· 11 min read
As the dust settles on 2023, we brace ourselves for what is to come in the new year. Major elections in the US, EU, UK, and India will set the direction of global climate action for years to come. They arrive in the wake of the first mention of carbon dioxide removal (CDR) in a COP agreement ever. Article 28e of the First Global Stocktake, calls on Parties to contribute to “[...] accelerating zero- and low-emission technologies, including, inter alia [...] removal technologies such as carbon capture and utilization and storage, particularly in hard-to-abate sectors [...]”.
UN Climate Change Executive Secretary, Simon Stiell, heralded the COP28 agreement as spelling the beginning of the end of the fossil fuel era. The agreement calls for boosting climate action before 2030 to keep the global temperature limit of 1.5°C within reach. At COP30, Parties must submit updated nationally determined contributions that are fully aligned with 1.5°C. This makes for a window of opportunity to get removals from a paragraph to a stand-alone section.
Removals need a holistic narrative that centers on green growth and sustainable development. A story that connects to conversations around just transition at a time when fossil fuels for energy use peaked in 2023, according to some climate scientists. One that positions CDR as a critical tool in the climate change adaptation struggle as the world witnessed the hottest year ever recorded. A narrative that is clear about the role of big industry, including oil and gas, and apprehensive about the risk of narratives justifying business as usual with CDR .
It will be no easy feat. It comes at a time when removals have barely reached the general public and the narrative around their use can get mired in controversy as big industrials wade in. If the ambition is the exponential increase of carbon removal capacity, the CDR community should be clear-eyed about the risks as much as the opportunities. So which mega-trends should you watch in 2024 and what are some of the uncertainties?
• Trend #1 - Doubling down: Is the CDR market maturing?
• Trend #2 - Globalizing trade: Are markets finally converging?
• Trend #3 - Cloak and dagger: Is it time for CDR to go public?
• Trend #4 - Managing the beast: Quo vadis petroleum?
I will get into all four trends below, ending with a conclusion on where to go from here as removals step into the limelight.
Trend #1 - Doubling down: Is the CDR market maturing?
For a long time, the carbon removal market has been dominated by early movers from the private sector deploying capital to drive innovation and early deployment. For most, this was less motivated by expected compliance requirements and more by a commitment to scaling an area of climate action still in its infancy, with all the commercial opportunities and reputational benefits that such investments bring. This is going to change in 2024.
A growing number of players are entering the market, driving up demand signals, offering greater volumes, and strengthening the enabling environment. It is needed. Greater diversity brings more liquidity, which is exactly what the market requires to scale:
• New suppliers are getting into the game: Challenging Direct Air Capture (DAC) and biochar, other ‘not so sexy, but high impact’ Biomass Carbon Removal and Storage (BiCRS) solutions such as carbon capture and storage on waste-to-energy plants, are positioned to sell large volumes at low cost. Enhanced rock weathering will take the market by force as reliable accounting and verification frameworks become available.
• New buyers are emerging on the stage: We are still speaking of early movers, but they are motivated by other considerations than the first generation of CDR buyers. Some of them, such as airlines, are testing the waters as they expect future compliance requirements under CORSIA. Others, such as financial services companies, are buying credits to learn about the market and position themselves early as financiers.
• Countries are making a move: New multilateral initiatives are setting the stage for bolder action on policy. This includes the Carbon Management Challenge (collectively manage at least 1 GtCO₂ by 2030), the Group of Negative Emitters (become net-negative with removals), and Global Carbon Removal Pledge (collectively remove at least 3.5 GtCO₂ annually by 2030, 5 GtCO₂ by 2040, and 10 GtCO₂ by 2050).
• Cities rise above the parapet: Missing in action so far, cities have a key role to play in advancing CDR deployment and raising awareness. The potential is huge, as our report with Bellona on CDR opportunities in Amsterdam showed. 2024 will see increased action from individual cities such as Nairobi, Bogota, Stockholm, Phoenix, collective platforms such as the 4 Corners Coalition, and new multi-stakeholder initiatives.
These developments will lead to stronger long-term demand signals, easing the perennial challenge for project developers to access fresh capital as financiers gain confidence in the profitability of CDR. Still, demand today remains shared by only a few buyer clubs (NextGen, Frontier) and individual buyers (Microsoft, Airbus). The scale and commitment level of government-led efforts may not be sufficient to bring in second tier buyers en masse just yet.
Trend #2 - Globalizing trade: Are markets finally converging?
The jury is still out on how to integrate removals into compliance mechanisms and which solutions are better suited for the voluntary market. But that does not stop governments from getting in on the action, as highlighted above, and voluntary action becoming increasingly ‘regulated’ to ensure a semblance of compliance-grade quality and safeguard market confidence at a time when greater capital inflow is needed to move the dial.
As Eve Tamme put it, the blurring of the line between voluntary and compliance markets will continue unabated, even after the collapse of the negotiations on the Article 6.4 mechanism establishing a global carbon market and the inclusion of removals:
• Cap-and-trade markets are gearing up: The EU ETS may only include removals as of 2031, but others such as the UK, Swiss and Japanese will move faster. This year, Japan is expected to announce the eligibility of international CDR credits for compliance purposes in its GX League. The UK may also provide greater clarity on its commitment to integrate removals. California and Quebec already allow the use of CDR credits.
• Government funding is deepening: The US has been at the forefront of deploying public funding in CDR. It is now preparing to launch a direct federal procurement instrument, engaging other countries to get on board. In 2024, we can also expect more clarity on Sweden’s BECCS procurement scheme and the announcement of Denmark’s first tender procedure for negative emissions under its CCS support framework.
