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BlackRock plans to invest $550 million in the world’s largest direct air capture project, being developed by Occidental Petroleum, in a sign of growing investor confidence in the emerging technology.
The companies said Tuesday they would form a joint venture to develop Stratos, a project under construction in west Texas that aims to remove carbon emissions from the atmosphere.
“This joint venture shows that direct air capture is becoming an investable technology and BlackRock’s involvement in Stratos underscores its importance and potential for the world,” said Vicki Hollub, CEO of Occidental, one of the largest U.S. oil companies .
It’s one of the largest investments ever in the technology and a boon for Occidental, whose largest shareholder is Warren Buffett’s Berkshire Hathaway.
The company is betting that carbon management will play an important role in the global decarbonization effort. Direct air capture – or DAC – sucks CO₂ emissions from the air to be buried underground or reused in building materials, agricultural products or fuels, rather than contributing to global warming by lingering in the atmosphere.
The International Energy Agency has said the technology will play “an important and growing role” in setting the world on course to reach net-zero targets as economies continue to burn fossil fuels. But it hasn’t yet been widely proven, and some environmentalists worry it will slow the transition to cleaner forms of energy.
BlackRock is investing through its fourth global infrastructure fund, which focuses on climate-related projects, including those that help brown industries become greener. Last year it raised $4.5 billion toward an eventual target of $8 billion from global pension funds, insurance companies and sovereign wealth funds. BlackRock emphasized that it put money into the Occidental project because of the potential for significant returns.
“Occidental’s technical expertise adds unprecedented scale to this groundbreaking decarbonization technology,” BlackRock CEO Larry Fink said in a statement. “Stratos represents an incredible investment opportunity for BlackRock’s clients. . .[and]underlines the critical role of U.S. energy companies in climate technology innovation.”
The $9.1 trillion dollar’s use of environmental factors in investments has made it a target for Republican politicians, who accuse it of boycotting fossil fuels and being “woke.” Climate activists, meanwhile, are angry that BlackRock voted against most climate-related shareholder resolutions this year, saying the proposals were too prescriptive. BlackRock and Fink emphasize that the fund manager puts returns and the demands of investors first.
Stratos — which is designed to capture up to 500,000 metric tons of carbon per year — is about 30 percent complete, according to Occidental, and commercial operations are expected to begin in 2025.
In August, another Western DAC development was among the winners of a $1.2 billion award from the Department of Energy, as the Biden administration looks to accelerate commercialization of the technology as part of its drive to decarbonize the economy to make.