Finance

Developing CO2 clean up options: a technology cost buydown fund?

Earlier this morning, Brad Plumer of the NY Times tweeted:

Brad Plumer tweet.png

Turns out, our team @carbonremoval has been kicking around a more modest (and not necessarily deficit-financed) idea like this to support carbon removal technology development and early deployment. Here’s how it might work:

What: a carbon removal purchasing vehicle that provides a guaranteed, credit-worthy buyer for a portfolio of projects.

Why: Carbon removal projects often struggle to find customers, and this purchasing vehicle would serve as a guaranteed demand source. It would enable early project deployments, which is critical for learning how to do projects more efficiently and cost-effectively.

How: The initial purchasing vehicle would provide on the order of $100Ms to spend on a range of early-of-a-kind carbon removal projects. Like a feed-in tariff in the electricity sector, the fund would only pay for carbon removal that is delivered, leaving the cost of technology/project development to the private sector. Over time, subsequent funds of greater magnitude could be raised to deliver larger carbon removal outcomes, all at lower unit cost due to learning from previous projects.

Through competitive project sourcing across a range of carbon removal pathways (i.e. direct air capture and storage, bioenergy + carbon capture and storage, soil carbon sequestration, etc.), the fund would ensure that it is buying the most cost-effective projects available within each category. Categories and funding allocation would be determined in advance by an investment committee of technology experts and investors/grantmakers. This approach would balance current solution cost with promise to actually get to scale to avoid premature technology lock-in, while also avoiding investments into low-cost but niche technologies that won't scale.

To ensure integrity across solution options, every project would be subject to a lifecycle carbon assessment to ensure that carbon accounting is apples-to-apples across approaches (and to create a robust lifecycle carbon assessment that can be exported to other voluntary and regulatory carbon removal efforts in the future). Every project would also be subject to environmental impact and community impact assessment in order to avoid any negative unintended consequences from early projects.

This structure is distinct from a traditional carbon offset because the amount of carbon removal generated will not be known ex ante. Instead, the amount of carbon removal ultimately delivered (and thus the $/ton price of carbon removal) will be determined by competitive bidding for each of the solution subcategories -- in essence a reverse auction to get the most economical projects for a set amount of up-front revenue.

This type of fund would also be complementary to broader decarbonization policy, and it would avoid competition with measures to reduce emissions.

The fund could also be capitalized from a range of sources -- governments are the most natural home for such a large scale effort, but companies and even individuals could contribute as well on a voluntary basis.

Lastly, this wouldn’t be complete without a hat tip to CMU researcher Costa Samaras for his “Green-BECCS” idea sparked from this thread:

Costa Samaras tweet.png

Ag. Tech's Role in Carbon Farming

Over the past few years, venture capital investment in agriculture and food businesses (collectively referred to as "Agtech") has soared (see chart below), startup incubators dedicated to Agtech launched, and even the USDA has gotten into the Agtech game by creating a fund to support Agtech innovation. All of this innovation has provided farmers with new tools to help them forecast weather more effectively, plant crops more precisely, and apply fertilizer / use water more efficiently (among many other benefits); and has provided consumers with new choices for eating more sustainable food.

  Data from the Clean Tech Group  show that venture capital investment in agriculture has taken off in recent years.

Data from the Clean Tech Group show that venture capital investment in agriculture has taken off in recent years.

One area of agriculture often overlooked by entrepreneurs and venture capitalists alike, however, is the field of “carbon farming.” Carbon farming is the umbrella term used to describe agricultural processes that sequester more carbon than they generate--i.e. produce net-negative carbon emissions--and can include: conservation tillage, cover cropping, crop rotation, compost application, and rotational grazing. Over the past few years, carbon farming has grown in importance both as a climate solution and because farmers are finding numerous economic, social, and non-climate environmental co-benefits from implementing carbon farming techniques. While the potential benefits from carbon farming have grown, innovations to help farmers implement and monetize carbon farming techniques have been slow to develop in parallel. For example, only a handful of companies out of the 264 deals that made it into AgFunder's 2014 Year in Review Investing Report were even tangentially related to carbon farming.

 Total greenhouse gas emissions from agriculture account for around 15% of total global emissions, from the  IPCC 5th Assessment Report, Working Group 3, Chapter 11, Figure 11.4

Total greenhouse gas emissions from agriculture account for around 15% of total global emissions, from the IPCC 5th Assessment Report, Working Group 3, Chapter 11, Figure 11.4

Here’s a list of four ways that the Agtech revolution could catalyze the development of carbon farming techniques:

1.      Measurement and verification. As of today, significant uncertainties remain about the amount and permanence of carbon sequestration over the full lifecycle of carbon farming techniques. Innovation to build inexpensive, connected soil sensors and even smartphone apps capable of measuring carbon in the soil could help reduce these uncertainties. If farmers can say how much carbon they have stored in the soil and how long that carbon is likely to remain there, it will be easier for them to access carbon markets, providing a greater economic incentive for the adoption of carbon farming practices.

