6 billion hectares of new forests, equivalent to 5x the size India, more than all the farmland on the planet.⁴ Therefore, it is paramount that a new suite of CDR technologies are developed to permanently capture and store CO2 at high volume and scale.

At AlliedOffsets, I have been exploring how the long term CDR market will scale. Below are four things I found in my investigation to date.

1. Biochar is the most dominant CDR technology in the VCM currently
2. The most promising CDR technologies and their 8 metrics of scalability
3. Pricing: CDR tech needs prices to be under $100/tCO2e to increase demand
4. Public sector is the most important factor for scaling CDR

Read on to find out the details of each learning.

1. Biochar is the most dominant CDR technology in the VCM currently

The AlliedOffsets database covers nearly all of the voluntary carbon market, and — when disregarding nature-based solutions — the vast majority of the removals market is currently being served by biochar projects.

There are approximately 25,000 projects in total with ~1200 CDR projects. The rest of the market is filled by mostly avoidance credits⁵, which do not lock away carbon, and many of the CDR projects that are out there are unregistered and do not have methodologies.

Biochar currently seems like the most scalable option according to a CDR scalability report by BeZero. Biochar is currently seen as the CDR technology with the lowest barriers to scale and currently has registered methodologies on Puro.Earth⁷ and Verra⁸; Climate Action Reserve⁹ is in review for release in 2023. While biochar has low barriers in terms of financial, ancillary value chain and monitoring, reporting and verification (MRV) readiness, its caveat is that it must use a large amount of land space compared to other technologies.

2. The most promising CDR technologies and their 8 metrics of scalability

There is an array of different CDR technologies to track, but the main problem is understanding which one shows the most promise and how can we assess that? BeZero has identified some of the most promising technologies and applied a framework to assess the scalability of each of them. Five of the most promising CDR technologies — bioenergy with carbon capture and storage (BECCS)¹⁰, biochar, DAC, enhanced weathering, and ocean alkalinity enhancement — have been assessed over 8 dimensions that are indicative of their barriers to scalability. (See our taxonomy of various CDR technologies here.) These dimensions are:

1. Energy: the quantity and quality of energy used to power the method
2. Land: the quantity and quality of land used within the system boundaries
3. Financial Restraints: the current and projected price, costs, and private financing for a method
4. Policy: the quantity and quality of catalytic policies and regulation at national and international scales
5. Resources: the quantity and quality of resources used, excluding energy and land, and physical outputs produced within the system boundaries
6. Localized Impacts: the social and environmental impacts which may affect local stakeholders, and method perceptions
7. Ancillary Value Chains: the level of impact from ancillary carbon value chains that are outside the system boundaries, such as transportation and storage
8. MRV Readiness: the readiness, robustness and ease of implementing MRV

Currently, out of the five CDR technologies BeZero has analyzed, biochar has the highest potential for scaling and ocean alkalinity is the furthest away.

3. Pricing: CDR tech needs prices to be under $100/tCO2e to increase demand

The Barriers to scaling the long-duration carbon dioxide removal industry report by CarbonPlan¹¹, which synthesized the opinions of 34 stakeholders in the VCM, reported the common opinion that the price of 1 tonne of CO2 created by any long term CDR tech should be under $100.

Cost barriers are significantly high for CDR, and currently technologies such as DAC cost between $250 — $600 per tonne (Climeworks)¹², and enhanced weathering $80–180 (Frontier Science)¹³. Below in Table 1 is a price comparison of the current average data pricing of different CDR technology projects with AlliedOffsets data, compared to the projected price of scaled CDR projects once they reach maturity, estimated by the American University.

This pricing data matches well with BeZero’s scalability report, giving an overall proxy for the technological readiness levels of each of the CDR technologies.

Decreasing these costs is believed to increase demand for these CDR credits, as currently the only purchases of these credits at the moment are a suite of (primarily) tech companies that are voluntarily leading the charge in subsidizing the technology until costs come down.

4. Public sector support is the most important factor to scaling CDR

Although voluntary private sector demand has contributed to the growth of the CDR industry, most stakeholders believe that the public sector should play a larger role in its development going forward. This is because the majority of private sector demand is limited to purchases of $10–20 million¹⁹ in CDR at the moment, not in the hundreds of millions that corporates are spending on more conventional VCM credits.

