- The IPCC says carbon removal is essential to keeping global warming below 1.5 degrees.
- The carbon-capture-and-sequestration market is expected to be worth $ 7 billion by 2028.
- Insider profiled 11 European carbon-removal startups investors think are poised to take off.
Sucking carbon out of the atmosphere through both nature and technology is likely to form an important part of the world’s effort to reduce emissions and avoid the worst effects of the climate crisis.
The UN’s Intergovernmental Panel on Climate Change has described carbon removal as essential in meeting the Paris agreement’s target of keeping global warming below 1.5 degrees Celsius, and it’s gaining traction among investors.
According to Fortune Business Insights, the global carbon-capture-and-sequestration market is expected to grow from $ 2 billion in 2021 to $ 7 billion by 2028.
PitchBook data indicates there are 55 venture-capital-backed companies in Europe’s carbon-capture-and-sequestration ecosystem. Startups in the sector raised $ 52.8 million across 20 deals in 2021, a figure dwarfed by this year $ 1 billion across 12 deals to date. The Swiss startup Climeworks raised the lion’s share, raking in $ 650 million in one round last month.
Alphabet, Meta, Stripe, Shopify, and McKinsey Sustainability have also committed to scaling carbon-removal technologies. Under a joint initiative named Frontier, the companies said in April that they’d earmarked $ 925 million to purchase permanent carbon removal from companies building new solutions over the next nine years.
Carbon-removal companies come in different forms – some are designed to suck carbon straight out of the air, while others extract it from industry processes before it’s emitted. Some startups take a nature-based approach to sequestering the gas.
Biochar, a form of charcoal that prevents carbon dioxide from entering the atmosphere by storing it in solid form, is another option. It is made from organic materials like crop residue that are exposed to high temperatures and low oxygen.
Carbon can also be stored in materials such as limestone and carbon fiber, which can be used as building materials and car parts.
“We will need to do all of these things, because we will need to move from net zero to net negative,” Michal Nachmany, the founder of Climate Policy Radar, told Insider. Nachmany, whose startup is building a searchable database of global climate policies, added that carbon-removal technologies should be used in addition to reducing emissions, “not instead of.”
Carbon removal is a nascent industry. Many technologies are new, unproven, and costly, making them difficult to scale.
Climeworks, which runs a direct-air-capture plant in Iceland, has said it’s convinced the global price of carbon will settle in the range of $ 100 to $ 200 a ton once the urgency and necessity of carbon removal are fully understood and the right policies are in place. It expects the cost of its current direct-air-capture technology to be $ 250 to $ 300 a ton by 2030.
Nachmany said investors, governments, and corporations must be bullish on carbon removal despite the high costs. “Investing in R&D and things that currently look very expensive and unrealistic – if we do not start that now, then they will continue being unrealistic and expensive,” Nachmany said.
David Frykman, a general partner at Norrsken VC, said that bringing down the cost is key to success.
“The need for carbon removal is sadly obvious. Luckily, there is a lot of innovation currently happening in the space,” Frykman said, adding that he’s watching the industry but hasn’t made an investment. “What’s more, we need companies that create the infrastructure, verification, and financing of carbon removal. There are many exciting companies working on these issues, not least due to recent gains in the momentum regarding net-zero commitments.”
Insider asked venture capitalists and industry experts to identify portfolio and nonportfolio companies they’re most excited about. Each company is profiled below.