 Inexpensive, connected soil sensors -- like the one from Edyn, above -- can prove critical for measuring and verifying soil carbon sequestration cost-effectively. via  Tech Crunch

Inexpensive, connected soil sensors -- like the one from Edyn, above -- can prove critical for measuring and verifying soil carbon sequestration cost-effectively. via Tech Crunch

2.      Optimizing carbon-negative fertilizer application. A number of fertilizers, such as compost and biochar, offer the potential to increase soil’s ability to store carbon. Tools that help farmers know a) which fertilizers can increase carbon storage the most and b) how and when to apply these fertilizers to maximize the carbon sequestration potential can prove critical. For example, the net lifecycle impact of biochar depends on numerous factors (e.g. feedstock, pyrolysis process, application method, soil type, local climate, etc.), and tools that help farmers understand what type of biochar is likely to have the greatest carbon sequestration benefit on their land would be valuable for effective implementation for carbon management purposes. Innovators can even leverage publicly available tools such as the USDA's COMET-Planner application to get started.

3.      Increasing plants’ ability to build biomass. As the plant stock on land grows larger, it reduces atmospheric carbon concentrations by shifting the balance of carbon stored in biomass versus carbon stored in the air. As a result, a number of efforts are underway to increase agricultural plant stocks for carbon management purposes. These efforts include organizations like the Land Institute which are attempting to perennialize annual crops, the Savory Institute who are working on rotational livestock grazing that encourage plants to grow deeper roots, and permaculture advocates that encourage the use of cover crops. Agtech innovations ranging from genetic advances to big data techniques to optimize plant yields can help make these processes more economically viable and effective at carbon management.

 Kernza is the strand of perennial wheat that the Land Institute is developing, via  Civil Eats

Kernza is the strand of perennial wheat that the Land Institute is developing, via Civil Eats

4.      Outside the box carbon removal technologies. Silicon valley is famous for taking ideas that sound crazy and making them the norm. Why not try to do the same with carbon farming? Some ideas, such as CO2 irrigation using direct air capture, seem like long shots today, but could hold breakthrough carbon sequestration potential in the future. Taking lots of long shots (of which the vast majority are bound to fail) is critical for finding that breakthrough innovation that can help increase food security and safeguard the climate for generations to come.

 Open air CO2 enrichment might sound like a crazy idea, but long-shot carbon farming ideas could provide breakthrough potential for the carbon management field. via  Ag Gas .

Open air CO2 enrichment might sound like a crazy idea, but long-shot carbon farming ideas could provide breakthrough potential for the carbon management field. via Ag Gas.

We are only at the beginning of the Agtech revolution, and innovation will prove critical for unlocking its potential value to farmers, venture capitalists, and the planet alike.

Carbon Removal Dialogue: What are barriers to increasing "carbon farming" participation?

Welcome to the latest "Carbon Removal Dialogue," a feature on the Center For Carbon Removal blog where we ask experts to share their thoughts on important questions related to carbon removal. We've consolidated the responses into a single post (below) -- and please share your thoughts in the comments section as well! 

This time, the question pertains to "carbon farming" -- i.e. the umbrella term used to describe the range of agricultural techniques that hold the potential to sequester carbon in plants and soils (check out our fact sheet for more information on these farming techniques).

Thanks to all of the experts that have responded to our question, and without further ado, our "carbon farming" dialogue!

Question:

In your mind, what are largest barriers to increasing “carbon farming” participation in carbon markets and/or offset schemes?
nature-sky-clouds-field.jpg

 

Responses:

Robert Parkhurst

Agriculture Greenhouse Gas Markets Director

Environmental Defense Fund

There are a couple of challenges to the adoption of soil carbon in environmental markets.  To start with, the soil carbon cycle is dynamic and complex.  There currently are few long term studies about what practices sequester carbon and how that carbon is retained over long periods of time.  This is starting to change, but is still a challenge.  Some simplifying assumptions have been made for the inclusion of carbon sequestration practices in voluntary carbon markets.  Three carbon offset protocols have been developed over the past four years which allow landowners to generate carbon offsets from practices such as the avoided conversion of grasslands to croplands and the application of compost to rangeland.  In November of 2014 the first project, located in the North Dakota, generated 40,000 tons of offsets from the preservation of grasslands.  Several other projects are in the pipeline.  To really expand this market, one of the three protocols needs to be adopted by the California cap-and-trade program.  To date only two agriculture related protocols exist in this market – dairy methane destruction and rice methane avoidance.  With the development of additional pilot projects, it would be possible to see a soil carbon offset protocol adopted by the California Air Resources Board in the future.

 

Peter Byck

Professor - School of Sustainability & Cronkite School of Journalism

Arizona State University

We (the ASU / Soil Carbon Nation research team) propose to conduct whole systems science comparing Adaptive Multi-Paddock (AMP) grazing with continuous grazing to see whether there are indeed C accrual benefits with AMP grazing.  Our principal investigator, Dr. Richard Teague of Texas A&M, has found that there is a large benefit re: carbon accrual with AMP grazing.

Soil carbon is currently not recognized for trading by the CA Air Resources Board.  Soil Carbon is not accepted by EPA in the President's Clean Power Plan, as a way for states to mitigate their power grid's carbon intensity.

