Carbon Removal Purchase Volume Soared (Taiwan, September 2023)

ESG Vision - Sustainability and Shared Good
“Carbon removal” purchase volume soared 4.6 times. How big is the market?
2023/09/06 | Text by ESG Vision Editorial Department (from text donated by OpenAir but not credited)

Recently, the carbon removal market data platform released the “2023 Mid-Year Progress Report”. As of August 2023, the purchase volume of carbon dioxide removal (CDR) has reached 4.1 million tons, and another 2.6% (about 110,000 tons) tons) delivered. Purchase volume increased 4.6 times compared with last year, and the total historical transaction volume reached US$2.05 billion. How big is the market for carbon removal?

At the beginning of this year, a research team led by the University of Oxford released the “Global Carbon Removal Report” , pointing out that if we want to control global warming within 1.5°C, we must not only reduce carbon emissions, but also step up efforts to deploy carbon dioxide removal ( CDR, Carbon Dioxide Removal).

[ESG Dictionary: Carbon Removal] The United Nations Intergovernmental Panel on Climate Change (IPCC) defines “Carbon Removal” (CDR): "Carbon dioxide is removed from the atmosphere through human activities and is permanently stored in geology and land. or in marine repositories or converted into products.”

The “carbon removal” market will have an average annual compound growth trend of 40 to 50%

According to the report, carbon removal procurement volume increased 4.6 times compared with last year, and the total historical transactions reached US$2.05 billion. Despite this, the research team emphasized that the current transaction volume only accounts for a small part of what will be needed in the next few decades. To reach the scale of 1 billion tons, it will need to maintain a compound annual growth rate of 40 to 50% every year until 2050. Go forward.

Robert Hoglund, co-author of the report and an expert on the SBTi technical advisory group, said, “If billions of tons of carbon dioxide are to be removed before 2050, tens of millions of tons (which have been permanently stored and certified) must be delivered before 2030. The amount of carbon dioxide removed.” Therefore, he called on more buyers to actively invest.

Picture: If billions of tons of carbon dioxide are to be removed by 2050, tens of millions of tons of carbon dioxide must be removed by 2030. Cut from @cdr_fyi

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Core buyers such as Microsoft and WoXu Energy have expanded CDR market purchases.

As carbon removal technology gains traction, how will carbon removal procurement volumes change? The report shows that carbon removal procurement volume jumped to 33 million tons in 2023.

Among them, the three major procurement cases composed of Microsoft, WoXu Energy, Mitsubishi Corporation, SouthPole (Swiss carbon finance consulting company), Stripe, Shopify (Canadian multinational e-commerce company) and JP Morgan Bank accounted for 94 % of market purchases. Buyers with purchase scales of more than 10,000 tons also include 12 companies such as Airbus, Boeing, UBS, and H&M; the remaining transaction volumes average less than 100 tons each.

Picture: The report shows that carbon removal procurement volume jumped to 33 million tons in 2023. Cut from @cdr_fyi

In 2023, the delivery volume achieved through carbon removal technology was 33,636 metric tons, which was slightly more than the same period last year. It is worth noting that the predicted delivery period for carbon removal on the market this year is 14 months longer than last year, with the average delivery time after pre-order being 45 months. This means that corporate buyers are willing to accept a longer delivery period, and also shows their determination to invest in the CDR market in the early stages and move towards the goal of carbon reduction.

“Let a hundred flowers bloom” thinking model promotes the development of diverse technologies

The report also mentioned that the main sources of carbon removal procurement this year are 88% bioenergy carbon capture and storage (BECCS), 4% bio-oil (Bio-oil), and 3% direct air capture ( DAC, Direct Air Capture) and 2% biochar (biochar).

Other carbon removal methods, such as large seaweed, enhanced weathering, and biomass storage, are gradually receiving market attention and exploration, although their supply scale is still small. The CDR research team believes that different carbon removal technologies have different scalability potential, reversal risk, future cost curve, MRV (scientific measurement method) feasibility and co-benefits, etc. Enterprises should be encouraged to try through a diverse approach that allows a hundred flowers to bloom.

The average transaction price of the carbon removal market in 2023 is US$450 per ton, and the transaction volume is estimated to reach 7 million tons. Although the total amount of energy has grown strongly, it only reaches 0.04% of the target required before 2050. The research team pointed out that to achieve sustained maturity, the existing core buyers must continue to be expanded, and procurement by governments with large-scale purchasing capabilities is the ultimate goal.

Extended reading: The new “black gold” in the carbon rights trading market! An article analyzing the gold content of biochar with negative carbon technology

To promote the development of CDR technology, buyers can have two roles

At the end of the report, the research team pointed out that buyers play two important roles in the development of CDRs.

First, the funds brought in by buyers can improve carbon removal technology and reduce costs, which is beneficial to market scale. “CDR cannot grow from tens of thousands of tons to billions of tons in just a few years.” Therefore, the research team suggests that in the process of scale-up, it is necessary to learn by doing and build a complete infrastructure. As the volume increases, the sales price will gradually be lowered to be able to supply more buyers.

Second, buyers have also become the driving force behind accelerating innovation and creating a more diverse CDR technology ecosystem. The research team admitted frankly that the best way to remove carbon may not have been invented yet. These simple technologies require more resources to be invested so that science and technology can move out of the research laboratory and progress to demonstration and deployment. “This is probably more critical than the first role,” Robert said.