Climate Economics with Arvid Viaene
A research-focused podcast on the economics of climate change and air pollution. Episodes are released every two weeks on Tuesday at 6 am CET. Episodes will be either expert interviews or solo explorations of key issues. Hosted by Dr. Arvid Viaene, a climate economist with a PhD from the University of Chicago. He has done research on the impacts of climate change on agriculture and mortality. His research on climate-related mortality has been published in The Quarterly Journal of Economics, and he has advised the European Commission on the impacts of climate policy on firm competitiveness.
Climate Economics with Arvid Viaene
#9 - Marian Krüger - Carbon Capture: Technologies, Competitiveness, and the Importance of Demand-side Policy
Marion Kruger, co-founder of Remove, explains how carbon removal technologies are essential for achieving net zero targets by compensating for emissions that are impossible or extremely expensive to eliminate. Carbon removal is what puts the "net" in net zero, and by 2050, we'll need to remove 5-10 gigatons of CO2 annually—creating an industry comparable in size to today's oil and gas sector.
• Three main types of carbon removal technologies: nature-based, hybrid, and engineered solutions
• Nature-based solutions like afforestation cost around $50/ton but face durability challenges
• Hybrid solutions like biochar offer middle-ground approaches at roughly $150/ton
• Engineered solutions like direct air capture provide the most permanent storage but currently cost $1000+/ton
• The "like-for-like principle" matches emission types with appropriate removal technologies
• Market development requires policy support, particularly integration into compliance systems like the EU ETS
• Geographic flexibility is needed to deploy removal solutions where they're most cost-effective
• Carbon removal startups face a "valley of death" in financing that threatens industry development
• Public procurement programs and early innovation funding are critical to bridge the gap until markets mature
• Carbon removal complements rather than replaces emissions reduction efforts
For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com
So, first of all, today with me I have uh a really special guest, which is Marion Kruger. He is the co-founder and director of Remove, an organization that supports European, Indian, and African carbon removal startups. Previously, he headed the Sustainability in Business Lab at ETH Zurich, advised industrial companies and public institutions on decarbonization, and founded a successful solar startup. So, Marianne, welcome to the podcast.
SPEAKER_01:Thanks for having me. Excited for the conversation.
SPEAKER_00:So I should mention I had the pleasure recently of interviewing Ben, a also person who works at ETH Zurich on carbon offsets. And it was an amazing interview with episode four. And in that we really discussed carbon offsets. And because of that, I learned about you because you two have written a book together called Race to Zero: How Companies Can Lead the Way to Climate Neutrality. And I can really recommend the book. I learned a lot. And in it, you discuss carbon removal technologies at depth. And it's something I didn't know anything about. And of course, I recommend people go check out the book, but today I'm really excited to talk about that topic with you. And I was wondering, just to start off with like maybe a takeaway, for people who don't know about this, what would be one or two things you would want them to take away about carbon removal technologies?
SPEAKER_01:Yeah, I think at the highest level, you know, we are all talking about net zero. Companies make net zero goals. We as a globe, uh global society, need to reach net zero. What puts the net in net zero, that is carbon removal. Otherwise, we would be talking about absolute zero. Right. So if there's one thing that listeners want to take away, carbon removal is what puts net in net zero, right? What that implies is we have some subtraction and addition of emissions at some point. Because as much as we want to and try to avoid emissions and reduce emissions, there's going to be some emissions that we cannot get rid of or that are extremely expensive to get rid of. And for these emissions to compensate for these, so that at net level we have a zero emissions or even negative emissions, that is what carbon removal does. It takes our carbon out of the atmosphere that's already there and stores it away for ideally as long of a time as possible. And this is no small feat. We, if we look at the IPCC scenarios, we actually need a lot of it, between five and ten gigatons. Just to put that in perspective, if we say five to ten gigatons, that is maybe between five to ten percent of the emissions. And if we say, let's assume 100 US dollars per ton, we can talk prices of where those are realistic later. But that is from an economic perspective, about the size of today's oil and gas industry.
SPEAKER_00:That's about the size of the oil and gas industry. Could you elaborate on that?
SPEAKER_01:So if we think about per year in 2050, and of course, all the way leading up to that, and also after that, we need to remove five to ten gigatons, gigatons. So that's billion tons of CO2 from the atmosphere. And if we assume every ton costs us about 100 US dollars to remove, that puts us from a sort of revenue perspective, from economic value perspective, in the same ballpark of revenue of the current oil and gas industry. So at again, highest level, and putting it very bluntly, we are building the reversal of the oil and gas industry. Um, and that is no small feat, of course.
