BCG Report Highlights Crucial Role Of Government Policies To Scale Carbon Removal

BCG: Only 10% of Companies Measured Their Emissions Comprehensively in 2022 - Carbon Herald
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According to a report from the Boston Consulting Group (BCG) published earlier this week, the contribution of carbon removal towards keeping global warming at bay hinges on political support, rather than voluntary demand.

The consulting company’s analysis shows that anywhere between 6 to 10 gigatons of annual CO2 emissions will very likely remain unabated by the 2050 deadline that the Paris Agreements 1.5′ scenario has set. These are roughly distributed in three groups: industry with around 40%, energy supply with 30% and transport with 20%.

The market size for carbon dioxide removal (CDR) is expected to be in the $500B-$1T range with North America and Europe providing most of the revenue. Germany is highlighted as one of the countries with high growth potential with a possible $75B market, which could generate almost 200,000 jobs.

Image: BCG report “Boosting Demand for Carbon Dioxide Removal”

With the range of this market size – and taking into account emission reductions and carbon capture efforts – the BCG report identifies three scenarios for the impact of the carbon removal market, with the most ambitious one saying that 2.5Gt/yr of CO2 will be durably removed by 2050 given current policies and supply/demand dynamics.

This creates the outlines of a 3.5-7.5Gt/yr gap that has to be addressed.

How does BCG think carbon removal can scale

The report explores the challenges for voluntary demand of carbon dioxide removal (CDR), as its characteristics make it different that other emission reducing technologies like wind and solar where there is strong demand.

Identifying direct and indirect drivers BCG focuses attention on the need to have clear carbon pricing, inclusion of CDR in emission trading mechanisms, industry requirements for decarbonization and crucially – government procurement for CDR.

One of the figures that jumps out here is that emission trading schemes are expected to cover 26Gt of global emissions (and 30 if carbon border adjustment mechanisms proliferate), driving the message that CDRs impact can only be achieved by embedding them within these markets.

Relevant: DOE Announces 24 Semifinalists For Carbon Removal Purchase Pilot Prize

On the indirect side there are financial incentives aimed at reducing the cost of removal and creating standards for net zero claims that use CDR.

Finding the right policy balance

One of the important themes in the report is rolling out incentives to tackle the different parts of the supply/demand dynamic for CDR. But it does also identify the pitfalls of keeping them for too long or misallocating them.

The full spectrum of subsidies that target cost reduction in the near term and financial incentives for developers are laid out in detail by region and industry. But the authors highlight that they could actually have a distorting effect on the behavior of companies and ultimately lead to slower decarbonization.

Keeping prices artificially lower, they say, could encourage emitters to remove emissions rather than reduce them.

Read more: The New State Of CDR Report Is A Key Tool In Assessing How To Scale The Industry

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