We've been told by folks within CA ARB and EPA that the data we propose to collect will be very helpful in getting those agencies to recognize soil carbon as a tool in carbon mitigation.


Adam Kotin

Associate Policy Director

CalCAN

"An overly market-based approach to achieving agricultural carbon sequestration may present too many logistical challenges for most growers to overcome. As I wrote in a blog post last year, the burdens imposed by agricultural carbon offset protocols can be high, excluding participation from growers (particularly smaller ones) who lack the time and resources to take them on. Meanwhile, the monetary compensation may be so small as to be practically insignificant. The State of California can still plan an important role in promoting carbon sequestration and other farm practices that reduce GHG emissions and improve overall environmental health. They can do that through grower technical assistance, outreach and financial incentives separate from the carbon market."


Amanda Ravenhill

Executive Director 

Project Drawdown

Carbon farming will be greatly accelerated when more talent, time, and treasure are focused on the growing field of open-data monitoring and modeling for regenerative agriculture. Farmers, ranchers and land managers need more access to low-cost sensors for measuring and monitoring soil carbon, Photosynq being an excellent example of such a sensor. Other new tools and resources in this field are farmOS, Cool Farm Tool, GoCrop, and the Soil Carbon Coalition. You can learn more about these organizations and tools by watching the Open Agriculture Learning Series. Watch this space, it will change the face of agriculture.

 

Guy Lomax

Researcher

Virgin Earth Challenge

I'd say there are two big barriers: accountability and permanence. First, accurately estimating the amount of carbon being sequestered and/or avoided in an agricultural practice is often more difficult and time consuming than in activities that reduce fossil fuel emissions. With the latter, you need to estimate how much energy or fuel has been saved and the emissions saving is a straightforward calculation; for the former, you need to regularly monitor carbon in soils across a whole landscape. The amount sequestered will also vary between different places and over time in response to changing conditions like rainfall. This also makes it difficult to predict the number of credits you'll produce from an agricultural activity.

The second big problem is impermanence. Carbon stored in soils can be easily re-released by a future change in climate or cropping practice, for example, which makes a soil carbon credit fundamentally distinct from an avoided emission credit and risks undermining the carbon market concept. This is the main reason forestry and agriculture are not permitted in the EU Emissions Trading Scheme. One answer is to make farmers liable for any re-emitted carbon, but that raises another problem: how do you convince people to sequester carbon in their soils if they might have to pay for its release a decade from now, especially if the carbon price then could be five times higher than what they receive today? 

 

Noah Deich

EXECUTIVE DIRECTOR 

Center for Carbon Removal

Improved measurement and verification tools. Regulators need more confidence in carbon accounting (i.e. whether specific management practices on specific plots of land lead to the carbon sequestration benefits that are claimed). And farmers need inexpensive (both in terms of effort and capital) tools to measure carbon sequestration and monetize their benefits.  

Have an idea for a dialogue question? Email us (info@centerforcarbonremoval.org) or leave it in the comments below! 

Three Lessons Carbon Removal Can Learn from the Low Carbon Energy Investor Forum

The state of carbon removal technologies in investment today is akin to the beginnings of other now well-known mitigation technologies like solar, wind, and energy efficiency. Scaled demonstration projects, industry and policy support, and an open dialogue on the potential for carbon removal technologies is imperative to preventing climate change

How today's "low-carbon" investors are charting a course for financing tomorrow's "negative-carbon" investments

IEA investment
IEA investment

In 2014, investors allocated $310B in capital to clean energy projects according to Bloomberg New Energy Finance, making up a significant portion of the ~$1.5T in total global investment in energy supply as estimated by the International Energy Association ("IEA"). What's more, the IEA predicts we will need over $40T in cumulative energy investment by 2035 to meet energy needs, suggesting that the amount of capital needed to be deployed annually for clean energy projects will have to increase by an order of magnitude over the coming decades to meet the dual goals of preventing climate change and powering the world's economy.

Above: The IEA's 2014 World Energy Outlook projections for necessary clean energy investment.

As the clean energy finance community grows, it also pioneers new ways to finance low-carbon energy projects. The past few years are no exception: publicly-traded yieldcos have flourished, asset-backed securitization has helped reduce cost of capital for distributed generation companies, and public-private partnerships have helped increase clean energy deal flow.

These financial innovations that enable low-carbon projects have enormous implications for "negative-carbon" projects that scientists increasingly project we will need but that have only just begun to develop. Low-carbon technologies like energy efficiency and renewable energy have had several decades to de-risk technical, regulatory, and financial barriers, and sit well poised to expand rapidly. Negative-carbon approaches must leverage as much of the experience of low-carbon projects as possible if they are to develop to appropriate scale quickly enough to prevent climate change.

Later this month, many low-carbon financial success stories will be on display at the Low Carbon Energy Investor Forum 2015 in downtown San Francisco. I'm excited to be speaking at the event, as the agenda includes conversations on emerging financial innovations, technology developments, and policy support needed to scale low-carbon developments.

