Carbon dioxide removal (CDR) technologies have long been seen as a tool to tackle climate chaos, but the potential was largely theoretical. Two projects at Sleipner and Snohvit off the coast of Norway have been capturing and safely storing millions of tons of CO2 for 27 years and 15 years, respectively, but overall deployment has been slow to take off.
However, this has changed as the urgency of climate action has gathered pace. In 2021, Orca, a large-scale direct air capture (DAC) and storage plant in Hellisheidi, Iceland, entered operations, becoming the first of a new generation of facilities based on newer, cheaper technologies. Although small (Orca only currently captures about 4,000 tons of CO2 annually), the Icelandic plant showed the potential. Since then, there has been a rush of planned CDR projects.
Let’s be clear—CDR alone will not save the planet. It remains more effective never to emit CO2 than to try to suck the particles out of the atmosphere after the fact. However, this is not always practical in a world where we need steel and concrete, and where people still want to fly, and build and heat their homes. CO2 is unlikely to be dislodged from industrial processes any time soon, so carbon mitigation is essential if we are to reign in climate change.
The knife edge upon which the world is poised is captured in the “carbon budget.” This refers to the maximum amount of CO2 that can still be emitted while having a chance to limit warming to 1.5C by the end of the century compared to pre-industrial levels. If average global temperatures rise above 1.5C, it is expected that the natural systems that sustain us will push past a dangerous turning point.
According to one estimate in the United Nations–backed Intergovernmental Panel on Climate Change’s (IPCC’s) recent review of climate science (AR6), the world can only emit 300 gigatons (Gt) more from Jan. 1, 2020, for a high likelihood of limiting warming to 1.5C. As we currently emit about 40 Gt CO2 annually, the remaining budget could be burnt by about 2027.
Enter CDR. In AR6, the IPCC found that capturing and storing CO2, though expensive, might play a role in keeping global temperatures within safe bounds. The hope is that removing carbon from the atmosphere will provide breathing space to decarbonize heavy-polluting sectors.
Challenges and Risks
The boom in carbon removal cannot come fast enough. It is estimated that the world needs to remove up to 1,000 Gt of CO2 from the atmosphere by the end of the century to keep the world livable.
Growing carbon removal in line with current estimates requires an urgent, massive scale-up in the next decade. Government policy must be met with private capital to unlock the full potential of carbon capture and storage (CCS) and limit global warming to 1.5C to avoid the most catastrophic impacts of climate change.
There are reasons to be optimistic: The infant industry is growing fast. In 2019, the capacity of CCS facilities worldwide was 85 million metric tons per year. By 2022, it had already reached more than 240 million metric tons, with a growing crop of new projects in the pipeline around the world.
Government support is also helping get the industry off the ground. Some $251 billion of the money earmarked recently by the Biden administration in the U.S. for climate action is targeted at carbon capture. The European Union’s (EU’s) response, the NextGenerationEU, is also likely to promote carbon removal, too.
This is a rapidly developing industry. The underpinning technology has been around since the 1970s, but factors are combining now to see growth accelerate, and it is being driven by smart, young, dedicated people who understand the future our planet faces and are determined to make a difference.
For a construction insurance project, risks would typically involve damage during erection/installation of heavy plant equipment, potentially also resulting in delays to the project. Then there is also structure/collapse risk (such as collapse of a building frame/structure, which could occur during erection for a number of reasons), as well as equipment accident during delivery risk (such as specialist processing skids, which must be transported to project sites and can be damaged during delivery and offloading). Not forgetting, the testing and commissioning of various systems including gas-fired boilers for fire/explosion risk.
For insurers such as Allianz Commercial, it is great to develop long-term partnerships with companies involved in such projects as they help our world transition from one of fossil fuels to one with a very low use of carbon fossil fuels compensated by CCS.
—Steffen Halscheidt is Global Practice Group Leader, Oil & Gas at Allianz Commercial.