ImpactAlpha, May 23 – Corporations are teaming up to use their buying power to accelerate commercialization of carbon removal technology. The latest: Boston Consulting Group, LGT, Mitsui O.S.K. Lines, Swiss Re, and UBS are the founding buyers in an initiative organized by Swiss-based climate solutions provider South Pole to purchase 1 million tons of carbon removal tech by 2025.
The corporate backing for the NextGen Facility, as it is called, comes at Davos, where climate action will be a focus amid broader geopolitical concerns.
The gathering “is a chance for us to reset the way that we’re thinking particularly from a corporate perspective about the impact of climate related issues,” South Pole’s Philip Moss tells ImpactAlpha.
Corporate purchasing agreements have emerged as a key tool to advance climate solutions that experts say will be required to meet net-zero goals by mid-century. The advance purchase commitments give nature- and technology-based carbon removal developers revenue guarantees that they can leverage for growth capital.
The market for technical solutions is still small, notes Moss, and will need to double every year to meet demand. “We need to do everything we can to build up the ecosystem so that it can see exponential growth moving forward,” he said.
In April, a group of companies led by payments provider Stripe launched Frontier to purchase close to $1 billion on permanent carbon removal by 2030. The LEAF Coalition has commited to buying nature-based offsets, which fetch less than technical removal solutions. Offtake agreements are also part of the model being pursued by the Bill Gates-backed Breakthrough Catalyst.
The First Movers Coalition, announced by U.S. climate envoy John Kerry A COP26, spurs corporations to commit to purchasing low-carbon technologies, including carbine removal.
Ready to scale
South Pole spent two years researching carbon removal technologies to identify candidates that are relatively mature and can be reliably purchased this decade, or even next year, for an average of $200 per ton, said Moss.
Some early climate removal tech solutions fetch $600 or more a ton today.
NextGen’s focus is on high-quality, technical carbon removal solutions, including high-temperature biochar, CO2 capture and storage from biomass, mineralization, and direct air capture. The purchase commitments can be leveraged by solutions providers for growth capital to further scale and reduce costs for their technology.
“Corporations can’t justify hundreds of millions of dollars not related to their core businesses,” said Moss.
Swiss Re, the reinsurer, has said its internal carbon price levied on business units will rise from $100 to $200 a ton by the end of the decade.
South Pole, which develops and invests in carbon removal projects, considers itself a “one-stop shop for climate solutions,” said Moss. In February, it raised a fresh round of funding from Temasek and Salesforce Ventures.