SPEAKER_00:Well, thanks for that. And I will even say this this topic is so fascinating that this is the first time you know conversation where I really had a challenge, like how do I approach this? Where do we start? And maybe can you just then give a broad overview of the different types of technologies? Because I think people might not be aware of the full range here.
SPEAKER_01:Yeah, absolutely. So um there are a multitude of ways to take carbon off the atmosphere, right? And I think the first one that a lot of people think about, and also often you see in the comments on LinkedIn or on their articles is well, we already have the best solution, it's trees, though, right? Why should we do anything else? And I think trees here stands for a range of solutions that just rely on the best mechanism that it's essentially nature has developed for this photosynthesis. So during the growth of plants, these plants take up CO2 from the atmosphere and store it in their trunks, in their roots, in their biomass, right? And a lot of these solutions, so that is afforestation, so growing new trees, planting new trees, that is also mangrove restoration, increasing the soil stock in uh in in um agricultural fields, all these solutions are subsumed as nature-based solutions. I don't necessarily like the term, but that is one way to classify them. So that's the first bucket. They typically are rather easy to implement, also at scale. The problem is this carbon is not stored as durably as you want to. Why? Imagine a forest, imagine a forest in the Amazon, and imagine all the dangers that this forest is under, especially as the impacts of climate change increase. Wildfires, deforestation, right? And as soon as there's a fire, the carbon is re-emitted. So that is the reality for a lot of these nature-based solutions. We should be doing them for a lot of reasons, including carbon storage, but also because they're great for ecosystems. The second sort of category, if you will, are what we also in our book called hybrid solutions. They take processes that nature already has in place to take carbon out of the atmosphere and in one way or another enhance them or make them work better, more efficient, more quick. An example of this that some listeners might have heard about is biochar. You take biomass that a lot of the times doesn't have any other use, you put it in a sort of oven called a pyrolyzer, where you heat it up at high temperatures without the presence of oxygen, and that creates this charcoal at the end. Essentially, it looks very much like the charcoal you would be using for bio for a barbecue, and that stores the carbon quite permanently, and then it could be used as fertilizer, for instance, on agricultural fields. So that's an example where the carbon storage has happened through nature. We're still using biomass, but we're enhancing it. That's the second category, just to give you sort of a one feeling. There's a lot of other options in this category as well. And then the third one is what we really then call engineered solutions. So here we're really relying on technology to do the job for us. Um, one of them would be direct air capture. As the name suggests, we have a technology that takes air out of just the atmosphere, strips the carbon away, and then at the end of this machine, you can imagine like a big fan, the air out of uh the air comes out without CO2. And the CO2 we then, for instance, store underground in empty gas fields. So that's at the highest level, an idea about sort of what the the options we have at our disposal in carbon removal. And within each, there's a mirage of um diverse options to use them and to develop these.
SPEAKER_00:Yeah, thanks so much for that overview. So there's exactly there's a there's a first is like the nature, two is like the hybrid and three engineered solutions. It's interesting because I thought of this as the first thing I would think of is like the direct air capture, you know, exactly like trees have the cycle, but because I can see like talking to Ben about you know carbon offsets where like there's some more uncertainty about did you actually grow the threes you want to grow, like forest fires. So just but it it's like easier to implement versus the engineering solutions, I would imagine can be more credibly monitored in some sense. Yes, but they're more expensive. Is that kind of the scale that that we're looking at?
SPEAKER_01:I think so, yeah. At the highest level, I think that's a distinction or a statement that you can make, right? Um, and I think that's also something to very important to take away with. Carbon removal is not created equal, right? It's not one uniform thing. It actually is a wide uh wide variety of things that, depending on the method, have certain benefits, certain qualities, certain advantages, and certain disadvantages. And what comes with that is different carbon removal methods and thus the credits that are being generated. So that's essentially the verification that a ton of carbon removal has been taken out of the atmosphere. Ben has talked about this in the last episode with you, they can be used for and should be used for different things. So there's a thing, and this might already go sort of in regulation and policy a bit. There's a thing called the like-for-like principle. So if we think about reaching net zero, that's what we want to do as a globe, right? We will have a variety of emissions at net zero, be that in 2040, be that in 2045, be that in 2050. We will continue to have some fossil emissions, say, for instance, from flying, right? Or for some industrial processes. They are just very, very hard to get rid of. These fossil emissions will stay in the atmosphere for extended periods of times. So the like-for-like principle then suggests we need to take carbon out of the atmosphere for an equally long amount of time.
SPEAKER_02:Yeah.
