Investment in Carbon Removal Technologies Just Hit an Inflection Point

A panel at the 2022 Climate Conference underscores a dramatic revving up of demand for a technological niche.

From left to right, Nili Gilbert ’03 of Carbon Direct, Ryan Orbuch of Lowercarbon Capital, and Professor Gernot Wagner of Columbia Business School discuss climate solutions during a panel at the 2022 Climate Business & Investment Conference.
Nili Gilbert ’03 of Carbon Direct, left, and Ryan Orbuch of Lowercarbon Capital, discuss climate solutions during a panel at the 2022 Climate Business & Investment Conference.
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Social Impact, Entrepreneurship & Innovation
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Katie Gilbert
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Carbon removal technologies, long considered too speculative to be taken seriously, are rapidly shedding that reputation and attracting significant investor capital for the first time.

At Columbia Business School’s 2022 Climate Business & Investment Conference, hosted by the Tamer Center for Social Enterprise and Columbia Climate School, some of the leading investors in the space—as well as a representative from one of the companies developing this technology—gathered for a panel discussion about the possibilities and limitations of carbon capture technologies and the auspicious moment in which they currently find themselves.

In early April, news broke of a massive investment in carbon removal technology from online payments provider Stripe, in partnership with Alphabet, Meta, Shopify, and McKinsey, which together announced that they would commit to purchasing nearly $1 billion of permanent carbon removal over roughly the next decade. This represents a dramatic revving up for a technological niche for which corporate demand was nearly nonexistent just two years ago.

A rapidly scaling space

Lowercarbon Capital partner Ryan Orbuch, who served as Stripe Climate’s procurement lead until late last year, was on hand to discuss the rapidly scaling space and his own firm’s dedication to it via a new $350 million fund, announced in April. Orbuch said he and his partners will be looking to invest in early-stage companies that can achieve gigaton-scale carbon removal over the next few decades.

“Market signals are starting to become obvious enough that scientists believe there’s a market for this,” said Orbuch.

Beyond Stripe’s announcement, recent examples of these signals include the $2.3 billion allocated to carbon capture technology in President Biden’s Bipartisan Infrastructure Law, which the U.S. Department of Energy has begun to distribute, and public votes of confidence from other prominent investors, including the technical lead investor at Bill Gates’ climate tech investment firm, Breakthrough Energy Ventures.

“For a while, the lack of examples of things working has made it really hard; that’s changing,” Orbuch said.

He pointed to the example of Climeworks, whose chief marketing officer, Julie Gosalvez, also joined the panel. The Switzerland-based company uses direct air capture to pull carbon from the air.

Another strong signal of support for the space came from the latest U.N. Intergovernmental Panel on Climate Change (IPCC) report, added panelist Nili Gilbert ‘03, vice chair at Carbon Direct, a firm that both invests in technology for decarbonizing heavy industry and advises companies and municipalities on their own carbon removal efforts.

For the first time, the IPCC focused its report on mitigation and possibilities for carbon capture—a notable change even since the era of the 2015 Paris Climate Conference when U.N. scientists were still cautious about carbon removal technologies because of a paucity of developed examples.

“In the most recent report, the IPCC added to its conclusions not only the need for nature-based carbon removal but underscored the need for permanent, durable carbon removal and storage of the type that Climeworks and others are doing,” said Gilbert, who is a graduate of the Columbia Business School.

No panacea for the climate crisis

Although the funding for carbon capture tech is growing rapidly, it’s still a small fraction of the investment flowing into other types of crucial cleantech, like wind turbines and solar panels. And this is a good thing: As each panelist stressed, carbon capture technologies cannot at any point be treated as a panacea, or even the leading force, in addressing the climate crisis.

Panel moderator Gernot Wagner, a climate economist and visiting professor of business at Columbia Business School, emphasized that the development of this technology must remain secondary to the expansion of policies, technologies, and other major transformations that allow societies to rapidly reduce—and not just Hoover up—their carbon emissions.

Still, carbon capture technologies must have a role in the multifaceted effort to halt climate change, as the IPCC report acknowledged.

“When you think about limiting global warming even significantly below 2 degrees, we’re certainly going to have to do a significant amount of reduction, but we’re never going to be able to reduce all of the emissions that we’re putting in the atmosphere by 2050,” said Gilbert. “And if you really start with the imperative of limiting human suffering and limiting planetary suffering, you start to ask yourself, what do we need to do to achieve this goal?” Part of the answer, she suggests, must involve pulling carbon from the air.

Nili Gilbert ’03, vice chairwoman of Carbon Direct, speaks at the 2022 Climate Business & Investment Conference.

Nili Gilbert ’03, vice chairwoman of Carbon Direct, speaks at the 2022 Climate Business & Investment Conference.

Despite this imperative, Gilbert said she often hears the implication that carbon removal processes are still speculative or unproven—which she stressed is an outdated assumption. She pointed out that Carbon Direct employs 60 climate scientists who are devoted to finding ways to scale up the solutions that are already working. And the growth equity investments her firm makes are in those technologies and companies that have already developed solutions and are making sales and growing.

In a separate panel, Rich Lesser, global chair of Boston Consulting Group, argued that over the next decade, “we have to build a removal economy” in parallel to reduction efforts. He presented figures that illustrate just how inaccurate narratives and projections about cleantech can be. For example, in 2002, projections about solar photovoltaics dramatically underestimated their 2030 capacity (by a factor of 36) and overestimated their cost (by a factor of three).

“The world has underestimated how fast these technologies can progress,” Lesser said. “One of the most powerful things we as leaders in the business community and in the technology world can do is, one, have some confidence in the power of technology to enable us to make progress faster than we think we can and, two, to then be catalysts for those technologies.”

Ramping up capacity

Climeworks is demonstrating in real time just how fast carbon removal technologies can scale. Last fall, the company launched Orca, the world’s largest direct air capture and storage plant, in Reykjavik, Iceland.

It currently captures roughly 4,000 tons of CO2 per year, which it then stores via underground mineralization. Although that’s a microscopic fraction of the world’s daily carbon emissions—roughly the equivalent of the emissions from 48 tanker trucks worth of gasoline or 20 railcars’ share of coal—Gosalvez said the company expects to ramp up that capacity by a factor of 10 over the next couple of years.

Having the plant out in the field and operating is a major step, Gosalvez said, allowing Climeworks scientists to learn about how it interacts with its environment—especially in varying rain, snow, and temperature conditions—which is helping them further refine it.

“When you think about the scale of carbon that needs to be removed, we are in the very early innings.” Nili Gilbert ‘03, vice chair, Carbon Direct

She said the economics of Climeworks’ technology still reflects its early stage. The company’s cost to capture a ton of CO2 is currently about $800, a number it hopes to eventually push down to about $100—though Gosalvez didn’t specify a projected timeline to achieve that. The startup recently announced that it raised $650 million in its latest equity round.

Though Climeworks is an early exemplar, Carbon Direct’s Gilbert and the other panelists believe the direct air capture space is about to get much more crowded. Gilbert said she believes at least 1,000 companies are working on carbon removal in some form—and added that at Carbon Direct, investors take stakes in only about 5 percent of the companies they seriously vet.

“The scale we have ahead is very exciting—and should not only be exciting to us as humans living on this planet but should also be exciting to us as businesspeople,” Gilbert said. “When you think about the scale of carbon that needs to be removed, we are in the very early innings.”

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