What is particularly interesting to me about this, however, is that for an event with the words "low carbon" in the title, the word "climate" appears only once on the agenda -- for a session titled "Climate Change – The new factor becoming mainstream among investors." This shows that, with or without an explicit mandate to fight climate change, the financial sector is committing hundreds of billions of dollars to technologies that are pivotal for fighting climate change. And as much as any financial lesson, negative-carbon solutions can learn from low-carbon solutions the power of strong financial business cases in helping to catalyze the growth of negative-carbon solutions, and make these nascent investments today the "mainstream" investments of the future.

Want to join the Low Carbon Energy Investor Forum? Use the code "lcei15" for a 15% registration discount.

Carbon-as-a-service Businesses?

The Cleantech Group's annual San Francisco Forum wrapped up earlier this week. The event's theme was "Cleantech-as-a-service," and featured parallel tracks named "Cloud" and "Connect." Overall, this focus on technology-enabled business model innovation shows how mature the cleantech field has become, as the event felt very much like a "standard" tech conference in the Bay Area.

Above: Sheeraz Haji kicking off the Cleantech Forum SF 2015 event.

The growing emphasis on the "tech" portion of "cleantech," however, has not caught on for all clean technologies. For example, carbon sequestration businesses were conspicuously absent from this year's Forum. Economic fundamentals can help explain this lack of carbon sequestration businesses on display. Most of the discussion at the Cleantech Forum focused on the left-hand side of the McKinsey GHG abatement curve (below), which makes perfect sense: no amount of clever business model or financial product innovation will help uneconomic businesses (like many carbon sequestration businesses today) flourish.

mck ghg abatement
mck ghg abatement

Above: McKinsey GHG Abatement Cost Curve

The big exception to the above, however, is solar PV -- which many would call the poster child of the cleantech-as-a-service revolution. What has set solar apart from other high dollar-per-ton GHG abatement schemes is non-carbon-focused regulations (be it some combination of net-metering, renewable portfolio standards, PACE financing, etc. designed to specifically support renewables).

What is so striking is how little acknowledgement such policies now get in the cleantech conversation. Business model innovation is highly complementary to environmental policies, yet so few of the leaders on stage at the Forum advocated for additional/ongoing policy support. I worry that the focus on business model / financial innovation will only take the cleantech field so far (or will delay its development considerably), preventing us from achieving the rates of decarbonization necessary to prevent climate change.

When former EPA Administrator Lisa Jackson came to speak at Berkeley on March 12th, she remarked that her job at Apple today is still to make good policy, it is just to do it from inside of business instead of inside government. I am eager to see if this philosophy will gain broader acceptance, and I look forward to the discussion at future Cleantech Forums to track how this dialogue unfolds.

Problems with $17T-Save-the-Planet headlines

Bloomberg news recently ran an article on conventional Carbon Capture and Storage (CCS) technology titled "We Now Know How to Save the Planet. For $17.6 Trillion." While "saving the planet" sounds great and "$17.6 trillion" sounds absurdly large, both claims are probably incorrect and likely to generate misleading perceptions about the appropriate role that conventional CCS technology might play in the fight against climate change. For one, deploying large-scale conventional CCS is unlikely to be enough to "save the planet" from climate change by itself. Emissions from the power sector only comprise about a quarter of all GHG emissions, and conventional CCS has little ability to decarbonze other sectors that represent net sources of GHG emissions today, such as agriculture, forestry, and transportation:

Pie chart that shows different sectors. 26 percent is from energy supply; 13 percent is from transport; 8 percent is from residential and commercial buildings; 19 percent is from industry; 14 percent is from agriculture; 17 percent is from forestry; and 3 percent is from waste and wastewater.

Source: EPA website

While CCS could provide a critically important component of a broader portfolio of solutions to prevent climate change, it isn't likely that CCS alone will "save the planet."

An important caveat here is that the Bloomberg article only analyzed "conventional" CCS on stationary power sources. In fact, there are many ways to achieve "CCS" through non-conventional means: through planting more trees, managing agricultural lands using carbon sequestering approaches, and restoring wetlands/grasslands, to name a few. With this expanded view of what CCS means, CCS can have a much larger impact on preventing climate change, especially in the difficult-to-decarbonize sectors like forestry and agriculture.

But returning to the article, the second key problem is the fact that the $17T figure cited for the estimated cost of deploying conventional CCS globally is likely too high. To get this $17T estimate, the author applies the cost of a first-of-a-kind CCS project in Canada across all power plants globally. This is akin to applying the cost of a 1980s solar plant to estimate the overall cost to deploy solar across the globe: it would fail to factor in the decades of R&D and cost declines that happen as more and more projects get installed.

Solar PV chart
Solar PV chart

Source: adapted from costofsolar.com

Energy technologies take decades to develop, but when they do, they follow fairly predictable learning curves:

energy learning curves
energy learning curves

Source: Dan Kammen, UC Berkeley (lecture notes 17)

So long as conventional CCS doesn't face the same safety/regulatory hurdles as nuclear and can benefit from some degree of economies of scale in manufacturing, the overall cost of CCS would likely be an order of magnitude less than this estimate if conventional CCS were deployed at the massive scales suggested in the article. For such a large-scale deployment of conventional CCS, even a $5T price tag spread evenly over 25 years would amount to a capital cost of about $250 billion per year -- around a quarter of a percent of global GDP and equal to what we invest annually today in clean energy. It is fair to say that CCS is an immature, costly, and unproven technology today; it is not fair to simply assume that CCS will remain this way indefinitely -- especially if we continue to invest in R&D for CCS technology in the future.