SPEAKER_01:For these, for instance, a direct air capture uh credit would be good because there we can creditly monitor and make sure that carb, that ton of CO2 we have taken out of the atmosphere is going to stay away from the atmosphere for millennia. There's other ways to do this as well. Um, enhanced weathering, for instance, would be another one. Now, we also will have some emissions from agriculture, nitrous oxide, methane. So these are short-lived emissions that do not are not as long in the atmosphere as a fossil emission. For these, we can think about in like of like principle, more um or less durable carbon removal solutions, such as afforestation, such as soil carbon regeneration, right? So there's there's not just a difference in the solutions, there's also a difference in what we do with the solutions to compensate in the end.
SPEAKER_00:Yeah, if I recap that it's whenever CO2 is emitted in the atmosphere, it's there for a very long time. So you need a very long, more almost permanent solution. Whereas for methane, it's just they're like much shorter. So you can actually look at these shorter cycles. Because you know, you capture it, the methane goes away, and then you know, if you remove the forest, then it's just it just balances out.
SPEAKER_01:Exactly, exactly. It's it's obviously not as easy as that. Methane is very potent, right? So there's you know, there's factors that you need to assume, and there's you know, very smart people working on on how to best do this. But at the highest level, yeah, think of like for like long emissions, long fossil emissions need long permanent carbon removal. Short-lived emissions can also do with others.
SPEAKER_00:Just as a side question, but your book, I think in the introduction, you said you focus mostly on CO, like you focus on CO2. Has there been research on methane two to remove it? Because as you say, methane and nitrous oxide are very potent.
SPEAKER_01:There is a bit of work happening, luckily. Um, if we think of where carbon removal is right now, the work on superpollutants is probably five, six, seven years uh behind.
SPEAKER_02:Okay.
SPEAKER_01:Um, I think the main takeaway from these superpolutants is our main job there is to reduce and to avoid them reaching the atmosphere in the first place. And especially with methane, there's so many methane leaks of pipelines, for instance. Uh then, of course, there's enteric methane emissions from livestock. These are the big, big emitters that we should uh should be thinking about. The removal, we've seen the occasional methane removal startup that has applied to our program, particularly it's it's really very, very early days. And if we think the carbon removal policy landscape is in its infancy, let's not even go talk about superpollutants, right? Because they're really, there's absolutely nothing.
SPEAKER_00:Maybe as a bridge from that, could what are then the you know, the podcast is called climate economics, so we have to, you know, talk some numbers about the the cost per ton. So could you give us maybe some some ranges of of estimates of like how costly these types of solutions are to remove tons of CO2?
SPEAKER_01:Yeah, sure. Um, and you'll you'll realize also with the numbers that I'll be giving you that the range is massive, right? And I think this again reflects the diversity of carbon removal methods that we have, both in how mature they are, how much they've been deployed, whether at scale or really in its infancy, and with the potential of cost reductions that are still ahead. Um I think one parameter that we need to take into account again, and it will come up again again, is this durability or permanence of carbon storage. Because that really differentiates one carbon removal solution from the other, and thus also is a bit of a proxy for the price. So if we start with the nature-based solutions, right, there you can get high-quality nature restoration credits, so a ton of carbon removed through soil carbon sequestration or efforestation for 50 US dollars, for instance. Now it depends on the contract, but those then maybe have a durability of 20 years, 30 years, 40 years, 50 years, but typically around that range. Well, that means if you have an emission today, typically 20, 30, 40 years down the road, if you want to continue to compensate for that, you need to buy another credit.
SPEAKER_02:Yeah.
SPEAKER_01:So that is something to keep in mind here. It might be cheaper uh at first sight, but if you want to continuously compensate for the emission today, you would need to, there's ways to do this, right? Vertical stack and horizontal stack, don't only need to get into it, but there's there's ways that you need to deal with that. On the other end of that spectrum, a direct eye capture credit, easily, especially from the you know novel technologies, can cost you four digits, like a thousand US per one ton. You could say, well, it's the same ton with that we take out of the atmosphere. What the difference is, is how sure are we that it will remain out of the atmosphere? And what's the risk of reversal, right? In between, you have quite established solutions such as biochar, which I've mentioned, where you can get like a high-quality industrially created uh biochar credit for let's say 150 US, right? Okay, that's much more or less. Yes. Um, and then you have some others, for instance, um, ocean capture solutions or enhanced weathering solutions, which are more than between let's say 200 and up to like six, seven hundred, uh, even also ranging to the thousands. I think what's what's interesting here is also if we look, think cost projections and where could this head. Um when I did this crude calculation of how much economic value this industry could have in 2050 at 100 US, this 100 US dollars is this ominous number that's actually people have tried tracing it back and no one really exactly knows where it's come from comes from. Um, I don't think that's the the right target to have in mind because it's it's quite unrealistic to get there, right? If we say we need carbon removal to come down to$100 US per ton for a lot of the solutions, that's just very, very hard, if not impossible. And on the other hand, I think what's the basis for this, right? If we think social costs of carbon, it's definitely higher than 100 US dollars, right? Um, maybe a better proxy is what are the marginal abatement costs in hard-to-abate sectors? Right. And at some point, carbon removal will be cheaper than abating a ton at 250 US in the steel industry, for instance. Now, that of course is not as nice of a number as to say we need to go down to 100, but probably more realistic because those are going to be the decisions being made on the corporate side of whether they need to buy carbon removal or whether they can reduce internally.