• Projects will straddle jurisdictions: Next generation CDR projects are becoming more complex as they are integrated into the carbon management economy. Mixed emissions projects and projects connected to CCUS hubs will involve emissions covered by both compliance and voluntary frameworks. This challenges accounting and verification, as we outlined in an article on steps to building a new carbon management economy.
• Voluntary action will be standardized: This year will see further efforts to standardize the accounting and use of removals. The IC-VCM will conduct its first assessments of carbon crediting programs and carbon accounting methodologies and the EU will likely adopt its Carbon Accounting Certification Framework. Expected guidance from the SBTi on the use of removals as part of its Net Zero Standard will hopefully clarify the extent to which companies can use removals as part of their science-based target.
As government-led voluntary and compliance efforts take shape, it will be vitally important for buyers and suppliers alike to ensure a smooth transition from the voluntary market as it exists today, or even a structural connection between the two for a selection of certified durable CDR solutions. Building such bridges will be important to safeguard the resilience of the sector at a time when climate action itself will be put under a magnifying glass.
Trend #3 - Cloak and dagger: Is it time for CDR to go public?
We are living in an era of rage. 2024 will undoubtedly heighten the angst with electoral politics and climate action now fully immersed in the culture wars dominating Europe and the US. Climate policy may not survive as it exists today as the political capital for bold action evaporates. Carbon removals have so far faced limited politicization, if only at the hand of environmentalists and academics warning of mitigation deterrence. But that may change.
A number of prominent losses for the climate agenda should serve as a warning signal as the world prepares itself for a Super Tuesday of elections. In the EU, we saw the center right swoop in to try and kill off the Nature Law, a key plank of the European Green Deal. Also hearing the siren call of the far right, the UK Conservatives watered down its net zero plans. In the US, President Biden appears unable to translate the economic benefits of the Inflation Reduction Act for red states into electoral gains. All three are having elections this year.
It may seem a blessing in disguise that the general public remains by and large unaware of removals, as this limits the risk of dedicated funding being sacrificed. But the reality is that public funding in place today is vastly insufficient. Indeed, much more needs to be unlocked for the sector to stand a chance of maturing. The timing to ask for that funding is suboptimal to say the least, but 2024 may be as good a time as any for the CDR community to ‘come out of hiding’ and make the case to the general public.
Successfully coming out means connecting up with other climate and non-climate communities of action. Informed by the myriad benefits that different solutions can bring, as we outlined with the WBCSD in this corporate guide for CDR portfolio management, removals need to be a structural part of discussions on climate change adaptation, biodiversity increase and conservation, industrial policy, and the just transition. A narrative centered on green growth and sustainable development, with high profile ambassadors that call time on business as usual.
Trend #4 - Managing the beast: Quo vadis petroleum?
If COP28 showed anything, it is that engineered carbon removal is easily conflated with carbon capture and storage on point-source fossil emissions. Fudging the differences risks weakening climate action over time as it precludes targeted action. In the First Global Stocktake agreement, CDR is mentioned alongside CCS on fossil emissions, giving the impression that they are equal in their impact. This contrasts with the roles for CDR described by the IPCC.
Take the Carbon Management Challenge. It has an aim to collectively store 1.2 Gt of CO2 by 2030. However, most of the carbon will come not from CDR, but from carbon capture on existing or new fossil fuel use. Yet reducing the rate of emissions is distinct from removing historical emissions from the atmosphere. Without dual targets for reductions and removals, it is impossible to put in place the targeted measures needed to advance CDR.
How the oil and gas industry will position itself is going to be the proof in the pudding. Early signals of ‘net zero’ petroleum products claiming the neutralization of associated emissions are worrying. So are statements around the coupling of CDR and enhanced oil recovery. Clearly, we should all pay attention when the CEO Exxon Mobil frames removals as an opportunity to retain a social license to continue producing hydrocarbons. Oil and gas companies are however going to be critical for a successful scale-up, at least for those solutions involving geological storage.
Clarifying the nature of and need for removals therefore remains vitally important. Recent publications, such as Bellona’s report on ‘Who should use NETPs?’, point at removals as a scarce good. This has been countered by Robert Höglund’s argument that scarcity is not the result of physical limits, but the willingness to pay. Either way, the deployment of CDR will face increasing competition for renewable energy, land, and storage capacity. This means that the case for removals has to be crystal clear. It cannot be to maintain the status quo.
Where do we go from here?
If 2023 was the year of removals entering the international climate scene, 2024 has to be the year of consolidation and deepening of the business case for removals. Welcoming new players on the market will be important to both increase liquidity and market depth, as well as boosting legitimacy by including civil society, enticing second tier buyers, and countering false flags.
The politicization of removals in the domestic space is imminent and with it come new challenges. Tackling them requires collaboration. Concerted efforts involving non-state actors such as Carbon Removals at COP and the Global Carbon Removal Pledge are powerful tools for the advocacy that is so dearly needed. So are efforts to make CDR technologies the subject of a new ‘space race’ that brings China and India into the game, building a truly global competitive environment that unlocks ever greater amounts of capital, innovation and impact.
But more is needed. Carbon removals have to be sold; not just the credits. More importantly, the story itself needs to be told and retold, strengthened and evolved. It needs to reach the general public sooner than later to put up a fight when it will inevitably be subjected to the changing political economy of decarbonization. After all, it is only through public consensus that we can unlock what is in effect a public good.
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