The team of experts from the field of energy and fuel of future, and analysts from the advanced materials, chemicals and fuels at BIS Research, recently, concluded an extensive webinar on ‘Going Carbon Negative – Future Potential of Carbon Removal Technologies’.
The webinar was hosted by lead analyst, Pooja Manek and senior analyst, Aryan Akshya. The guest on this webinar were Mr. Aksel Gungor and Mr. Nikolaus Wohlgemuth.
The session was full of industry insights as well as deep marketing intelligence around the scope of sustainability and going carbon negative and how carbon removal technologies can support the objective of achieving net zero emission target in the coming years. Some very critical questions were raised during the session by the attendees, which were duly answered by the panel of speakers.
Here’s an excerpt from the QnA that took place during the webinar:
Ques. How would you split the project financing in the percentage of financing type (how much debt and how much equity)? Do you think projects are only equity financed, and after how many years would project developers be able to bring in debt?
Answer: It depends; for instance, at Carbonx, the company does not get involved in equity or debt financing in any way, as the equity financing is really going to be on the investor side. So, the traditional kind of venture capital (VC) or perhaps other parties, and on the debt side, is actually quite difficult.
A lot of the projects are not bankable today. So, it's difficult to use debt as an instrument. So, what's remaining is the first part, the equity financing, which the company is not going to get involved in. What the company does is try to bring the corporate sector into the mix and really take corporate funds to not only deploy those funds but also to compensate for offset tons.
But as mentioned, really deploy those funds through a climate strategy to maximize climate impact for that corporate client.
For example, if there's a $1,000,000 budget from a corporate client, the split of that budget across prepayments or long-term offtake depends on the strategy on the corporate side and on the types of projects they'd like to invest in depending on the pathway that is being utilized. So, it is going to have different splits of prepayment vs. long-term offtake depending on how nascent the technology is, etc. So, there isn't any definite split like a 50-50 or 80-20.
Ques. Do you have an example of companies involved in the insurance space? What other types of insurance might they focus on besides the non-delivery risk of the carbon credits?
Answer: The two examples can be KITA and Oka, and there could be more than that. In terms of other insurance, it should be thought from company-level insurance, in addition to project-level insurance or credit-level insurance. As of now, the only thing that is available is a non-delivery risk, but it is expected that more products are going to be coming out that ensure the kind of the whole chain or the whole stack.
Ques. Have either of you started looking at hydrogen production pathways that use biomethane/renewable gas as feedstock and then split it into hydrogen and solid carbon?
Answer: If carbon, like solid carbon, can be produced because of that, and if the project emissions are carbon negative, then the removal can be credited. It is expected that this is a project where there is currently no methodology available to issue carbon credits today, but it is encouraged to apply for Carbonfuture’s catalyst program with which the company could provide support such as selecting a standard development, developing a methodology, and even maybe issuing some experimental carbon credits from that.
Ques. What is the main constraint to unlocking the growth of value chain management (VCM): supply or regulation?
Answer: From the regulations point of view, everybody's kind of waiting for some definitions, which will inherently define quality. As per the view from the supply side, the projects are trying to raise money, sell directly to raise funds for credit, and really accelerate their operations. So, in this case, what Carbonx does is unlock the demand side to accelerate as the company is entirely focused on it. Most of the efforts by the company are going into speaking with the corporate sector to bring them closer to projects and permanent removal to kind of unlock these operations and help them accelerate.
Ques. Is the method of production for biochar/grinded rock (which is energy intensive) considered when calculating how much carbon has been permanently sequestrated?
Answer: Yes, and this is regulated by the standard and methodology which is used in the credits. So, any project emissions need to be considered if there is a demand to issue credit.
Ques. Most offsetting techniques used to achieve carbon neutrality are now considered greenwashing and cannot achieve net zero. Do the speakers expect the carbon dioxide removal (CDR) market to rapidly reach that scale?
Answer: Yes, the CDR market needs to scale rapidly. If we take the 1.5 degrees Celsius target seriously, then there is an urgent need to just reduce emissions as much as we can and scale the CDR market.
Ques. How can small medium enterprises (SMEs) participate in the carbon dioxide removal market/credits, and can carbon credits be a valid removal quantity under ISO 14067 for GHG reporting?
Answer: With ISO14067, companies report their carbon footprint. To compensate for their footprint, companies can purchase removal credits. If these companies can prove that they made the best efforts to reduce their emissions and they compensate 100% with removal credits, then these companies can make a claim for being net zero. SMEs also could get active in the sector of carbon removal with activities they take in their value chain. A food manufacturer could, for example, motivate farmers to use biochar for their agricultural activities. Like that, the footprint within the value chain can be reduced, which is called “insetting.”
Ques. How 'profitable' is it for companies to use Carbonfuture’s service?
Answer: The “service” of Carbonfuture is tracking carbon removal and operating a marketplace for removal certificates. The beneficiaries of the service are the producers of carbon removal, i.e., biochar producers, biochar traders, companies engaging in enhanced rock weathering, etc. These companies benefit from increased transparency through the company’s tracking and from the sales of the associated removal credits.
Ques. Why are more finance companies and investment banks investing in the purchase of carbon credits?
Answer: It is probably the case that companies with higher margins will be able to spend more than the ones with lower margins. The bit of irony there is that, while it's a generalization, the biggest emitters are also the businesses with the lower margins. So basically, the lowest emitters may, in fact, contribute the most, whereas the highest emitters will not be able to contribute as much. So, given that this market is growing and establishing itself, it would make sense for the 'market foundation' type of institutions (finance companies, insurance, banks, etc.) to want to be there from the start to lay the groundwork for the future market. This is one of the reasons why financial companies and banks are ramping up activity in this space.
Watch the complete webinar below:
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