The bottom line is that the Bloomberg article creates a significantly skewed understanding of what role conventional CCS technology might play in the fight against climate change. While a more nuanced discussion around the appropriate role for CCS might be less prone to catchy headlines, it is nevertheless important to engage in today.

Are loan guarantees the right answer for catalyzing development of CDR solutions?

U.S. Department of Agriculture Secretary Tom Vilsack greets Cool Planet CEO Howard Janzen

The USDA recently announced a $91M loan guarantee for Cool Planet's biofuel and biochar facility in Louisiana. Loan guarantees from the US government are a critical way for early stage companies to reduce their cost of capital for capital-intensive projects. Without loan guarantees, private banks would charge high premiums on debt to compensate them for the technology and scale-up risks inherent in first-of-a-kind project -- and these capital costs can ruin project economics.

Photo: "U.S. Dept. of Agriculture Secretary Tom Vilsack (l) greets Cool Planet CEO Howard Janzen (r) prior to the announcement that Cool Planet has been awarded a $91 million dollar USDA loan guarantee" Source: [link]

So on the one hand, Cool Planet's loan guarantee is fantastic news for the CDR field. Cool Planet's proposed facility will provide enormous help in learning how to make biochar at industrial scales in a way that could help make a material impact on removing carbon from the atmosphere. If Cool Planet is able to sell their biochar as a fertilizer additive, for example, they could help sequester considerable amounts of carbon in soils.

On the other hand, loan guarantees like the one Cool Planet has received are not without their risks. The collapse of Solyndra in the DOE's loan guarantee program provides an important lesson: that even though well over 90% of the DOE's projects in their loan guarantee portfolio fully repaid their loans, the failure of a single company (i.e Solyndra) had incredibly damaging effects to the public perception of government support for the entire field clean energy. If unexpected challenges confront Cool Planet and they have to default on their loan, the entire biofuels and biochar field risks getting unfairly tarred with the same brush. Further loan guarantee funding opportunities could then lose political support, holding back the industry unfairly.

Photo: Solyndra's bankruptcy had far reaching effects on political perception of clean energy technologies. Source [link]

That said, Cool Planet is primarily a biofuel play, so any potential failure might not reflect entirely on the biochar field. And success of the facility could do wonders for the biochar industry. But it is important to understand the downside risk of failure of this particular loan to the CDR field. Loan guarantees could become a useful and pervasive tool for catalyzing the development of large scale CDR projects at some point in the future. So it is important to develop the business and scientific case for CDR as much as possible now so as to defend against any potential loan defaults early in the development cycle for CDR approaches.

What the McKinsey GHG Abatement Curve tells us about CDR

McKinsey Supply Curve
McKinsey Supply Curve

The CDR field has begun to emerge out of relative obscurity recently as scientists have grown more confident that we will need to remove carbon from the atmosphere to prevent climate change. But CDR is not a new concept. In fact, there are a handful of CDR approaches that have been hiding in plain sight. Take the following supply curve of GHG abatement options that the consultancy McKinsey has prepared.

The approaches highlighted in orange are all CDR techniques. So what does this chart tell us?

  1. CDR isn't new.  McKinsey first produced this widely distributed chart in 2007. While CDR might not have been a concept that was widely known at the time, this chart shows that many CDR techniques were clearly on the radar of climate change analysts.
  2. CDR is relatively inexpensive. The handful of CDR abatement options considered here all are expected to cost less than 20 Euros / tCO2 by 2030 (note: this chart shows estimates for McKinsey's expected cost/potential of different GHG abatement options in 2030 -- not actual  costs/potential as they stand today).
  3. CDR Supply Needs
  4. The supply of CDR techniques is potentially quite large. The techniques considered by McKinsey are able to provide around 5 tCO2 per year, which could provide a significant fraction of the likely demand for CDR, as shown in the chart below:  Source: The Climate Institute
  5. CDR is a complement to mitigation -- not a competitor. Many worry that CDR will be used as an excuse to delay decarbonization of the economy. This chart shows that CDR isn't a substitute for decarbonization, but instead part of the portfolio of solutions we can deploy to minimize the overall costs of decarbonization.
  6. Only a small fraction of the CDR approaches that have been proposed are expected to be "viable" by 2030 according toMcKinsey. Many other CDR approaches besides the ones considered by McKinsey have been proposed, as shown below:
CDR Approach tree
CDR Approach tree

The McKinsey curve focused only on the orange box under the "biological removal" branch of proposed CDR approaches. I've constructed a supply curve of many of the prominent CDR options based off of data and estimates from the IPCC and the Virgin Earth Challenge, reproduced below:

CDR Supply Curve
CDR Supply Curve

Of note is that McKinsey only considered GHG abatement options that they expected would cost less than 80 Euros/tCO2 in 2030, whereas the full CDR supply curve includes a number of approaches well above that threshold. The cost estimates in the full CDR chart also are current estimates (not projections for 2030), and so are likely to come down in cost significantly by 2030 if significant R&D spending flows to these approaches.

