As climate policy crafters around the world are realizing the need to include stronger mitigation efforts, the range of carbon removal solutions to help us reach a net zero economy by midcentury is also being broadened. Carbon removal solutions are receiving an increased amount of attention from policymakers and the last few years have seen them added to legislation for the first time.
We interviewed Vikrum Aiyer, Heirloom‘s Head of Policy, who shared with us Heirloom’s journey from the start to launching the U.S.’s first commercial direct air capture (DAC) facility, the sector’s supportive global policies and how DAC can grow without any use case for fossil fuel developments. Christian Theuer, Policy and Comms at Heirloom also contributed to our conversation explaining California’s recent climate policy developments and added details about the Heirloom – CarbonCure partnership.
How are things at Heirloom right now? At what stage of development is the company at the moment?
Heirloom had an incredibly fascinating year. Taking a step back, it is a 3-4 year old company born out of PhD research that looked into the carbon mineralization properties of the rock limestone.
And to go from that research phase to lab scale determination and then to a fully commercial facility – the one we launched in California in 2023 which is the United States first, fully commercial, direct air capture facility, is an incredible growth.
We are very excited that we have been able to demonstrate the technology is working. We are also really excited that there has been lots of momentum moving forward for the broader sector and for the voluntary markets. When it comes to carbon removals, in 2023 we have seen a record in deals like Microsoft’s commitment to purchase carbon removals from us, which is one of the biggest direct air capture deals in history.
Several competitors and peers in this space also inked deals with groups like JP Morgan BCG, and Frontier. To see all of that action is really promising because it means the technology is working and now we can continue investing in scale. It also shows that the demand side from a voluntary market perspective is robust and humming along.
We create bankable deals that hopefully spur more investment in the arena. All of those activities also underscore the need for even more government action and intervention. The United States has benefited from a lot of legislation that has been enacted into law, such as the inflation Reduction Act or the Bipartisan Infrastructure Law. Changes in those laws have breathed additional life into the carbon removal industry. We expect to see even more players grow and scale in the years to come.
The European Union is also setting 2040 targets from which carbon removal policy and potentially funding might flow. We know countries like Canada and regions in the Middle East are grappling with ways to enact policies to scale carbon removal and direct air capture. That additional policy action by governments, including the United States, needs to continue if we are going to meet our climate goals, and if we are going to scale and usher in this new era of new infrastructure jobs.
Could you give us an overview of the global policies that support direct air capture, apart from the ones you already mentioned?
Vikrum Aiyer: We are tracking a couple of things across some territories. Obviously, the US has made certain strides and we expect the industry to continue to push the US to advance those strides. That means provisions in the tax code that incentivize the capture and permanent storage of CO2, making sure it is implemented effectively.
There is a procurement prize program that the US Department of Energy is piloting. I think we can expect to see additional calls to Congress to allocate even more funding in the years to come.
We are not talking about something that happens tomorrow but in the long-run. It includes state action as states within the country have their own net zero targets and are interested in passing legislation to establish compliance markets and procurement markets. We know that there are legislative debates happening at the sub-national level in the US about voluntary markets, where heavy emitters might be asked to purchase removals from companies such as Climeworks, or Heirloom.
The dialogue about involuntary markets is also something we are seeing in the European Union. There have been calls from expert working groups to explore how the EU ETS might actually include removals. We have seen conversations in the EU about the 2040 targets. There is a Carbon Removal Certification Framework push from the European Union, which looks at how you certify removal schemes within the continent.
The United Kingdom advanced a Contracts for Difference format of legislation, which is a fancy way of saying that in order to spur more carbon removals, the central government might end up paying and exploring ways to set pricing to subsidize some of the costs of carbon removals in the early innings of the company’s development.
We have seen Canada advance very high capital expenditure subsidies by offering offsets to equipment purchases that are required to develop carbon capture and storage projects.
Christian Theuer: An interesting policy that is worth flagging is California’s Low Carbon Fuel Standard aiming to cut down the carbon intensity of all transportation fuels in the state. They released a staff report that could be translated into guidance for the state to actually act on the policy. It would see a reduction in carbon intensity of all transportation fuels, including jet fuel to 30% by 2030 and 90% by 2045.
