Insights

Carbon Removal Needs Demand

February 28, 2024

Microsoft remains, by orders of magnitude, the largest buyer of novel carbon dioxide removal (CDR) services provided by start up companies relative to any other company buying cdr right now. To be clear, the Intergovernmental Panel on Climate Change (IPCC) has stated that carbon dioxide removal is critical to ensure that the planet does not exceed the level of atmospheric carbon associated with runaway climate change. In fact, to stay below the 1.5 degree limit (some experts believe we are already there), more than 10 Gigatons a year must be removed annually through 2050, more if we look to completely restore the climate to pre-industrial levels. Yet only a small number of very progressive companies have come forth to make advanced commitments to pre-purchase, conduct an off-take agreement or just buy credits of novel carbon removal in various forms.

The general public remains largely unaware of CDR and most companies do not understand how CDR can help them attain their net zero goals. Moreover, the common refrain is that we should be decarbonizing first through efficiency and renewables and only then would we invest in removals. That cannot be more incorrect. While decarbonization and reducing emissions is indeed critical, it is important that people understand that the IPCC has stated that removals must also happen at the same time as decarbonization. If we were to wait until the grid had been completely overhauled, it might be too late for carbon removal technologies to scale up in time to meet the annual 10 Gigaton removal goal.

Another troubling trend is that government agencies are forcing the nascent industry to keep its costs to extremely low offerings based on very little understanding of the logistics, planning, material costs, testing costs, and operational costs involved. Project finance and equity investors will shy away from industries that have shrinking returns. We have seen this race to the bottom dynamic in renewable energy. Meanwhile the big oil and gas companies are proposing that taxpayers in the US pay this industry to capture carbon from its refining operations and use it for Enhanced Oil Recovery operations (or circular petroleum as one might think of it) to the tune of billions of appropriated dollars for the Federal Bipartisan Infrastructure Deal. This underscores the need for more companies to generate the kind of demand for carbon removal that can begin to overshadow activities of this kind. Think of a bathtub that is overflowing. We can lessen the flow of the spigot but if the tub is already spilling over, someone needs to unplug the drain. We certainly can’t afford to be taking buckets out and putting them back in during all this.

Drivekey, can mitigate fleet emissions, help companies mitigate emissions in their operations, help them report and comply with regulations and we can assist with setting up removal credit buying opportunities or arrange industry cdr buying parties. We believe in doing both at the same time and can help companies act on this as well.

What are the types of removal that can be purchased? This FAQ from the Open Air Collective might be helpful.

FAQ about California SB 253, SB 261 and SB 308

Monday April 8 2024

California’s corporate carbon accounting, action, and climate risk disclosure legislation SB 253 and SB 261 has already been widely covered and many companies are beginning to act yet this could be daunting if a company has yet to do work toward these tasks. For those companies, questions might include: “What does each bill require?”, How do I get my emissions data?”, “Is my company included in this?”, “Who does the audit and what does that entail?”, “What is TCFD?”, “Where do I publish that information?” “What is that data used for?” “How can I start reducing my emissions?”

“What does each bill require?”

253: Requires a reporting entity to annually disclose and verify all of the reporting entity’s scope 1 emissions, scope 2 emissions, and starting in 2027, your scope 3 emissions.

261: provide a climate-related financial risk report disclosing the entity’s climate-related financial risk and measures adopted to reduce and adapt to climate-related financial risk. The bill would require the entity to make a copy of the report available to the public via the corporate website.

“How do I get my emissions data?”

It depends on the size and complexity of your organization and what kind of data you already have. Your emissions can be calculated from your energy use data in most cases. In some cases, an energy audit might be needed.

The results are used to conduct a carbon inventory that complies with the Greenhouse Gas Protocol Corporate Standard. Many reporting regimes recognize this standard as the correct way to inventory and report corporate carbon emissions. Once the energy use data has been converted into CO2 equivalencies and then parsed into Scope 1 2 and 3 using the proper methods, this will be reviewed by third-party auditors.

If your company has already done its carbon inventory, then perhaps the next phase is to use the inventory to set reduction targets, or maybe an LCA is needed in order to get Scope 3 data (note that SB 253 will require Scope 3 reporting by 2027).

There are several stages in the inventory process and to do a good job, your Drive-key carbon engineer will ask some quick questions.

“Is my company included in this?”

If your company has more than a billion dollars in revenue and does business in California, then yes, your company must report Scope 1, 2, and eventually your Scope 3 emissions and provide information about financial risks that your company may face due to climate change. Any company with revenues exceeding $500 Million is specified for this. Drive-key has an interactive online tool that will produce the results you need for this.

