“If there is a cost associated with excessive CO2 in the air, there is value not only in avoiding its emission but also in removing it to acceptable levels.”
Fans of carbon removal may blindly agree with this statement, but it can be a hard concept to grasp. Sit with it for a minute; it’s important to understand. You need to take this concept to heart because it is going to define the next century of economic activity.
A few years ago, the general consensus was that we just needed to stop emitting greenhouse gases. If we stopped fast enough, we could handle the climate impacts. As such, my earliest analysis of carbon removal tech like direct air carbon capture and storage (DACCS) led me to say something along the lines of, “there is no value in injecting CO2 underground – it must be used to make something, otherwise that’s just a waste of money.”
And I wasn’t alone. It’s surprisingly easy to get stuck in an ‘avoidance-first’ mindset. For instance, a widely-held belief for cleantech success goes something like,
“whatever industry or product you are disrupting, your technology must perform at least as well as the incumbent, but offer some other advantage, either cost or performance.”
Since robust carbon pricing has failed to sweep through the world’s economies, its effect on cost is generally dismissed as an unreliable assumption at scale.
It’s officially time to work on getting ‘more costly’ clean technologies to market. Carbon pricing, both internally at corporations and regionally by governments, is scaling rapidly, and more than a billion metric tons of emissions will be priced above $100 per ton CO2 by 2030.
In a perfect carbon-priced world, a low-carbon product with a green premium has the same value as a traditional product paired with a carbon removal credit, if both products have the same carbon footprint. Over the coming weeks, we will dive into that loaded sentence with more nuance. For now, the point is that carbon removal and avoiding emissions provide value if the cost of emitting is not externalized.
Unfortunately, carbon pricing varies region to region. It is usually too low to appropriately value abatement, so the world has yet to see peak emissions. Excessive CO2 concentrations are starting to highlight the economic penalties with horrible spectacles of nature. As our emissions continue, and we increase the cumulative CO2 in the air, these penalties will exponentially increase.
Pre-industrial CO2 concentrations were around 280ppm. Climate change costs were not abundantly clear in the 90s at 350ppm (<$1/tCO2). Today, at 420ppm, economic losses are apparent and significant. Future climate-linked damage will be worse than what we observe today.
The true test of the “cost associated with excessive CO2 in the air” is how much an entity will spend on carbon removal (i.e. the “value”). At minimum, carbon removal’s value should theoretically match the economic and environmental damage caused by accumulated emissions. That is, with sufficient carbon removal scale to match the rate of emissions, the cost of doing business for emitters should include the cost of carbon removal. It’s too early to draw the full demand-price curve for carbon removal, but an upper bound of ~$2,000/tCO2 was recently spent on 420ppm direct air capture.
The ultimate question for carbon removal remains: who pays? The next few Anticarbon newsletters will focus on this question and the broader business case for carbon removal. If you are Anticarbon, subscribe now.