2023 was a remarkable year for the conversation around the role carbon capture plays and its potential impact on climate change, both for capturing CO2 from fossil fuel sources as well as capturing from the atmosphere.
From the UK government announcing a £20bn investment in fossil fuel carbon capture and storage (CCS) in March to the US awarding $3.5b to the first Direct Air Capture (DAC) Hub projects to the historic commitments toward reduction of fossil fuels made at COP28 in December, we are beginning 2024 in a very positive position.
With the previous year filled with so many milestones at Skytree, the team shares their thoughts on what 2024 will hold.
Increased focus on Direct Air Capture
The historic decisions and agreements at COP28 to step away from fossil fuels on a global level are extremely welcome. For some this is not radical enough but it certainly is a change toward how we planned to power industry and society for the last century. For these commitments to be fulfilled, there will need to be an increased focus on Direct Air Capture technology (DAC) as an alternative CO2 source for processes requiring it as a feedstock, as CO2 availability from fossil fuels is expected to decrease, while demand is expected to grow exponentially.
DAC allows for replacement of current fossil fuel based CO2 supply chains and helps solve the removal of both historic and future emissions, while at the same time putting pre-existing infrastructure such as piping and empty oil wells to better use as assets to combat climate change.
In the year ahead, look for new investments to be made into the necessary technologies that will truly enable a move away from fossil fuels. As more businesses and leaders continue to become aware of the benefits of DAC technology, expect to see increased investment and discussion around innovators in this sector in 2024 and funding of projects, initiatives and financing of removal infrastructure through carbon credits and government programs.
Policy momentum will stimulate market growth
As interest in CO2 reductions and removals grows, so do concerns regarding transparency, accountability and integrity. To resolve the criticisms surrounding carbon credits, many institutions have been scaling up their efforts, one of the most notable being the European Parliament. This November, Parliament approved the Carbon Removal Certification Framework (CRCF) which sets more stringent guidelines on carbon removal credit certificates. While this framework acknowledges the different options for carbon certificates, its definitions related with ‘removal’ and ‘storage’ are still ambiguous. It is important to note that the text has yet to be adopted by the EU. For adoption to happen, an agreement must be reached between Parliament and Council, which requires another vote, which will be held in the first half of 2024. Regardless, this is still a crucial step in European policy that will help the EU reach its climate goals.
While planting trees has proven to be sensitive to cheating and even fraud, DAC related credits are more trustworthy by nature as the CO2 removed is easier to measure and track than verifying if individual trees are really planted (and not double counted) and maintain to take out the promised CO2 from the atmosphere. More importantly, the EU should adopt its new 2040 climate target later this year, offering clarity on its goals for the next decade ahead.
On the other side of the ocean, the Integrity Council for the Voluntary Carbon Market (IC-VCM) has published their Core Carbon Principles in 2023, which also contains rules for the VCM that should increase credibility. We are also seeing the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law (BIL) accelerating the flow of finances into natural and technological Carbon Dioxide Removal (CDR) applications. The Bipartisan Infrastructure Law is committed to the creation of 4 DAC Hubs and has allocated funds for the Carbon Utilization Program while the IRA is increasing incentives for carbon sequestration via DAC projects and prioritizing DAC over carbon capture from fossil fuel sources (e.g. 45Q tax credit). The IRA is also boosting financial incentives for markets that DAC can grow in, such as sustainable aviation fuels and green hydrogen, which require CO2 decoupled from fossil fuels as a feedstock.
Scalable DAC carbon capture technology
Building scalable climate technology isn’t easy. It requires research, innovation, smart engineering, capital, supply chains, patience, and purpose-led teams.
In order for the DAC industry to scale, barriers such as innovation costs pay back, high production costs of first generation technology, lack of clarity on industry standards, and energy consumption issues must be reduced. In 2024, we expect to see greater collaboration between private, academic and public sector bodies to remove these barriers and encourage accelerated adoption of DAC solutions, creating space and opportunity for scaling and innovation.
Funding for climate-tech start-ups set to increase further than any other industry
McKinsey’s latest report calls for increased funding of early stage technology builders. Tech.eu also suggests that climate-tech start-ups will receive more funding than any other industry for the next 12 months. We expect this to be a recurring theme of 2024.
Innovation is at the heart of reducing carbon emissions. Through funding, incentives and increased subsidies, businesses with clear agendas can be at the forefront of change. An investment in any business is a leap of faith. At Skytree, we have been fortunate to generate over €13M in investment over the last year, with plans to close a Series A round later this year. Supporting the start of production and rollout of the first few hundred DAC systems, while continuing innovations that drive down costs and energy consumption.
Further investment means businesses like Skytree can hire the best talent, invest in research and development, scale up production and make a difference sooner.