“Who does the audit and what does that entail”

Once your company has its carbon inventory, Drive-key contacts a third-party, independent auditor to conduct the review. Audits are typically done by companies like Bureau Veritas, or Det Norsk Veritas or maybe companies like Ernst & Young or Deloitte. If the inventory has been done according to proper methods, then the auditor will certify the results. Then, you’ll have a digital record of the audit for compliance purposes with SB 253 or 261.

“What is TCFD?”

In SB 261 Section 1, the legislation informs us that the Insurance industry has chosen to adopt the risk assessment standards of the Task Force on Climate-Related Financial Disclosures regime when conducting its reporting. TCFD is for all companies but in 261, the text of the legislation is only for the insurance industry and doesn’t refer more broadly, so in this case, it isn’t required to do TCFD but note that this reporting framework is required in more than 130 countries. Drive-key carbon engineers are working to automate your TCFD reporting for you.

“Where do I publish that information”

California will appoint an entity to compile an annual report of all the submitted carbon disclosures. Companies doing business in or based in California must submit their disclosures digitally to the report. Once complete, the report will be made available online within 30 days of receipt. Drive-key will provide a digital report for your disclosure needs.

“What is that data used for”

With your audited Scope 1 and 2 data, investors will be enabled to make more informed decisions. The state could theoretically use this data to develop relevant policies as well. From there we can use the data to set up your SBTi targets, conduct an LCA to get more granular on your entire upstream and downstream emissions so you can have good Scope 3 for SBTi and for 2027 compliance. With your Scope 1 and 2 data, your company is now ready to report to any number of current carbon reporting regimes around the world today such as TCFD, CSRD, EU Taxonomy, the newly finalized SEC regulations, etc.

“How can my company start reducing its emissions”

It depends on how far along your company is working to reduce emissions. Perhaps your company has yet to conduct any carbon accounting or decarbonization project implementation. You’ll need an energy audit and an Life Cycle Assessment (LCA). Drive-Key will arrange for an energy auditor to model or do a site visit to get the data we need so that we can calculate your emissions from that. If you need an audit, then you’ll likely also need an LCA. LCA helps us understand all the upstream emissions associated with your company’s supply chain, all the emissions of your processes, and all the emissions with transport and use of your products and their disposal, among other things. The inventory helps us prioritize and evaluate projects to help reduce your emissions. We collaborate with companies who can carry out the insuring and financing of such projects and we will connect you with carbon removal options.

This is where SB 308 comes in. SB 308 is a bill that sets up state level institutions that establish grants and institutions for carbon removal activities to be scaled up in California. Your company can take part. The IPCC has said that carbon removal will be necessary to meet the 1.5-degree limit, even if we manage to completely and immediately quit fossil fuels. That is because carbon emissions linger in the atmosphere for 300 to 1,000 years. Before the industrial era, carbon levels were 210 ppm. Today we are at 420 ppm. 10-20 Gigatons of carbon must be removed from the atmosphere annually through 2050 to remain under the 1.5-degree limit.

Drive-key will help you choose a portfolio of carefully vetted, high-quality removal credits. You’d be joining industry trailblazers like Microsoft, Shopify, UBS, SwissRe, and other companies to help this critical industry scale up. Companies can collectively buy removals or a company can develop a portfolio of credits for different projects.

Quotes:

Numbers:

The National Academy of Sciences has estimated that meeting the Paris Agreement's goals will require scaling up to 10 gigatons (Gt) of CDR annually by 2050, with 20 Gt of CDR each year by 2100 (more if we want to return to pre-industrial climate conditions).

Facts

More than 5300 companies will likely have comply with SB 253.

Images

Note: Trees are not a permanent carbon solution and are therefore not covered by some registries. Geological CO2 storage should only ever be done in basalt deposits that are located everywhere but especially in Oregon which has been termed the “Saudi Arabia of Basalt”. The oil and gas sector will say they are capturing carbon but they use it for something called Enhanced Oil Recovery or EOR which is not a climate solution.

Carbon Removal vs Carbon Capture: how both may be relevant to a company’s operations and disclosures

Monday April 8 2024

Carbon Capture Utilization and Storage

Carbon Capture Utilization and Storage (CCUS) is used by heavy industry to mitigate the emissions from their operations. This involves installing equipment onto smoke stacks or modular equipment that use centrifugal force, temperature swing or novel materials to adsorb or absorb the carbon from the stack, separate it and get into a state so it can be transported. Energy use is required to separate the captured carbon from the equipment in some cases and for running the system itself, sometimes chemical compounds are used that require special handling.