6. McKinsey is bullish on the technical potential for "biological" carbon removal approaches. The science behind several of the proposed land management CDR approaches that McKinsey considers remains uncertain. The degree to which grassland management, for example, can sequester the amount of carbon McKinsey suggests still requires significant scientific analysis to confirm. It is certainly possible for McKinsey's supply estimates to be validated, but first considerable investment in basic science behind some of the CDR approaches is required.

What UBS's death-of-centralized-power-plants prediction means for CDR

UBS has a new report out predicting that:

"Large-scale power generation...will be the dinosaur of the future energy system: Too big, too inflexible, not even relevant for backup power in the long run."

In short, UBS argues that distributed solar photovolatic (PV) systems, battery storage, and electric vehicles (EVs) will drop in price dramatically over the coming decades. When these developments (along with advances in utilities' "smart grids" and demand-side management programs) occur, large-scale, centralized power plants will no longer prove economically viable.

UBS
UBS

Source: UBS

If UBS's prediction is accurate, it has a number of important implications for the CDR field.

But first, is UBS's prediction about the death of large-scale power plants fundamentally sound?Having looked at UBS's model, I remain unconvinced. Here's why: As distributed generation technology costs come down like UBS (and many others estimate), so too do the costs of utility-scale renewable+storage installations. If utilities can adjust power prices fast enough to reflect this lower cost of centralized generation (a critical assumption that likely doesn't hold in many cases), then the investment case in distributed power systems remains harder to justify. This is because utility-provided generation would be so cheap that individuals would have less incentive to buy their own distributed systems (even though these systems themselves might be inexpensive compared to the prices of today's systems). I don't see any analysis in UBS's paper comparing the economies of scale from centralized solar PV + storage systems to the distribution cost of this centrally-generated power, or any analysis about regulatory ability of utilities to adjust prices to reflect lower costs of centralized generation. UBS hints at these issues at one point in the report:

"By 2025, everybody will be able to produce and store power. And it will be green and cost competitive, ie, not more expensive or even cheaper than buying power from utilities. It is also the most efficient way to produce power where it is consumed, because transmission losses will be minimised."

The last sentence in this excerpt, however, is a gross over-simplification of the economics of central v. distributed power, as many more factors besides transmission losses go into the efficiency of a PV power system (like local solar radiation profiles, balance-of-system components, etc.). And so in my mind, it remains unclear whether UBS's overall prediction on the death of large-scale power generation is based on sound economics.

But if it proves that solar PV + storage has relatively few economies of scale and/or utilities are unable to provide consumers with lower costs of centrally-generated power, then UBS's prediction may well turn out accurate. And if it does, it has important consequences for how we pursue CDR as a society.

First, this shift away from centralized generation would be bad news for advocates of bioenergy + carbon capture and sequestration (bio-CCS). Many scientists estimate that bio-CCS will be the largest contributor to a gigatonne-scale CDR portfolio in the future. That said, bio-CCS systems have large economies of scale, as today's carbon capture and carbon transportation/storage technologies have very large fixed-cost components. Without strong markets for centralized power generation, bio-CCS systems could be rendered prohibitively expensive (or carbon prices could raise to very high levels if few other large-scale CDR approaches emerge).

Second, this prediction would suggest that smaller scale power generation technologies capable of CDR might have a brighter future than currently assumed. For example, biochar is viewed in many circles as too small scale to contribute significantly to a large-scale CDR portfolio. But if small-scale biochar-generating pyrolysis electricity systems proliferate as a potential complement to solar energy, then biochar might play a greater role in a carbon negative economy than previously assumed.

Finally, this prediction challenges the entire notion that removing carbon from the atmosphere is an energy problem. Without large-scale markets for centrally-generated power, CDR might have to turn to other markets to generate additional revenue streams, such as agriculture, building materials, and forestry.

It will be interesting to watch the degree to which UBS's predictions come true over the next decades. Regardless of what happens to centralized power plants over this timeframe, it is important to keep these macro-level trends in the utility industry in mind as CDR approaches continue their commercialization.

3 reasons to invest in CDR today

When arguing against investing in the development of CDR solutions today, CDR's opponents frequently cite the fact that our society still emits billions of tons of GHGs into the atmosphere. CDR, opponents argue, costs more than many GHG emission mitigation strategies, and removing a given quantity of GHGs from the atmosphere has the same effect on atmospheric CO2 concentrations as not emitting that same quantity of GHGs. If CDR achieves the exact same impact as GHG emission mitigation strategies, why would we bother pursuing CDR when we could focus our efforts on less-expensive alternatives that achieve the same goal? There are several reasons that, despite CDR's lack of short-term cost-effectiveness, I think it makes sense to pursue developing CDR solutions:

1. CDR might take a lot of development before it is more affordable -- starting that process now will help us scale CDR more cost-effectively when it is needed in the future.

