As the world comes together at COP27 in Egypt this week, global leaders will be reminded of the ever-increasing importance of removing CO2 from the atmosphere to reach global climate goals. Key enablers for businesses to achieve net zero by 2025 will be the implementation of carbon removal technologies and committing to carbon offsetting.

What are carbon removal technologies?

Carbon Capture & Storage (CCS) can capture and store up to 90% of CO2 before it is released into the atmosphere from industrial processes. This technology is particularly beneficial when combined with bioenergy production (BECCS) as it has the benefit of delivering negative emissions whilst producing energy. This will prove vital for meeting global net zero targets, particularly in countries like the UK where natural gas makes up a large percentage of the energy supply. Evidence from ESME, the Energy Technologies Institute’s energy modelling tool, suggests that by 2050, BECCS could deliver 55 million tonnes of net negative emissions a year in the UK.

Substantial progress is being made in the rapid deployment of the CCS market, encouraged by policy support in key markets such as the US, UK, EU and Australia. The UK government for example, has committed to capturing and storing 20-30 million tonnes of CO2 per year by 2030 and is providing £800m of funding to establish at least two CCS sites this decade.

The EU estimates it will need to capture and utilise or store 300-640 million tonnes per annum of CO₂ by 2050 to reach its climate goals. The European Commission will launch a new €3bn funding round later this year aimed at incentivising the development of more CCS projects. Next year, it will also publish its strategy for the sector focused on three areas: funding, infrastructure and regulation.

Direct Air Capture (DAC) extracts CO2 directly from the atmosphere. In the IEA’s Net Zero Emissions by 2050 Scenario, DAC technologies capture over 85 million tonnes of CO2 in 2030 and approaching 1 billion tonnes in 2050. A rapid expansion of DAC facilities is needed to meet this scenario and interest in this technology is rising sharply. Since 2020, governments have committed $4bn in funding for DAC technology development, with the US government making the biggest commitment of $3.5bn. Corporations, carbon removal funds and private investors are also supporting DAC development either through direct investment or the purchase of carbon removal credits.

The importance of carbon offset markets

Carbon offset markets also have the potential to play a significant role in delivering negative emissions. The increasing number of companies committing to net zero emissions targets led to the voluntary carbon market (VCM) quadrupling in 2021 to $2bn. This is just the tip of the iceberg though, as The Taskforce on Scaling Voluntary Carbon Market estimates that the market could be worth up to $50bn by 2030.

Companies leading the way in carbon removal

Microsoft committed to a carbon negative pathway in January 2020 and started building its carbon removal programme last year which included purchasing 1.3 million tonnes of carbon removal. Many other companies have begun to follow suit. This year, Airbus purchased 400,000 tonnes of carbon removal credits from Occidental’s Low Carbon Venture business 1Point5, whilst McKinsey, Alphabet, Shopify, Meta and Stripe committed $925m to accelerate the development of permanent carbon removal technologies.

What’s next?

In the next few decades vital action will be needed to reach net zero by 2050 and companies around the world will be under the spotlight more than ever to reduce their CO2 emissions. The carbon removal market will be crucial in this process and if forecasts are correct, the CCS, DAC and carbon offset markets are just at the start of their upward growth journey.