- Direct air capture (DAC) can be a valuable tool in removing carbon dioxide from the atmosphere as part of efforts to limit global warming.
- However, the adoption of DAC is limited, with the high cost of the relevant technology currently restricting its widespread deployment.
- Governments must provide financial support to demonstrate the reliable performance of DAC and secure its broader acceptance.
We still emit ~50 GtCO2 every year, and the CO2 emission reduction is not materializing at the desired rate, so it is highly unlikely the 1.5ºC target will be met.
Direct air capture (DAC), considered both a technology and process, deployed in tandem, is the best option to remove CO2 from the atmosphere to limit global warming. DAC is different from conventional carbon capture, which typically implies locking in carbon molecules at the source of emissions, as it extracts CO2 directly from the atmosphere.
However, the adoption of DAC is limited. Presently, 27 DAC facilities are reported to be commissioned globally, and cumulatively, they can capture about 10,000 tons of carbon dioxide per year, according to the International Energy Agency (IEA).
Another 130 DAC facilities are thought to be in the pipeline, and it is estimated that a cumulative capacity of 75 MtCO2/year will be installed – still less than 0.5% of global emissions per year.
Challenges to scaling up DAC technology
The high cost of DAC technology is restricting its deployment – the current DAC cost is about two to six times higher than the desired cost. Capital and energy cost constitutes about 95% of the cost of DAC technology.
The capital costs for the DAC systems contribute to the majority of costs – in the range of $150/tCO2 - $1,000/tCO2 depending on the type of technology.
On the operating cost, the cost of clean energy would be in the range of $360–620/tCO2 while the cost of fossil fuel would be in the range of $88–228/tCO2. Hence there is a trade-off between a high rate of CO2 removal – using DAC without using fossil fuel – and the cost of removal. The challenge is to reduce the cost of capital and energy.
Increasing the scale of manufacturing, increasing the energy efficiency of manufacturing sub-components, and utilization of clean sources can help reduce DAC technology's cost.
Using the learning-by-doing rules in the mass manufacturing of DAC, the cost is expected to come down rapidly. DAC facilities designed and manufactured as simple and modular knock-down units can lower costs as standardized spares can be mass-produced.
On the operational expenses front, nature-based sorbents with high capture rates, efficient thermal energy regeneration coupled with waste heat utilization and optimized air contactors are looked upon as quick wins for cost reduction.
Additionally, increasing energy efficiency in the operations of a DAC facility can be a source of cost relief. Future opportunities for cost optimization can stem from advancements in air-contactors, sorbents, and design elements of DAC units. Specifically, passive air contactors are some of the recent considerations.
Financing innovation and scale-up of DAC technology
DAC technologies are in their early stages of development. The business cases and economies of scale for commercial operations are yet to be conclusively established. Hence, perceived and real uncertainties constrain large private financing flows, which in turn constrains production scale.
There is therefore a need to establish a dedicated ‘DAC fund’, if it is to attract large-scale capital.
This proposed DAC fund – supported by governments and multilateral agencies – can accelerate financing for DAC technology. Since the technology is novel, a massive amount of grant capital and early-stage risky equity capital is required.
A DAC fund could infuse public capital to increase the scale of operation of relevant technologies and would help funnel investment into the development of new technologies to improve unit efficiency and economics. Unlike private financers, the fund could provide risky capital on a lower or no-expected-return basis or grants wherever necessary.
The fund could also invest strategically to alleviate the apprehensions of private investors. For example, public financing can be used as junior equity in DAC technology projects to reduce the riskiness of private investors.
Have you read?
- Achieving net zero: Why costs of direct air capture need to drop for large-scale adoption
- Explainer: What is direct air capture and how can it fight climate change?
Strategic public investments in breakthrough technologies often arrive early, absorbing major uncertainties and long-term risks associated with the early stage of technologies. Carbon reduction is a mission for all governments across the globe that warrants mission-oriented R&D investment, which only public investors can undertake.
All governments and multilateral agencies must join hands and provide capital to accelerate the deployment of DAC technology, considering the technology is creating a global public good. The technology can be taken over by businesses only once profits are apparent.
The CO2 molecule isolated through DAC has myriad use cases. Carbon’s versatility makes it an indispensable ingredient for industrial chemicals that have high commercial value.
To nurture this potential, initiatives like X-Prize and Breakthrough Energy’s Catalyst programme have been launched. The recent $650 million fundraising by Climeworks indicates that private investments have started considering DAC as an attractive investment.
Here, public financers can find a way through a blended financing mechanism – blending public and private capital – to leverage the use of public capital.
A vibrant carbon market can shape DAC technology
Thus, from the demand side, concerted efforts must be put towards creating market mechanisms and policy interventions to develop demand for carbon removal as a service (CRaaS). A vibrant carbon market backed by prudent climate action policies can shape DAC technology.
The market can make CRaaS a viable business opportunity in the medium-long term, where CraaS units are sold in the open market like carbon credits. The creation of such a market could drive private capital flows to DAC technology.
What’s the World Economic Forum doing about climate change?
It is also important for governments to support developing sites to demonstrate the reliable performance of the technology and gain broader acceptance of the technology. The cost of DAC and storage is expected to fall to between $100–600/t-CO2 by 2050. However, such a price must be evaluated in the context of the social and economic cost of inaction.
The deployment of DAC must be considered a global public good as it can be used to remove carbon from the atmosphere, which is essential to save the earth from catastrophic risk.
Views express in this article are personal and do not represent that of the authors' employers.
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The views expressed in this article are those of the author alone and not the World Economic Forum.