As long as the world expects that it will only need to reduce (not eliminate or reverse) GHG emissions to prevent significant climate change, the case for investing in CDR today is not very strong. But if we need to both stop emitting GHGs and sequester some of the CO2 that we have already emitted, then CDR will be necessary at some point in the future.

If CDR is necessary, it will be important to have affordable CDR options, which will potentially take a significant amount of time to develop. Take solar energy for example, which has taken some 35+ years to just become cost-competitive with other sources of energy in some (but not all) locations:

Image
Image
Image
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Source: http://costofsolar.com/cost-of-solar-panels-10-charts-tell-you-everything/

Given that solar energy businesses share many characteristics with CDR solutions (capital intensive, commoditized market, heavily regulated, etc.), it is reasonable to conjecture that CDR will also take decades of innovation to become more affordable.

But when will we actually need to start investing heavily in CDR innovation? That is, when will we really need affordable CDR? The UN IPCC projects we will need to emit negative emissions as a society in 70 years or so (see below) to avoid significant climate change under its most aggressive emission reduction scenarios. This sounds like ample time to start developing CDR, but this 70 year timeline also assumes that we start drastically cutting emissions over the next decade.

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Source: http://mitigation2014.org/ -- The blue lines show what emissions will need to look like to avoid 2 degree C climate change: note the lines going below zero after 2080 and the rapid downward slope of these lines by 2025...

If we don't cut emissions quickly over the next decade (which seems highly likely), we might need cost-effective CDR by mid-century instead of the century's end. And if we want to be prepared with cost-effective CDR solutions when we need to deploy them at scale, it would be prudent to start developing these solutions today.

2. Inexpensive CDR could help increase political support for fighting climate change.

If renewable energy and energy efficiency remain the only feasible options to reducing GHG emissions, established fossil fuel interests will likely remain opposed to significant reductions in GHG emissions, and will fight comprehensive carbon regulation efforts. To fossil fuel interests, the short-term costs of switching to renewable energy are perceived as worse than the long-run costs due to climate change, and thus they have fought climate regulations that would have generated huge net positive benefits to society (but not necessarily to these fossil interests).

If cost-effective CDR is available as a complement to renewable energy, however, burning fossil fuels no longer is mutually exclusive with meeting GHG emission reduction goals. This is because of the fact that, as long as fossil fuel emitters generate more CDR than GHG emissions, they can reduce their contributions to total atmospheric CO2 concentrations. The prolonged burning of fossil fuels might have other adverse consequences that we want to avoid, but CDR can help reduce the short-term costs of GHG emission mitigation to fossil fuel interests, potentially changing their political calculus to support climate change mitigation efforts.

3. Getting to zero GHG emissions might be really expensive, and CDR could help make emission reductions more affordable.

Many activities, such as long haul trucking and aviation, don't lend themselves to de-carbonized electrification well. As long as biofuels remain expensive, completely eliminating GHGs from these sectors will also be expensive. Developing affordable CDR solutions will provide yet another weapon in the arsenal to reduce GHG emissions without causing costs to skyrocket in industries most affected by climate regulations. Even if it turns out that we are able to reduce emissions quickly enough to mitigate climate change without going negative, CDR could play a significant part in helping to generate these emission reductions as cost effectively as possible.

Editorial on "Negative Emissions Insurance"

By Sally Benson, in Science, here (gated unfortunately). One thing I would also note is how critical carbon prices are for making biomass energy with carbon capture and sequestration (BECCS) a viable technology. BECCS technology is very similar to conventional fossil-fired CCS, but the inputs for fossil CCS (i.e coal, natural gas) are much cheaper than the inputs for BECCS (i.e. biomass). Biomass is unlikely to become less expensive than fossil fuels without strong carbon prices: BECCS generators actually generate revenue on net from carbon prices (biomass fuel is carbon neutral, while CCS is carbon negative), whereas fossil CCS generators end-up breaking even under carbon pricing schemes (fossil fuels carbon charges net out against carbon revenues from CCS). Until carbon prices can pay BECCS generators more than the additional cost of using biomass fuel, we aren't likely to see many BECCS installations (without other types of BECCS-specific government mandates/subsidies, that is).

Update: More articles on BECCS from June 26: http://www.extremetech.com/extreme/185336-carbon-neutrality-has-failed-now-our-only-way-out-of-global-warming-is-to-go-carbon-negative

How feasible and expensive would gigatonne scale CDR likely be if we tried to enact it today?

One way to quickly achieve near-gigatonne-scale (1 billion tonnes of CO2 removed) CDR would be to shut down the approximately 1/2 of the 300 GW of coal fired electricity generation capacity in the US and build new biomass gasification power plants with carbon capture and storage (BECCS) in its place. Such an action would eliminate over 750M tons of CO2 emissions from the coal plants each year, with the added benefit of sequestering roughly the same amount of emissions through the biomass CCS, for a net benefit of nearly 1.5B tons of CO2 -- roughly a quarter of all CO2 emissions in the US. Is such an action even feasible?