SPEAKER_00:Yeah, because then we also exact get into policy, because for example, the EU ETS, they also have the option to buy it, so to say, from a different company. You know, if if we have a future where the the caps just get tighter and tighter, which they would have to, you know, given the goals, the prices would start to rise. And then you like if you say like the biochar was like 150, it wouldn't be permanent. You know, there would have to be some some like application. I don't know how long is biochar?
SPEAKER_01:Like how long, because you said it depends on uh on how it's produced. Um, but there is high quality biochar, there's still research ongoing, it's a bit of a debate, but uh the most recent science indicates that it can be permanent for up to a thousand years.
SPEAKER_00:Okay, so you know, pretty much infinity for any rate. Um because because that would be, you know, from an economic perspective, if you've got an EU ETS, this is like what I was thinking about, and you've got some established technology for a thousand years, which is you know, we can just take that as for infinity, then that's like an upper cap on the EU ETS if it were to be like credibly integrated, you know, just like verified, stored. I think that to me is another very promising thing. Like as these prices were to go up, at some point you could hit it if it's well integrated.
SPEAKER_01:Indeed, yeah. And that's that's why a lot of work and also, to be fair, hope is being placed into ETS integration. Whatever that integration may look like. I think there's um again, smart people working on it. Uh there are a variety of ways that this could happen. Um because there's no way we will reach the five to ten gigatons if this remains a voluntary market as it is right now. This there's just absolutely no way because right now we rely on um a selected number of companies that can afford to buy carbon removal at these high prices because they have made public net zero claims and pledges and want to want to live up to them. But in essence, this is voluntary, and if push comes to shove, and we have seen this with a bit of an economic downturn, that tides have shifted a bit. Yeah, and the startups that we work with, they see this day day in and day out. In a very crude analogy, right now carbon removal is a vitamin, and unless it becomes a painkiller, we will have a very, very hard time ramping up supply. And the ETS is one main, if not the main way that we can really get to scale.
SPEAKER_00:Yeah. There's a few follow-up questions I have for that. Um you know, one is the the current regime in the US isn't the most um favorable for these types of things, but that might change in the next, you know, next president. Um but the research needs to keep happening because I feel in the book I also got the sense that if there's not enough demand, well then the startups will fail because they need their funding, they need their promise. Um, you know, there's been some companies who've done individual purchases, but they they need to get there. Like between the I think in the book you also talk about there's some funding from the initial research that be done, but then you know, scaling it up is is intensive. Um, so in this this like almost draw, I don't know if Christian, you know, in almost in this this time of like maybe less demand or like more uncertainty. I can imagine it's very hard to keep the research going to get it down to these more affordable numbers. I think that just seems like a big challenge.
SPEAKER_01:Absolutely. You you hit the nail on the head. This is essentially the work that we do day in and day out with supporting these startups, right? Is not really helping them scale right now. Right now it's about helping them to survive.
SPEAKER_02:Yeah.
SPEAKER_01:Right. Because there's not enough demand. The problem with that is it's not only that there's not enough revenue coming in, the volumes that they will be selling are not enough to really hold them afloat, anyways. But what it means is no demand means investors stay on the sidelines because they perceive the market risk to be too high, right? And without investment, you cannot continue to develop your technology, come down the cost curve, and become more attractive for demand down the line. So it's a bit of a vicious circle, actually. Um, so that's why, well, there's a variety of ways that that you can sort of alleviate this a bit. One needs to come from the policy side. And indeed, what we have seen in the US is they, in the Biden administration, under the Biden administration, started out with significant incentive schemes for carbon mover startups, albeit a bit focused on some technologies, but still that that was strong and great. And now some, luckily not all, some have been pulled back. And we see the immediate, the immediate um sort of effects of that. Luckily, individual member countries in the EU and the EU itself seems to be moving to jump in and take that position a bit. Um, we still need to see the actual results of this, but we're there's promising signs um which which need to happen. Otherwise, the problem is, and we we I I won't get tired of being on stage and saying this, we cannot afford to lose just this generation of carbon removal startups. Because if we need to start from zero in 2030, 2031, when from one day to the next the EU ETS integration comes, we won't just be there with millions of tons of removal, right? This generation is the one that will be delivering those removals in 2020, 2031.