The captured carbon can then be beneficially used in things like concrete, agricultural lime production, housing materials or carbon nano-fiber manufacturing. Companies with large amounts of captured carbon end up having to transport it and usually try to geologically store it but there are many problems with that.

Pipelines are prone to accidents and with geological storage there is no surefire guarantee that the carbon won’t leak. The more preferable method of geological storage is to safely and ethically transport the captured carbon to basalt deposits where it will be deposited for gradual transformation into limestone.

The most cutting edge capture proposals would remove massive amounts of carbon but are still mostly in demonstration phase.The problem is that they are often being proposed for fossil fuel power plants with plans for potentially unsafe methods of transport and even worse end use applications.

Capture seems fine for a paper manufacturing plant or other non-fossil fuel operations but it is not a climate solution if it is used for Enhanced Oil Recovery (EOR). The price tag for these projects, if they are approved, could be quite high. Some of them costing upward of a $1Billion. These projects are often confused with novel carbon removal which is described below.

These projects would have a significant impact associated with their construction, operation and in the final treatment of the captured carbon. There are also ethical considerations. Should we even be allowing a “circular” approach for fossil fuel activities when more than a Trillion Gigatons of legacy carbon exist in the atmosphere that will have to be removed even if we stop emissions completely and immediately?Companies engaged in these activities should not hope to count EOR toward a net zero report.

Carbon Removal

The Intergovernmental Panel on Climate Change (IPCC) has said that even if we were to halt emissions completely and immediately, we need to remove between 10-20 Gigatons of carbon annually through 2100 just to keep the earth from warming beyond the 1.5 degree threshold. That is because carbon remains in the atmosphere for 300-1,000 years.

RMI has a great resource classifying a multitude of ways to remove CO2 from the atmosphere. Durability of the removal is key. Companies like Eion, Climeworks, Noya, Heirloom Carbon, Noya, Travertine, Vesta.Earth, Planetary, among many others are providing a wide array of novel removal solutions that will take down large amounts of carbon, efficiently and durably getting paid by large companies to get started. The rapidly advancing novel carbon removal industry is held to strict standards to ensure that all proper carbon accounting, LCA and project management best practices are being upheld and that the removal is as close to permanent as possible.

Companies can access these credits in the emerging voluntary credit markets and several registries are emerging. The price of the credit is tied to the quality of the removal process and technology. A new carbon credit rating agency evaluates removals on an AAA-CCC scale, covering everything from amount removed and proper calculations in the assessments to community engagement and safety practices. Drive-key has deep in-house removal expertise and can also help companies take part in this movement by building a diverse portfolio of removal credits and will advise on best practice for applying that to net zero claims and carbon accounting.

Relevance to Companies

There are a number of reasons why companies need to begin investing in removal:

As described above, mostly fossil industry driven large-scale capture projects have a lot of downsides.
If the world waits until later to begin conducting removals, the technologies and processes will not be properly scaled up in time.
There are trillions of tonnes of CO2 and other greenhouse gasses currently lingering in the atmosphere. Even if we halt emissions today, that legacy carbon will continue acting as a blanket around our atmosphere.
To limit warming to stay below 1.5 degrees C between 10-20 GtCO2 will need to be removed annually.
There are currently only a few companies making pre-purchase agreements or advance committing to buy credits when they are delivered. Companies like Microsoft, Shopify, UBS, etc can’t be the only companies helping to jump start this industry. If we are do have any hope of making a dent in the legacy emissions, we need every company, large and small to do their part. Drive-key can help your company navigate this new industry and integrate removals into your decarbonization strategy.
California SB 253 and 261, TCFD, SBTi, SEC Carbon Reporting Rules, EU Taxonomy, CSRD, among many others require companies to report their emissions. Removal is slowly getting more attention in these, particularly EU Taxonomy. The European Carbon Border Adjustment Mechanism (CBAM) may begin allowing removal credits count against the total bill for embedding emissions in imported goods.

Quote

“Almost all scenarios that limit warming to below 1.5°C require novel CDR to be scaled up, but countries currently have few firm plans to do this.” Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report.

Numbers

Ideas

What if groups of companies got together to pitch in small amount and as a group, conduct advance purchase of removals from a big portfolio of different removal solutions coming online in 2024?