A trio of IPR reports highlight the importance of direct air carbon capture and storage in tackling the 1.5°C exceedance, while industry experts underline the key role of policymakers.
Policies and policy makers will have to play an essential role in ensuring this direct airborne carbon capture and storage (DACCS) is affordable and widely available in the likely event of a 1.5°C exceedance, said three reports issued by the Inevitable Policy Response (IPR).
DACCS is a process by which carbon is removed from the air and buried underground or used in chemical processes to make plastics, CO2 feedstocks for syn fuels or even building materials such as cement. This could help decarbonize sectors that are difficult to tackle, such as industry and the land sector.
Commissioned in 2018 by the Principles for Responsible Investment (PRI), IPR emphasized that policy is “central to any scale-up” in the development of clean energy technologies.
Speaking at the ‘DACCS – Quantifying the investment Opportunity’ webinar, jointly organized by the IPR and PRI, IPR founder Mark Fulton agreed that DACCS “must be driven by policies around reducing carbon emissions”.
He added that clean and new energy technologies will “require a lot of government input to get going.”
According to the Intergovernmental Panel on Climate Change, DACCS has the potential to remove up to 339 gigatons of carbon dioxide (GtCO2) and scale up to 1.74 GtCO2 per year by 2050. But the current cost of the solution is between $700 and $1,400 per ton of CO2 removed and even a full-capacity plant would likely make this possible. for a breakeven price of $600.
The IPR Financing direct air carbon capture and storage (DACCS): quantifying the investment opportunities The report emphasized that DACCS will need to reduce costs to “competitive levels” to make scaling up the technology politically and economically feasible. It noted that this would likely require reducing costs to around $120 to $150 per tonne of CO2 removed by 2050.
IPR previously warned that unless policymakers take “drastic action,” there will be a temperature overshoot, which will require significant carbon removals from solutions like DACCS to correct.
In April, IPR predicted that the world will overshoot at 1.5°C in the early 2030s and the quarterly Forecast Policy Scenario (FPS) project a policy response with a 50% chance of achieving an outcome of 1.8°C by 2100.
In one of the three reports, which emphasized the importance of policy support for DACCS and IPR marked three possible solutions for policymakers to reduce its costs: using direct subsidies such as tax credits, direct purchasing of DACCS credits, and using carbon markets to “make the costs of DACCS attractive rather than emitting.”
There is already direct funding for DACCS research and development, including the EU Innovation Fund, while the US Inflation Reduction Act (IRA) offers direct incentives through tax credits or for production, including carbon subsidies of up to $180 per ton captured and stored.
There is currently no carbon pricing regime that includes DACCS. However, regions such as the EU and China have carbon markets that could be adapted to include DACCS. IPR emphasized the Paris Agreement‘S Article 6what makes possible voluntary cooperation between countries to achieve the emission reduction targets of Nationally Determined Contributions (NDCs), as being an “important instrument”.
IPR also said that public tenders of DACCS credits and through reverse auctions can be used for price discovery.
Fulton told earlier ESG that DACCS could be a “game changer” for tackling climate change with a “significant impact” on carbon removal.
“By the early 2030s, we’re starting to think that climate events are going to become more pronounced, that we’re going to reach social tipping points and have an impact that makes policymakers say we really need to start moving,” Fulton said.
He emphasized that it is essential for policymakers to “act quickly” and suggested that if faced with “a potentially disintegrating society” they will purchase, encourage and massively subsidize DACCS.
During the IPR webinar, Jennifer Anderson, co-head of Sustainable Investment and ESG at Lazard Asset Management, said it is “very clear that when we get effective government policy, it can really transform the landscape for these technologies.”
She underlined that if governments can initiate “effective policymaking” after COP28, this “could begin to encourage many more investment opportunities for DACCS and other negative emissions technologies (NETs).”
Dr. Ben Allen, director of ESG Issues at the PRI, acknowledged that DACCS is currently being criticized for being “expensive and unproven on a large scale” and still seen as “somewhat controversial”.
But while IPR noted that voluntary and mandatory carbon markets have been “fraught with problems” over the past two decades, the company argued that DACCS does not face the same problems.
IPR highlighted that a key advantage of DACCS is the permanent solution it provides for CO2 removal “unlike most nature-based solutions”.
According to the United Nations Framework Convention on Climate Change new long-term development strategies with low emissions synthesis report32% of long-term, low-emissions development strategies mention bioenergy with carbon dioxide capture and storage (BECCS) as necessary to limit temperature rise but not immediately deployable, while 22% mention DACCS as a technology that can be used in the future are used if costs are “significantly reduced”.
However, IPR said DACCS has a long-term advantage over BECCS because the solution does not compete with other land use requirements as it can be deployed on non-arable land.
The IPR DACCS 2050 forecast roughly corresponds to the growth trajectory of solar energy between 2002 and 2022 from 2030.
Under the IPR FPS, NETs – including DACCS and BECCS – could generate more than $600 billion in revenue by 2050.
“NET is starting to become part of the conversation,” said Lazard’s Anderson, noting that investments previously focused on lower-cost technologies such as solar, wind, electric vehicles and battery storage.”
“But with the US IRA and its carbon capture and storage subsidies becoming commercially viable for the first time, this negative emissions technology is becoming commercially viable,” she added.
The International Energy Agency’s recent World Energy Employment 2023 report discovered that Employment in the use and storage of carbon capture, including DACCS, will steadily increase as a result of the growing number of projects announced from a number of new pilot carbon capture incentives, particularly driven by the US IRA.