SPEAKER_00:From what you're you're saying, it sounds that the potential integration in the EU ETS might be you know a credible sign. Also to investors, you know, if you can get connection to this scheme in a credible way, that's like, you know, if your future revenues are more guaranteed rather than these like one-offs. How is that going? Is is there some sign there, or like what is happening there?
SPEAKER_01:I completely agree. I think so. So the earliest that the integration would be happening in in operation is 2030, 2031. Okay. That's of course in especially startup land, that's an eternity, right? But what would already happen massively if there was the integration on the horizon? Because if we knew that happened and if we knew that market existed, investors, as well as the companies that are compliant under the or need to be compliant under the ETS, will need to start moving. Because if I'm a cement company and I'm regulated by the ETS, if I start looking at this in 2029, it's too late, right? I need to establish uh internal capacity, I need to establish relationships to suppliers now rather than in 2029. Same with investors, right? If if I know that the market will be there, I'm very happy to take up the market risk until that time. That's essentially what venture capital is for, to take up the that risk and to make those bets. Um by summer 2026 is when the commission needs to come up with a proposal for the parliament and the council to how negative emissions, so carbon removal, are going to be integrated into the ETS. So everyone is looking, waiting for that. Um, there's good people working on the policy side, like Carbon Gap and other organizations, to argue and inform about the need and how to do this in the best way. We are seeing on the UK side, for instance, which have just come out with a strong statement from the government to say yes, um, carbon removal and their and on their um their lingo it's called greenhouse gas removal is going to be integrated come 2028. We already have some integration in the Japanese ETS. So there's some good signs, but of course the big one is the European ETS because it's by far the biggest compliance regime in the world.
SPEAKER_00:And then how do you see it for like the direct air capture? Because I think you said there maybe it will come down to 250 like dollars per ton, it'd be hard to get it lower. At that point, it would still be more or less something voluntary by firms to do, but at least then you could get it into the market because you know, if at the price it would be trading, say it goes up to 100, 150, it still wouldn't be competitive, so to say, in the market, unless it really goes high.
SPEAKER_01:Yeah, I think that's a very good question in terms of how this play will play out. I think it's going to be obviously a question of how much supply will there be of other carbon removal because all carbon removal is essentially limited by one uh or another parameter or input, right? If we talk biochar, it's great that we can do it at 150 today. Biomass at some point will be limited because also there's other use cases for that biomass, think bioplastics, right? Which also helps us mitigate. Um on the direct air capture side, for instance, there's only so much, um, it's quite energy intensive. So we need to think about is there enough energy? Do we need to put extra energy on the grid? Um, there's land use problems with some of the other solutions. So in the end, we will have a mixed back of carbon removal at various price points. It's going to be very interesting to see how Direct Archia fits into something like the UTS. Um, maybe there's going just going to be a limited supply of biochar in the UTS, and at some point, once that is used up, more higher priced um removals will come in to remain um compliant. It's also going to be very interesting to see how far the architecture companies can get their prices down, right? Obviously, because there's this ominous goal, if you look in investor presentations, they'll tell you they can come down to 100. Well, if you give me an Excel, I can model everything to come down to 100. So I understand it, right? That's that's the job. And you know, with certain assumptions, you can do that. I think that that's also a very interesting thing to think about is how do we think about cost cost curves and scaling down, right? Again, carbon rule is very, very diverse, and we cannot assume learning rates across the board. They're going to be different. I think for some solutions that where where CapEx dominates, then massive cost reductions are possible, right? We're going to be building better, cheaper, and bigger. And there, yeah, we can massively come down. If OpEx dominates, like energy demand, of course we can come down, but there's going to be limits to that. So I think we cannot be, and luckily, you know, the startups that we work with there are not blind and just assume solar type of cost reductions or battery type of cost reductions for all of carbon. That's just not going to be realistic.
SPEAKER_00:Because that's like the interesting tension that you've mentioned this in your book, that energy is cheaper in the US. So it's actually cheaper to do some of these things in the US than in the EU, where energy prices are just higher. So, in some sense, you would want them to develop in the US, bring down the costs, and then we can do them in the EU, which is why the Biden incentives probably were so so helpful. Because then you get the low energy, which is you know one of the main focus points of the current administration. Like we want to keep energy prices low versus Europe when then they're just higher.