There is a direct air capture based credit generation mechanism within the lower carbon fuel standard, which would allow direct air capture credits to be sourced by companies. As California has a 2045 net zero goal and the carbon intensity of fuels has to be down by 90% by 2045 that leaves about 10% that is essentially going to be catered for through carbon removal, specifically direct air capture.
Could you please tell us more about your partnership with CarbonCure on the commercial scale facility you launched in California?
Christian Theuer: Earlier in February 2023, we pioneered the storage of atmospheric CO2 in partnership with CarbonCure. We signed an agreement with them to store the CO2 we capture at this first commercial facility in Tracy, California. We are injecting CO2 into the concrete mix and the benefit of that is a very durable storage of the gas. Once it is injected, it is mineralized in the concrete and it won’t re-enter the atmosphere.
Vikrum Aiyer: This is exciting for us not only because we are able to demonstrate the technology but also because we are able to generate the commercial crediting market activity that is required to kick in additional capital in the sector. Not only can Heirloom’s technology scale, but other private and government investors can see it is real which helps move the market.
Heirloom is also proud that we are able to power the technology with renewable energy and that we are working with local labor unions to ensure the jobs created are good quality. We are also able to demonstrate a carbon removal approach that is completely decoupled from any oil and gas interests or any claim of expanded fossil fuel production. We think it is important to demonstrate that the carbon removal of existing CO2 in the atmosphere is how we march towards our overall 1.5 degree goals.
Not enabling additional extraction or expansion of fossil fuels is how we get there. The capture capacity of the facility is now up to 1,000 tons of CO2 per year but it is an important first step. Obviously, we need gigaton scale of removal to really get to our overall global climate goals. We are excited about this march to demonstrate how you actually responsibly deploy one of these technologies within the United States.
We are really just focused on the work of removing the billions of tons of CO2 required to prevent catastrophic impacts of climate change. The fact that you have companies like Heirloom, demonstrating that you can operationalize this technology without advancing a specific use case for fossil fuels, shows that others can follow suit. We hope there are others in the carbon removal and the direct air capture family that join us in this effort.
Do direct air capture facilities need to be located somewhere close to a greenhouse gas emitting source to improve efficiency?
Christian Theuer: No. We can remove CO2 from anywhere in the world as the concentrations are consistent. When the CO2 gas enters the atmosphere, it dilutes fairly quickly as it is in the same kind of measurable 421ppm everywhere on the planet.
Have you started delivering the carbon removal tons yet?
We’re on schedule to begin deliveries in Q1 2024. For every time we are able to capture and store one ton of CO2, we are generating a unique removal credit that is able to be purchased in private, and eventually public markets. The generation of that credit occurs, as acknowledged by the US Department of Treasury, when a single ton of CO2 is being stored.
When buyers ask to purchase the rights for a couple of different vintages of removals across the different facilities we might be building in the future, it is called an advanced market commitment. We have seen that from big entities or consortium entities like Frontier powered by Stripe.
What do you think of COP28, what are your main takeaways?
I think it was an incredibly energizing time to be there. Certainly, we know that climate is in all hands on deck moment and everyone around the world from farmers, to policymakers, companies like ours, technologists, universities are grappling with it. But to see it physically, personified, with so many people descending on one town, to be able to talk through all those climate issues was fascinating and inspiring.
Another thing was observing how the resolutions and texts were debated, and whether or not fossil fuel language would be included. I think it acknowledges a very real tension that direct air capture companies navigate which is do we continue to advance fossil fuel production while we bring on new removal technologies or do we commit to reducing reliance on those fossil fuel technologies over time while we increase the efficacy of removals.
Being there as a burgeoning industry in the carbon removal sector and as a young but fast growing company was really important as we were able to acknowledge the fact that there is a rule for removals to honor the UN IPCC science. There is an even bigger role from a policy perspective to incentivize the growth of those removals.