The public sector is crucial because it can support projects that the private sector cannot, especially those that require funding in the range of $50–100 million²⁰. It is unlikely to scale up to the gigaton level through voluntary purchases alone. However, there are differing opinions among stakeholders about the specific roles that the public sector should play:

1. Some believe that the public sector should establish standards for high-quality CDR and define the requirements for achieving them.
2. Others suggest that the public sector should take a more proactive role in catalysing the industry’s growth, such as expanding policies to fund and encourage the scale-up of CDR through measures like expanding the 45Q tax credit (tax credit for CO2 storage policy)²¹, increasing R&D investments, and offering guaranteed loans.
3. Finally, some stakeholders feel that the public sector should directly procure long-duration CDR, as government procurement could be the most effective way to scale up the CDR market.

Conclusion

While there is still a long way to go in terms of CDR technology scaling, with CDR credits making up only a small fraction of the market for a high price point, the demand for these technologies to reach the 1.5°C target is paramount. The barriers to scaling have a vast array of inter related factors, such as the involvement of the public sector, price point at scale and ancillary value chains. The question remains: can we develop the capabilities to execute and sustain these technologies quick enough?

If you want to dig through the data and understand how the CDR space will expand in detail in relation to the VCM, we have the data. Please visit our AlliedOffsets demo dashboard here.

References:

[1] Energy Monitor: Carbon removal offers redemption for “almost inevitable” 1.5°C overshoot — IPCC: [https://www.energymonitor.ai/tech/carbon-removal/carbon-removal-offers-redemption-for-almost-inevitable-1-5c-overshoot-ipcc/]

[2][17] American University: What is Direct Air Capture? [https://www.american.edu/sis/centers/carbon-removal/fact-sheet-direct-air-capture.cfm#:~:text=What%20is%20Direct%20Air%20Capture,lasting%20products%2C%20such%20as%20cement.]

[3][12] World Resources Institute: 6 Things to know about Direct Air Capture: [https://www.wri.org/insights/direct-air-capture-resource-considerations-and-costs-carbon-removal]

[4] Oxfam: Tightening the Net, Net zero climate targets — implications for land and food equity: [https://oxfamilibrary.openrepository.com/bitstream/handle/10546/621205/bp-net-zero-land-food-equity-030821-en.pdf]

[5][11][19][20] Carbon Plan: Barriers to scaling the long-duration carbon dioxide removal industry | Report [https://files.carbonplan.org/CDR-Scale-Barriers.pdf]

[6] BeZero: Carbon Removal Scalability Assessment Report: [https://bezerocarbon.com/pdf/dfe4232529/scalability-assessment_-summary-report-january-2023.pdf]

[7] Puro.Earth: Biochar methodology edition 2022: [https://puro.earth/articles/puro-standard-biochar-methodology-edition-2022-is-out-now-743]

[8] Verra: Release of Biochar Methodology 2022: [https://verra.org/verra-releases-biochar-methodology/]

[9] Climate Action Reserve: U.S. and Canda Biochar Protocol: [https://www.climateactionreserve.org/how/protocols/ncs/biochar/dev/#:~:text=The%20Climate%20Action%20Reserve%20is,entering%20the%20atmosphere%20for%20centuries]

[10][14] American University: What is BECCS?: [https://www.american.edu/sis/centers/carbon-removal/fact-sheet-bioenergy-with-carbon-capture-and-storage-beccs.cfm]

[13] Frontiers: Enhanced Weathering Using Basalt Rock Powder, Carbon Sequestration, Co-benefits and Risks in a Mesocum Study: [https://www.frontiersin.org/articles/10.3389/fclim.2022.869456/full#:~:text=However%2C%20costs%20of%20C%20sequestration,1%20CO2%20in%202022.]

[15] American University: What is Biochar?: [https://www.american.edu/sis/centers/carbon-removal/fact-sheet-biochar.cfm]

[16] American University: What is Enhanced Mineralisation?: [https://www.american.edu/sis/centers/carbon-removal/fact-sheet-enhanced-mineralization.cfm]

[18] American University: What is Ocean Alkalisation?: [https://www.american.edu/sis/centers/carbon-removal/fact-sheet-ocean-alkalinization.cfm]

[21] International Energy Agency: Section 45Q Credit for Carbon Oxide Sequestration: [https://www.iea.org/policies/4986-section-45q-credit-for-carbon-oxide-sequestration]