SPEAKER_01:So I think you're hitting on a very interesting point, which is what's special about carbon removal is that wherever this is produced doesn't matter. The atmosphere doesn't care. Right? Um, of course, you know, the economic value resides wherever the carbon removal solution is supplied, but the benefits is for all of us. So if we think about where which carbon removal method is going to be deployed, there is going to be there are going to be geographies where a certain carbon removal solution is optimal and where others are not. Now, how does this pan out with the EU, for instance, saying in their carbon removal carbon farming framework, which is sort of going to be the guardrails of what makes up carbon removal? Credits need to be generated in the EU on EU soil. Right? I don't know how credibly we can get to the volumes that we need to at prices that we need them to come. If we restrict ourselves to say a biochar credit, high quality biochar credit cannot come from the global south. But in the global south, it would be a lot cheaper, have more co-benefits, and make more sense. Right. That is going to be a very, very interesting thing to see how that pans out. Because there's so many varying parameters and interests coming into it. Like in the US, right? Yeah, as you say, uh, energy price likely going to be cheaper. Access to storage, likely going to be cheaper, right? So shouldn't we deploy more DAC in the US or in the Imea region as opposed to putting it in land-constrained and energy constrained Europe?
SPEAKER_00:Yeah. Yeah, because then it's generally like, oh, we also want to stimulate jobs and you know all these other concerns. We want to make sure it's but it's like you say from a cost-effectiveness global perspective, it doesn't need to be in Europe. Now, of course, you there's probably some lobbying there, and then because they say Europe, we're kind of constrained on the land mass compared to you know other places. And yeah, would you recommend some more flexibility on that front? Like, because then I think there's two there's two counters that I would think of as like, well, one is you want to stimulate the economy and like you know, the general politician concern. The other concern, because I asked some friends also for for feedback, is that well, will it be credible? You know, if you go to the global south, then monitoring gets trickier. Now, the EU's already talking about carbon offsets, so you know, in some sense, they maybe can also do a part of this that this can be abroad. You know, this doesn't have to be a hundred-zero thing, but I I think the the credibility comes up then, you know. We talked this with Ben, but like how is it in terms of the verification of these things?
SPEAKER_01:Very good point. I think we have the the cautionary tale of CDM credits in the past and what they did to compliance regimes. So that's I think something that is informing the cautionary nature or approach stance on the EU side. I think I do not see a scenario where we can hit the volumes we need if EU wants to remain competitive, and that is one of the main goals of the current commission, right? Competitiveness. And that competitiveness for me includes to remain competitive in light of increasing climate regulation around the globe and um staying true to the climate commitments that you have made, then the ETS needs to be able to sustain ambition while maintaining competitiveness in at volumes that I don't see coming purely out of Europe. Probably in the ramp up, that is not going to be a problem. But we are just constrained in really almost all carbon removal methods. I don't think that I don't know whether that study or research has been done to actually um model this of whether we could uh deliver all the removals we would need in Europe from Europe. That would be a very interesting um paper to do. I'd love to see that.
SPEAKER_00:Um yeah, to all the researchers listening in. Uh um and because, like you say, there's probably physical constraints like the biomass, the the things, the you know, you've got to store it, which we haven't talked about much, but um yeah, and then again from a sort of CDR global CDR perspective, cost effectiveness, it's just it makes so much more sense to deploy some of these solutions outside of the EU, right?
SPEAKER_01:For a variety of reasons, one of them being cost. One of them being cost. Yeah, um, that's why, you know, as removed, we're also very active in the in the global south, in India and Africa, or so in Latin America, because there's just so much potential for carbon removal that is untapped in regions, by the way, that are being hit the hardest by climate change and have had the the least to do with it. So this also allows these regions to take up a position that is more than adaptation, but actually a more active role in in mitigation.
SPEAKER_00:How is that going? Because in your startup, you you know, you mentioned or I saw online you focused on Europe, India, and Africa. Is it is it suddenly growing there? Because you know, often there I did a podcast like that's coming out very soon about you know air pollution in India, and like that's where the main focus is, because you know, it just it's so costly in terms of currently lives lost. But but so I was surprised, like there's there's also seems to be a growing trend there to already focus on these carbon removal options or not.