Technically, most likely. Viable biomass gasification power plants and viable CCS technologies exist today. A Department of Energy study suggests that there could be 750 billion kWh of sustainable biomass supply available by 2030, which is roughly half of the coal generation in 2013 (parastic loads from CCS might drive this supply need higher, however, which would be possible in this report's more aggressive biomass supply scenarios).

How much would it cost?

Interestingly, the US Energy Information Agency (EIA) does not even estimate biomass IGCC + CCS costs (it only estimates biomass power, and coal/natural gas power with CCS). The EIA does estimate that biomass combined cycle power costs about $8,000/kW. Assuming BECCS has the same 50% premium over conventional biomass that coal CCS has over conventional coal, this would mean a biomass power plant with CCS would cost around $12,000/kW (and would be by far the most expensive technology in the EIA's estimates). At this price, it would cost roughly $1.8T to replace half of our coal power fleet with carbon negative biomass power.

In addition to this capital cost of new plants, it would likely cost significant amounts more to build the necessary CO2 transportation and storage infrastructure, and help retrain coal workers displaced by this change. If those costs added an additional 50% to the power plant price, this would bring the total costs for this action up to roughly $3T.

Lastly,  variable costs of power generation would also increase. It is difficult to predict exactly how much costs would rise, but biomass power is estimated at about $0.06/kWh. Add a 50% premium, and the $0.09/kWh energy from a BECCS plant would cost three to four times much as coal power does today. Coal is rarely a price-setting fuel, however, so it is unlikely that power prices would rise by an equal amount. Even if power bills doubled, this would amount to an extra $400B or so cost to the economy..

$3T up front and $400B annually is a lot of money, but if this plan were phased in equal installments in over 10 years, the annual cost would be roughly $500B (assuming $300B fixed +$200B in average price increases over the ten years), considerably less than then $3T or so the US spends on healthcare each year. With such low interest rates, the US could probably finance such a policy relatively cheaply.

Bottom line:

Simply switching out coal for BECCS in the next ten years is not the most cost-effective way for the US to reduce 1.5B tons in emissions -- and also runs additional risks of many adverse unintended consequences, such as biomass supplies not being grown sustainably or causing food prices to rise, etc. (without even touching the question of whether the US should use its access to cheap financing to borrow $5T to fight climate change...).

What it does show is that if we do find ourselves in need to deploy CDR rapidly and at large scale, we can probably achieve that goal without torpedoing the economy at the same time.

3 Follow up Questions to "Can carbon emissions become a revenue stream?"

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In a recent blog post at CleanEdge, Ron Pernick posed the question, "Can carbon emissions become a revenue stream?" The answer to that specific question is an unambiguous "yes." This chart from the US National Energy Technology Lab (NETL) does a fairly comprehensive job of showing the many ways in which carbon emissions could turn into revenue:

I think Pernick was really trying to get at the following three followup questions:

1. Can carbon emissions profitably be converted into useful products?

It frequently takes a lot of energy (and up front capital expenditure) to separate CO2 emissions from the other emissions produced by a power plant or other industrial facility. Then, it can take even more energy to convert that CO2 into the useful end product. The resulting end products don't exactly sell into particularly enticing markets either: high commoditization and low potential for brand distinction (e.g. as a "green" product) mark many of these industries. This makes the amount of revenue that one can get from CO2 quite low. In the US, prices for CO2 range from $20/ton to over $100/ton depending on where that CO2 comes from (natural sources are much cheaper than anthropogenic sources), but probably average closer to $30-40/ton for most major production facilities located near a CO2 pipeline (with niche uses paying higher premiums to have the CO2 trucked to their production facilities). With capture costs estimated at $50-150/ton for power plants, the economics for beneficial utilization of CO2 are difficult to pencil out.   Bottom line: The reason we don't see more beneficial reuse of carbon emission today isn't for lack of revenue sources, but rather because of the high costs associated with getting low amounts revenue.

2. How much carbon can we beneficially reuse?

To put this question in context, Ken Caldeira noted at his presentation at Berkeley this past February that the average American consumes over 100/lb CO2 per day.  CO2 consumption towers over that for other items, like food (about 5 lbs/day), plastics (about 1/lb day), cement (about 1 lb/day), etc. We would need large reductions in our CO2 emissions and/or large increases in our consumption of goods that can be made with CO2 to even begin to beneficially reuse a significant portion of the CO2 emissions that we generate. Not that we shouldn't necessarily do both, but its important to understand the scale of CO2 emissions that we generate and why most have suggested that underground storage of CO2 emissions is the best place to have immediate, large scale impacts on net emissions.

3. Can we sequester CO2 in the process of beneficial reuse?

Many of the uses for CO2 listed by NETL do not sequester CO2 (e.g. greenhouses, carbonated beverages, biofuel production, etc.). This isn't necessarily a bad thing -- reusing anthropogenic CO2 emissions reduces the carbon footprint of these goods. But this footprint can be reduced even further if those CO2 emissions are used in final goods like cement and plastics that remain in solid form for decades or longer. The holy grail, of course, is using biomass power or direct air capture devices to generate the CO2 used in the production of products like cement and plastics to create negative emissions, but we unfortunately are still a ways off from seeing this type of carbon removal at scale.