Sewage Treatment for the Skies:
Mobilising Carbon Dioxide Removal through Public Policies and Private Financing
Date of publication: March 2021
Authors: Poralla, M., Honegger, M., Ahonen, H., Michaelowa, A., and Weber, A.
The mitigation of climate change to limit global warming to well below 2°C, as specified in the Paris Agreement, builds on two pillars. The first pillar — supported by most stakeholders, but facing implementation challenges — is rapid and deep reduction of greenhouse gas (GHG) emissions from burning of fossil fuels and destruction of forests and other types of biomass. The second pillar — contested by many but increasingly seen as crucial — is carbon dioxide removal (CDR), i.e. the practice of actively removing CO2 from the atmosphere and durably storing it1. Both pillars complement each other in the quest to achieve greenhouse gas-neutrality, a balance of emissions and removals.
Many forms of CDR exist; some based on accumulation of carbon through natural processes, others through chemical-physical absorption and sequestration technologies. Generally, the nature-based options are currently cheap but face permanence challenges, whereas the technological options tend to be very expensive but come with high permanence. In contrast to many emission reduction technologies such as renewable energy or energy efficiency, most approaches to CDR do not generate any goods and services that can be sold and thus generate revenues. Exceptions are afforestation, reforestation and ecosystem restoration where revenues accrue from non-timber forest products and recreational amenities. But here the revenues need to accrue in the long term to prevent reversal.
Given that most CDR approaches do not offer a valid business case in the absence of dedicated policies that create climate change mitigation related revenues, conventional commercial and concessional finance has to date largely bypassed CDR. The metaphor ‘sewage treatment of the skies’ expresses this characteristic of CDR as a public service for cleaning up the atmosphere. Ensuring that this public service is provided thus seems the unequivocal responsibility of the state: Policymakers thus need to not only mobilise funding to cover up-front capital costs but also long-term operational cost, which can be very high for technological absorption and underground sequestration. Likewise, CDR related research, design, development and demonstration (piloting) (RDD&D) requires public funding in the near-term. The key challenge will be to bring down costs of non-nature-based CDR, and to prevent rent-seeking by technology providers. This can only be achieved if allocation of public funding is done in a transparent and competitive way, and continuously reassessed. The state will not be able to ‘pick winners’ once and for all. Initially, a differentiation by technology type will be needed given the massive cost differences between technologies.
In the long term, public policies should generate an increasingly universal carbon price — sufficiently credible to generate investment in CDR that contributes to a substantial decrease in CDR costs comparable to the cost decrease witnessed for solar and wind power such that CDR can become a regularly-provided public service across the planet.
The briefing report seeks to offer practical insights for experts and decisionmakers on how to facilitate scaling-up of CDR and CDR carbon markets through public policies and finance.