SPEAKER_01:Yeah, it's it's a good point also that you mention air pollution. Um, because the carbon removal narrative is a very different one in a place like India or Sub-Saharan Africa than it is in in Europe. Europe has demand. India has zero demand for carbon removal, right? They have other things to think about. Their net zero goal is 2070, they have immediate issues on air pollution, health concerns, economic resilience, uh, food security, right? So the narrative there really is what we in Europe consider co-benefits of certain carbon removal solutions, right? Those are actually the main benefits, and carbon comes as a secondary consideration, right? Which, to one end, is good because it facilitates deployment also at scale in these geographies, and sometimes it even generates other revenue streams. If, for instance, you can sell biochar as a fertilizer, it reduces your reliance on carbon removal revenues from the voluntary carbon markets. At the other end, the challenge for startups in the global south is how do I find a buyer for my credits?
SPEAKER_02:Yeah.
SPEAKER_01:And that is, I think, one of the main reasons why we entered those regions. By the way, always also with local partners, we don't think we understand India or Subsear Africa, quite the contrary, but that's why we have local partners. But um, because there's so much potential for the deployment of this, these removal solutions, not only for carbon reasons, but also for other reasons. But carbon revenue will always need to play a role in these business models, and it's just a big struggle for them to access the market. Uh, and that that that's you know, you asked why we did that and and how it's going. Well, that that really is our main task there to help them connect to the global carbon removal ecosystem. Because these entrepreneurs, they're doing a hell of a job in ecosystems that are very immature and nascent.
SPEAKER_00:One thing that I was wondering about, so we've talked about the integration in the EU ETS. If you were to be, if you're to have like a budget of like two to five million a year, as you know, as as either a philanthropist, you know, Bill Gates comes knocking or the commission like per per year, how would you best use it to support um the industry development?
SPEAKER_01:Probably three things. And we've talked about the importance of demand, right? There's no way we can scale this industry without demand. And in the absence of there being compliance demand, I think it would be up on either philanthropy or governments to come in to provide these demand signals. So one thing would be to do a public procurement program or philanthropic procurement program at significant size, right? To just stimulate the market to allow companies to show the traction vis-a-vis investors, and then certainly you're in a virtuous cycle, not in a vicious cycle. And I think that's so that's more on the demand side. I think the other two options that I would do are on the supply side. One is early innovation grants. Um, in the EU, we have the EU Innovation Fund, which is great, but which tackles projects that are 100 million plus. Barely any, if any, carbon removal project is at that level. Right? So it would need to have a lot earlier stage support because while there are already quite a number of carbon removal methods out there and startups out there, and we we have 160 that have gone through a program, right? And there's so many more. I do believe that potentially the most relevant or most efficient carbon removal methods are yet to be discovered. So I do not think right now is the moment to just say, okay, you know, we don't need to invest into early RD, into early innovation anymore. I think quite the contrary, double down on that. The second one would be the generation that has now come, say evolved over the last couple of years, a lot of them are now at a point where because of the problems on the economic side, on the vicious circle that we talked about, they struggle to finance their first projects. They are not in a stage yet where they can go to a bank and just say, I need a loan. But they're also financing everything through equity from investors would be way too expensive. And equity investors are also on the sidelines. So there's this valley of death for a lot of these startups where, again, public or philanthropic money could come in and say, Hey, we are willing to take a bit of a higher risk in sort of a say loan guarantee program, which in my mind would have a massively positive effect on the current generation, the current co-ed of startups, to bring them, to allow them to leapfrog and survive until say 2080, 20, 2028, 29, 2030. And with two to five million billion, I could do a lot. So I I wouldn't mind.
SPEAKER_00:Yeah, what I was actually saying, yeah. You know, because even you maybe the the even amount is too high, but it's almost if the 2026 the commission decides, like even to say 500 million guaranteed, even just for the EU and guaranteed things, or for things that have some hyper-verified things, because you know that I think based on what I get, that would be massive. Because it's like there's some things that are happening, it's just the market just isn't there, and especially now when you know, with uh the recent development.
SPEAKER_01:So absolutely. I think it's and this would have two elements of this. One, of course, the cash itself, but also the signal. Yeah, right. Um, the US, in the sort of last months or half year of the Biden administration, they announced a public procurement program. It was 35 million, so that's nothing, right? It's nothing. But the signal it sent was what mattered.
SPEAKER_00:Exactly. Because that's what the venture capitalists are also probably looking at. Like, are these procurements? Is there anything happening? Because I think sometimes the revenue of the EU ETS is now earmarked for green developments, like the social just transition, like governments cannot spend in anything, like it has to be related to climate. But I know sometimes that's often used for innovation projects for houses and then like electric cars. But if you look at the emissions that are the abatement costs for like electric cars versus gasoline, they're also not always the the highest. So I, in some sense, uh I'm just thinking I'm really brainstorming here. I never had this thought, but like if you could just earmark 2% of the EUTS revenue in terms of like guaranteed commitment for carbon removal projects, like you said, you probably don't need much, just a guaranteed size thing. And then now, of course, the direct air capture still would probably be the least competitive, like it would still probably be first like biochar some some of these other things first, but at least you're already like starting up the the process.
