Fitfully, fretfully, the world is beginning to decarbonise. Fossil-fuel demand is likely to peak in the next few years. Solar and wind energy are growing ever cheaper. Related technology, such as battery storage, has improved dramatically. In its most recent report, the Intergovernmental Panel on Climate Change cited "signs of progress" — by its standards, an expression of effusive optimism.
Unfortunately, this progress won't be enough on its own. Averting the worst-case climate scenarios will likely require not just reducing emissions but also removing huge quantities of carbon from the atmosphere — some 21.5 billion tons of it by 2050, according to BloombergNEF. As things stand, carbon removal is costly, inefficient and difficult to scale. Yet promising new technologies provide reason for optimism. Governments can do more to help them succeed.
As Bloomberg Businessweek recently reported, startups are pitching intriguing new ideas. Climeworks wants to trap carbon in a specialised filter, mix it with water, and pump it safely underground. Verdox Inc. hopes to capture emissions using an inventive electrochemical process. Meanwhile, Heirloom Carbon Technologies plans to heat up carbonate minerals to accelerate their natural absorption of carbon dioxide. Others hope to use kelp, bio-oil, advanced reforestation techniques and more.
All these efforts face an acute problem: No one wants to buy this stuff. Philanthropists and government agencies have long offered prizes for various carbon-removal benchmarks. Inchoate efforts are underway to turn stored carbon dioxide into something economically useful. Yet none of these efforts amounts to a sustainable business.
That, too, may be about to change. In April, a group of tech companies committed to $925 million in advance market purchases of removed carbon over the next nine years. Known as Frontier, the effort will prioritise projects that can store carbon for 1,000 years and have a plausible path to remove half a gigaton a year by 2040, at less than $100 per ton.
This approach has several advantages. Unlike a prize, market commitments could lead to viable business models, encouraging scientists, entrepreneurs, lenders and investors to enter the field in pursuit of profit. Setting simple qualification parameters should also allow for maximal competition among ideas, methods and technologies, and hence reward creativity and innovation.
In time, Frontier expects more companies and philanthropies will help expand this market. But governments too should take notice: A major public market commitment could have a huge impact. It would signal demand without requiring policy makers to commit to any particular technology. At the same time, it could turbocharge competition by offering higher prices for greater efficiencies.
A similar model worked wonders for vaccines. In 2007, a group of governments joined forces with the Gates Foundation and pledged $1.5 billion in advance commitments for pneumococcal vaccines for low-income countries. With a market established, pharmaceutical companies competed to provide 10-year supplies of a given shot on set terms. The effort led to three new vaccines, helped 150 million kids get immunised, and saved perhaps 7,00,000 lives.
The carbon conundrum is no less urgent. In time, companies may devise cleverer ways to commercialise removed carbon, rendering advance commitments moot. Perhaps the $12 billion Congress pledged to the technology in last year's infrastructure bill will lead to a breakthrough. Maybe green-energy investment will yield much faster emissions reductions than expected. But for now, an all-of-the-above approach makes sense — and harnessing the magic of competition can only help.
Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.