Direct air capture: how to accelerate this technology to limit global warming

Using the learning-by-doing rules in the mass manufacturing of DAC, the cost is expected to come down rapidly. DAC facilities designed and manufactured as simple and modular knock-down units can lower costs as standardized spares can be mass-produced.

On the operational expenses front, nature-based sorbents with high capture rates, efficient thermal energy regeneration coupled with waste heat utilization and optimized air contactors are looked upon as quick wins for cost reduction.

Additionally, increasing energy efficiency in the operations of a DAC facility can be a source of cost relief. Future opportunities for cost optimization can stem from advancements in air-contactors, sorbents, and design elements of DAC units. Specifically, passive air contactors are some of the recent considerations.

DAC technologies are in their early stages of development. The business cases and economies of scale for commercial operations are yet to be conclusively established. Hence, perceived and real uncertainties constrain large private financing flows, which in turn constrains production scale.

There is, therefore, a need to establish a dedicated ‘DAC fund’, if it is to attract large-scale capital.

This proposed DAC fund – supported by governments and multilateral agencies – can accelerate financing for DAC technology. Since the technology is novel, a massive amount of grant capital and early-stage risky equity capital is required.

A DAC fund could infuse public capital to increase the scale of operation of relevant technologies and would help funnel investment into the development of new technologies to improve unit efficiency and economics. Unlike private financers, the fund could provide risky capital on a lower or no-expected return basis or grants wherever necessary.

The fund could also invest strategically to alleviate the apprehensions of private investors. For example, public financing can be used as junior equity in DAC technology projects to reduce the riskiness of private investors.

Strategic public investments in breakthrough technologies often arrive early, absorbing major uncertainties and long-term risks associated with the early stage of technologies. Carbon reduction is a mission for all governments across the globe that warrants mission-oriented R&D investment, which only public investors can undertake.

All governments and multilateral agencies must join hands and provide capital to accelerate the deployment of DAC technology, considering the technology is creating a global public good. The technology can be taken over by businesses only once profits are apparent.

The CO2 molecule isolated through DAC has myriad use cases. Carbon’s versatility makes it an indispensable ingredient for industrial chemicals that have high commercial value.

To nurture this potential, initiatives like X-Prize and Breakthrough Energy’s Catalyst programme have been launched. The recent $650 million fundraising by Climeworks indicates that private investments have started considering DAC as an attractive investment.

Here, public financers can find a way through a blended financing mechanism – blending public and private capital – to leverage the use of public capital.

Thus, from the demand side, concerted efforts must be put towards creating market mechanisms and policy interventions to develop demand for carbon removal as a service (CRaaS). A vibrant carbon market backed by prudent climate action policies can shape DAC technology.

The market can make CRaaS a viable business opportunity in the medium-long term, where CraaS units are sold in the open market like carbon credits. The creation of such a market could drive private capital flows to DAC technology.