SPEAKER_01:Absolutely, and then it depends also on the mandate that you have is the mandate to buy the highest volume at the lowest price, given a certain standard, or is the mandate to really catalytically buy and develop the market, right? Um the market as we have it right now wouldn't exist if it wasn't for some big tech companies in the US, who essentially said, okay, we in the future will rely on this market, and in order for it to exist, we will take up this catalytic role. In the book we write about this advanced market commitment that's it's called Frontier, and it's a combination of I think uh Google, um McKinsey, um Meta, Stripe, all of these companies come together and said, we will rely on this market, so let's make sure it exists. So they buy catalytically and they buy at prices that economically don't make any sense. They buy at a direct capture credit at 1500 US, right?
SPEAKER_02:Yeah.
SPEAKER_01:Um, but why do they buy? Because they know without this, we will never get to cost that in 2030 and 2035, when their pledges hit, they need to rely on them.
SPEAKER_00:Yeah. Great. Um is there anything we haven't talked about or that you wish I I could have asked you, but you're like, well, this would still be good to know for the people listening.
SPEAKER_01:I think we covered really a lot, to be honest. I think uh sort of main messages that are relevant for me, I got across. It was very good that you started out with a front loading. I think that was a nice, nice touch. Because that would have been otherwise, that would have been sort of my my takeaway, right?
SPEAKER_00:Yeah.
SPEAKER_01:So it's good.
SPEAKER_00:It's exactly sometimes I ask this at the end, you know, it's like what has you know, and then the guy from me is like, well, actually, here's the you know the other big thing, you know, and then um, because it's just this is a really good conversation.
SPEAKER_01:So maybe if if I don't know, yeah, uh, I I I I saw on the question that you asked on LinkedIn that someone asked, how can we make sure this does not uh take away from uh reductions, right? So if you if you want, we can just speak two minutes about sort of mitigation deterrence.
SPEAKER_00:Sounds good. Yeah, sounds good. So yeah, so maybe then as a is also another question, what about mitigation deterrence?
SPEAKER_01:Yeah, I think that's a a question or yeah, a concern that many people have asked. So mitigation deterrence essentially means because we have carbon removal, does that mean we do less on the reduction and the avoidance side?
SPEAKER_02:Right.
SPEAKER_01:And I think it would be blind to say mitigation deterrence doesn't exist or the risk doesn't exist. It does exist, right? We we have carbon removal as a solution that can stand in for avoidance or reduction. I think there's several ways that we can mitigate that risk though. Uh, one is if we have targets, ideally those should be separate targets. So should we have an avoidance reduction target and we should have a removal target? By that nature, we already sort of distinguish between the two and don't allow for a combination or a sort of mingling of them. Then I mentioned earlier the like-for-like principle, also a way to strengthen this. And what is connected to like to like-for-like is because of the higher prices for fossil emissions and removals that can compensate for them, carbon removal will often not be the cheapest option. If we go the marginal abatement curve, if we go it up, there's probably a large chunk of emissions that are a lot cheaper to abate than to use high-quality, durable carbon removal. Only at some point there will be an inflection point. And at this inflection point, that is where potential mitigation turns can come in. Now, then the argument is well, maybe carbon removal is the better quote unquote, or at least economically better option, because it's cheaper to use that than to mitigate other ways. There are, for instance, with sustainable aviation fuel, some analyses suggest that maybe using fossil jet fuel and carbon removal is economically or does make more sense economically than to use ESAF. Now, there's other reasons why you might not want to do that because it prolongs the use of fossil fuels and um you know and creates sort of a lock-in effect with legacy fossil players. So I totally buy those arguments, but solely from a sort of economic perspective, um, there are arguments where carbon removal has sort of the optimal solution rather than continuing to go down the avoidance reduction and marginal abatement curve.
SPEAKER_00:Awesome. Then I would say, Marian, thank you so much for your time today. Is um it's been really interesting. I think I also got away a lot in terms of like the landscape, and you know, maybe with the upcoming EU developments, we'll have to talk again about how we can how we can get this into the EU stuff. So, but thanks so much for taking the time. I really appreciate it. And uh I think I got a lot of it. I'm sure people will get a lot of it. So thank you so much.
SPEAKER_01:Thanks for having me. This was fun.