Carbon removal offers trillion-dollar opportunity, says UN-backed investor body

(Credit: EPA/Filip Singer)

Demand for technologies that can remove carbon out of the atmosphere is set to soar as companies step up efforts to meet net-zero targets, creating hundreds of billions of dollars in projected revenues, a new study has found. 

The report, commissioned by United Nations-backed Principles for Responsible Investment, estimates that nature-based solutions (NBS) focused on reforestation, afforestation, and land restoration could generate $800bn in annual revenues by 2050.

Technologies such as direct air carbon capture, use and storage (DACCS) and bioenergy with carbon capture storage (BECCS), could generate an additional annual revenue of $625bn by 2050.

As a result, an entire new industry may emerge that values carbon stored in vegetation and soil, the report says, unlocking new business models for avoided deforestation and land restoration.

Why is this important? Mounting pressure from investors and consumers is driving more companies to make net-zero commitments, particularly among heavy emitters in oil & gas, utilities, steel, cement, automobile, food, and aviation.

Since late 2019, the number of companies committed to net zero increased by two-fold to 1,541 in 2020,  according to the United Nations Framework Convention on Climate Change. Meanwhile more than 820 cities have now made similar net-zero pledges.

Without negative emission technologies (NETs), the world will be unable to meet these pledges nor the targets set out in the Paris Climate Accord of limiting global warming to 1.5 °C or 2°C by the end of the century, the report says.

Planting more trees. Big oil companies have already started to channel their resources into forest-related projects. Shell, for example, is planting five million trees in the Netherlands and regenerating an 800 hectare-forest (ha) in Australia.

Technology companies are also pursuing similar projects. Apple is protecting a 11,000 ha mangrove forest in Colombia and Amazon has launched the Right Now Climate Fund, investing US$100m in NBS. The first project of US$10m was announced in April 2020 to restore and conserve 1.6 Mha forest in the US, removing 18 metric tons of carbon dioxide equivalent from the atmosphere.

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These projects are in turn driving the demand for NBS carbon credits. From 2017 to 2018, the voluntary offset market doubled in volume from approximately 50 million to 100 million offsets and in value from $150m to $300m, according to a report cited in UN PRI’s analysis.

“We can’t achieve net zero without nature-based solutions,” Fiona Reynolds, chief executive of UN PRI said.  “The pandemic has supercharged the investment case, especially in forestry, and this new analysis shows the magnitude of the opportunity. Forest finance has historically been small and largely the purview of the public sector. But policy and business momentum have now advanced to a critical mass for forests to begin emerging as a new asset class.”

“With more and more companies setting net-zero targets, investors also need greater transparency about the negative emission technologies businesses will rely on to get there. Afforestation activities are the most viable first move, but to ensure success actors must simultaneously focus on ending deforestation. The report also highlights that an overreliance on bioenergy could have terrible consequences for the planet, biodiversity and food security.”