The stakes are getting higher
Consumers increasingly factor environmental impact into their buying decisions and activist investors are waging campaigns based on environmental, social and governance (ESG) concerns. In fact, BlackRock Chairman and CEO Larry Fink said in his 2022 letter to CEOs, “most stakeholders – from shareholders, to employees, to customers, to communities, and regulators – now expect companies to play a role in decarbonizing the global economy.”³
Meanwhile, ESG-focused activist campaigns nearly doubled in the 2022 proxy season, according to EY-Parthenon analysis. European regulations already encourage lower-carbon energy and industrial footprints, setting an emissions reduction target of 55% by 2030 compared with 1990 levels.
Current carbon offsets have questionable effectiveness
Executives have typically relied on emissions reduction efforts combined with a carbon credit system to offset their company’s carbon footprint. Sectors where CO2 abatement is difficult, including heavy industry and aviation, are already adopting new carbon-neutral fuels and buying offsets to negate their carbon footprints. However, it is not always clear how effective these carbon offsets are at mitigating climate change. Since participation in the market for these credits is largely voluntary, it varies significantly by sector, quality, and geography. Effective offsets, such as direct air capture into geological formations, are energy-intensive and expensive. Cheaper offsets, such as in forestry, require long-term management and may still be subject to land use changes or unforeseen fires that could negate them. Offset markets are a step in the right direction, but most depend on avoidance of otherwise burned fossil carbon or rely on impermanent atmospheric removal. In many cases, CEOs and their teams may be focused on cost rather than environmental impact. However, lower-cost and lower-quality offsets are far less likely to realistically meet climate objectives.
Three ways emerging carbon removal technologies can become revenue generators
Focusing on revenue growth instead of costs reveals a new path that executives can follow. Emerging carbon removal technologies have the potential to help companies meet both climate goals and business goals – and it’s already or showing positive results in industries like airlines and personal care.
Examples of such technologies include the following:
1. Creating consumer products by capturing CO2 from smokestacks or from the atmosphere
Consumer interest in this space is growing exponentially – it started with niche luxury products labeling their carbon footprints, and it is expanding in mainstream commercial spaces. Captured CO2 can be utilized as a feedstock in bio-based products and incorporated into foods, personal care products, packaging, specialty chemicals, and even meat alternatives, and can displace the use of petrochemical-based products. Tax credits such as 45Q in the US are helpful incentives, but more investment is likely needed to scale these options to broad commercial and climate relevance.
CO2-based consumer products are slow to develop and scale. They can suffer from changes in consumer preference or pressures from volatile oil prices – a high oil price pushes the market toward bio-based alternatives, but a low oil price can draw it back to petrochemical feedstocks.
2. Stabilizing soils, decreasing erosion or nutrient loss, and improving agricultural output using captured CO2
“Green fertilizers” could help improve agricultural yields and soil health, decreasing the dependence on fossil energy to create ammonium fertilizers. Agriculture itself accounts for about 12% of US carbon emissions, mainly in livestock, crops, and associated fertilizers that depend on the use of natural gas in manufacturing. Innovative agricultural technology companies are developing microbial fertilizers using CO2 as a feedstock, building value from the sale of these solutions and potentially removing more atmospheric CO2 once deployed. Advanced cover crops or biochar (charcoal made from plant material) could be employed, providing a low-cost long-term carbon store and improving soil health, all while increasing yields and revenue from the primary crops.
Development of these technologies and novel farming techniques may take significant time to achieve technical viability and market feasibility. While nature-based solutions are more straightforward to implement, they may not offer the more permanent carbon sequestration needed at scale.
3. Improving mining yields of valuable metals essential for batteries and electric vehicles using captured CO2
The use of captured CO2 as a reagent in mining and metallurgy processes can sequester carbon permanently while increasing the yield of metals such as nickel and cobalt – which are predicted to be in short supply as electric vehicle adoption and home energy storage expand exponentially.
The technologies are in early stages and may take significant time to achieve technical viability and market feasibility. Adoption of new technologies is slow in the mining industry, especially in the absence of clear economic or regulatory incentives.
How to find the best carbon removal technology for your company
There is no panacea. No carbon removal technology is perfect for every company, and certain carbon removal technologies are not in the stage of development to meaningfully impact a company’s finances or meaningfully affect the environment. CEOs and company leadership likely need to employ a data-driven technical approach to identify, select and implement the best solutions for their companies.