Making the Shift from Traditional Offsets to Permanent Carbon Removal - Three Pathways

It's time to choose "cascading effect" over "race to the bottom".

In my last post, I covered the myriad of problems with traditional carbon offsets and the need to shift towards permanent carbon removal solutions. In this post, I will provide an overview of how to make that happen. The reason making this shift is so important is that while reducing our carbon dioxide emissions is critical, we also need to remove CO2 to achieve the climate goals set out in the Paris Agreement, likely to the tune of billions of tons of CO2 every year by mid-century.

We need to go carbon-negative by mid-late this century. Source: Vox

The challenge is that the most widely deployed carbon removal solutions are primarily nature-based approaches that sequester and store carbon away over a relatively short time frame. Oxford University’s Offsetting Principles points out that nature-based solutions with short-lived storage (like sequestering CO2 in trees) are important and can buy us time, but they do not constitute a long-term solution. The CO2 we emit today remains in the atmosphere for hundreds or even thousands of years - necessitating the shift to permanent carbon removal solutions. 

Unfortunately, permanent carbon removal solutions are in short supply and high in price. Take direct air capture with carbon storage (DACCS), for example. This technology uses large fans and chemical reactions to pull CO2 from the air and stores it permanently underground in geologic formations. The Rhodium Group estimates that for the United States to reach net-zero emissions by 2045, DACCS will need to remove and store at least 560 million tons of CO2 every year, even with aggressive emissions reductions and a sizable role for other carbon removal solutions. Current operating DACCS capacity is around 11,000 tons - nowhere near enough. While more DACCS is coming online, it’s still very expensive at roughly $600 per ton, holding back its growth potential.

The good news is that we have solved this scalability challenge before. Only 10 years ago, solar panels were 12 times more expensive than they are today. Thanks to pioneering individuals, businesses, and governments - solar PV is now a rapidly growing, competitively priced technology. So here are three paths that forward-thinking businesses can take to replicate this success and help scale up permanent carbon removal:

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1. Directly purchase carbon removal from permanent carbon removal providers

Companies and individuals can buy permanent carbon removals directly from carbon removal providers, in what is becoming known as “carbon dioxide removal as a service”. This is a relatively straightforward option that enables companies to measurably remove CO2 while directly supporting innovators in this space. As we know, these solutions are in limited supply and are relatively high in price. This option makes sense when businesses have quantified the carbon impact of hard-to-decarbonize activities and want to find an effective way to offset those emissions. For example, Tomorrow’s Air has partnered with Climeworks, a DACCS company, making it easy for people to permanently remove emissions from air travel. Individuals and businesses can purchase biomass-based permanent carbon removal directly from Charm Industrial. More options are emerging to buy permanent carbon removal at a larger scale. For example, Shopify recently reserved 10,000 tons of carbon removal from DACCS company Carbon Engineering.

2. Introduce permanent carbon removal purchases as part of a broader portfolio of carbon removal projects

Companies looking to offset a larger volume of emissions can assemble a portfolio made up of carbon removal projects that includes permanent carbon removal. This involves establishing screening and evaluation metrics, developing RFPs targeting carbon removal providers, and selecting projects that meet certain standards. Because these portfolios can include cheaper, temporary carbon removal solutions, this can end up being more affordable than the first option on a cost per ton basis. As permanent carbon removal solutions come down in cost, they can make up a larger share of the portfolio over time. However, there is complexity in identifying high quality carbon removal solutions with short-lived storage, like forestry projects, which can have difficulty proving additionality and permanence. Nonetheless, this is a good place to start for companies that want to invest in permanent carbon removal but doing so exclusively would be cost-prohibitive.

Oxford’s Offsetting Principles suggest increased use of permanent carbon removal (carbon removal with long-lived storage) over time. Source: Oxford University

Stripe, Shopify, and Microsoft have used this approach and each company has included varying levels of permanent carbon removal solutions in their portfolio. More importantly, they have been reasonably transparent about their decision-making process, offering a blueprint for other companies to follow.

3. Integrate carbon removal technology into value chains

Finally, there are creative opportunities to integrate carbon removal technologies into value chains. Instead of removing carbon and permanently storing it, the captured CO2 can be used as an input for products that require it. This is an emerging industry, sometimes referred to as “carbontech”. Integrating carbon removal technologies into a company’s value chain directly reduces the carbon footprint of business operations while supporting the underlying carbon removal technology. However, this can be complex and risky, as technologies like direct air capture are relatively new. This option makes sense for companies that want to establish a competitive edge by greening their CO2-dependent products or services and have the flexibility to experiment with nascent carbon removal technologies. 

Climeworks direct air capture facility channeling CO2 into a greenhouse. Source: New Atlas

Some use cases are already well underway. For example, greenhouses are sourcing much needed CO2 from integrated direct air capture machines. Captured CO2 can be incorporated into concrete’s curing process, strengthening concrete and reducing its high carbon footprint. Companies are also using captured CO2 to create synthetic aviation fuel and commonly used chemicals. While not all of these applications result in carbon removal, there are nearly endless opportunities for innovation and collaboration in the burgeoning carbontech space that can reduce emissions in hard-to-decarbonize industries.  

The sprint to claim carbon neutrality has created a “race to the bottom” where cheap offsets with questionable impact reign supreme.

The three pathways I’ve outlined above are by no means exhaustive - there are many more opportunities to support innovation in permanent carbon removal. But all of these options provide much needed funding to deploy more permanent carbon removal solutions. They also have a cascading effect: signaling to investors that there is a market for these solutions, unlocking additional private and public capital needed to bring improvements and new innovations to market, and in turn, driving down costs needed to achieve scale. 

Unfortunately, the sprint to claim carbon neutrality has created a “race to the bottom”, where cheap offsets with questionable impact reign supreme. As a result, two important opportunities are missed. First, less is invested in learning how to reduce emissions and sharing those best practices so that they can be replicated within industries. Second, nascent, albeit riskier innovations lose out on the funding they need now to play a critical role in decarbonization in the years ahead. We need to turn the page on balancing the carbon ledger with cheap offsets. Rather, companies can make a real difference by doubling down on efforts to reduce their carbon emissions while helping catalyze new innovations in carbon removal. And by being transparent about their experience and sharing their learnings, they can reduce the barriers for others to follow in their footsteps.

This post offered a high level overview of how businesses can begin to make the shift from buying traditional offsets to supporting emerging carbon removal technologies critical to long-term decarbonization. I’d love to hear from you about more pathways available to the private sector to support permanent carbon removal. In my next post I will review the policy levers governments and larger institutions can use to help catalyze this critical industry.