CDR.fyi Finds Just 0.5% Of Companies With SBTi Targets Have Bought Durable Carbon Removal

CDR.fyi Finds Just 0.5% Of Companies With SBTi Targets Have Bought Durable Carbon Removal - Carbon Herald
Photo by Ali Rezaei on Unsplash

CDR.fyi – the community-driven initiative aiming to monitor and bring transparency to the carbon removal market, posted its latest findings on the sector. According to Robert Höglund, founder of CDR.fyi and an author of the analysis, just 32 or 0.5% of the 5,998 companies that have committed or validated SBTi Targets, have purchased durable carbon removal.

Just 0.5% of the companies with committed or validated Science-based targets to reduce emissions is not enough for the carbon removal space to grow as quickly as needed to fulfill its purpose of eliminating excess carbon emissions from the atmosphere, summarize the results. 

Relevant: CDR.fyi Releases Its Most Comprehensive Report To Date

“There is a great need to start scaling the carbon removal industry now. All companies need some level of carbon dioxide removal (CDR) to reach their net zero targets, but today, only a handful are taking on the responsibility to grow the sector,” according to Robert Höglund.

CDR.fyi holds the largest open data on high-permanence carbon dioxide removal deals. According to its data, 4.78 million tonnes of carbon removal have been ordered so far. 

Some reports may quote slightly different numbers but globally, scientists predict that up to 10 gigatons of CO2 will need to be removed annually from the atmosphere by 2050, with an increased removal capacity up to 20 gigatons of CO2 per year by 2100 to keep temperature rise within the 1.5°C limit outlined in the Paris Agreement. 

Credit: CDR.fyi

Even a global warming of 1.5°C is dangerous and holds variable risks for life on Earth, especially when we compare it to current levels of warming of around 1.1°C, characterized by unexpected and devastating climate events like heatwave and cold snaps, storms, floodings, and wildfires to name a few.

Analysis by BCG on the market for permanent carbon removal states that voluntary CDR buyers are expected to continue dominating the market until the end of the decade, reaching 40-200 million tons CO2/yr by 2030. Compliance markets are expected to take over after that and increase demand in the space. 

According to CDR.fyi, reaching the lower end of this forecast would require preorders of CDR or offtake agreements to grow 100x and carbon removal deliveries to grow almost 1000x by 2030 from current levels. 

The calculations are based on the latest statistics showing that only 45,500 metric tons of durable CDR credits were delivered in 2022 and 4.78 million tonnes of carbon removal have been ordered so far.

One way to achieve the required growth in removing and storing CO2 from the atmosphere is to have around 4000 buyers order on average 100,000 tonnes for future delivery. As CDR.fyi has estimated, only 6 buyers have bought over 100,000 metric tons and 10 more have bought at least 10,000 metric tons. That means the number of big buyers needs to increase by several orders of magnitude.

Relevant: CDR.fyi 2022 Review: Not Enough Companies Are Buying Carbon Removal

The growth rate of the delivery end is also possible due to the fact that several companies are already planning facilities with megatonne annual removal capacity.

To ensure the growth in carbon removal capacity, participation from more corporates making big purchases is critical right now. For the new facilities to be financed, government support is not enough and multiyear preorders, not just single-year purchases are needed. 

Some governments have ensured financial support for carbon removal technologies like the IRA and the Bipartisan Infrastructure Bill in the USA with programs for the development of direct air capture hubs, for example. They bring confidence to the buyers who are willing to take part and purchase some of the carbon removal credits expected to be generated by those projects later on. 

However, if buyers are lacking, there are risks to the CDR space that it might fail to grow fast enough, the ecosystem might shrink and innovation gets stifled. According to CDR.fyi, buyers play two roles: scaling the market, and expediting innovation that helps construct a diverse supplier ecosystem. The second role also may include many fewer metric tons purchased from the diverse suppliers but perhaps could be the most important one at this early stage.

As CDR.fyi explains more buyers could be incentivized to take part and scale the market if guidance were available from scientific or non-governmental organizations. 

“The Science-based Target Initiative in particular (SBTi) plays a critical role in stimulating carbon removal. Even though SBTi mandates permanent carbon removal to reach net-zero targets, it currently offers no incentive for companies to finance carbon removal before net zero. SBTi can demonstrate more leadership by requiring companies to invest in external climate solutions today, so-called beyond value chain mitigation, and clarify that CDR is a crucial part of that support,” explains Mr Höglund.

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