A Billion Dollar Capture

FROM REDUCTION TO CAPTURING

Carbon emissions are minacious for both – our planet and humans. The International Energy Agency’s (IEA) Global Energy Review 2021 estimates that CO2 emissions will increase by almost 5% this year to 33 billion tonnes. The problem with carbon emission is that it leads to rise in global temperature causing irreversible effect on the climate and habitat.

The prime reason for carbon emission is the industrial activity (for e.g. production of cement). Over a span of 150 years, it has released roughly 2200 Giga tons of CO2. Their annual contribution stands at 40 Giga tons.

In order to keep the global temperature within the limit of 1.5° C as agreed in the Paris Agreement, we cannot emit more than 2620 Giga tons. Doing the math, it seems that we have 10.5 years only to reduce the current level of emissions. In reality, we have less than a decade. Why so?

You would be surprised to know that the average piece of furniture (for e.g. sofa or desk chair) contributes to 47 kg of CO2 equivalents. If you consider all the urban and rural households of India having furniture, together they contribute 0.01 Giga tons of CO2. It means others are also contributing to fill the gap of 420 Giga tons apart from the industrial activities.

Though the world is actively looking towards renewable energy, zero carbon products and judicious use of fossil fuels, it is imperative to note that these are decades-long process and we need rapid and deep solution. These astonishing facts have shifted the focus to carbon capturing, storing and utilizing (CCSU) technologies – a quicker way of reducing carbon footprint.

GOLDEN ECO-OPPORTUNITY

According to the IEA estimates, there is a need to capture 350 million metric ton CO2 every year till 2030 to limit the global temperature to 1.5° C. But we have captured only 35 million tons i.e. less than 1% of total annual emissions.

This gap in carbon capturing together with the fact that the number of companies setting net-zero emissions goal has increased to 1500 in September 2020 from 500 at the end of 2019 has created a big brownie opportunity for minting eco-money (i.e. money + better environment).

The Carbon Management System market is estimated to be valued at $19.83 billion in 2026. In India, Tata Steel has taken the first mover advantage by setting the first carbon capturing plant.

Therefore, it becomes crucial to understand – How exactly this market work?

What is the return for tracking and capturing carbon?

Source: CNBC

PROBLEMS OF POTENTIAL CUSTOMERS

The companies with net-zero emissions can achieve it in two ways:

• By reducing use of fossil fuels or

• By funding eco-friendly projects such as tree plantation drives or solar panel installation.

Meanwhile, the first way seems distant as 57% of the energy consumption will come from fossil fuels till 2040.

Prima facie the second way looks a good offsetting option but it allows the company to function and emit as usual. Moreover, it has been observed that the funded projects are not implemented in spirit and failed to meet the basic criteria of climate integrity. Due to the flexible reporting requirements, majority of the companies don’t track their emissions and implementation of projects.

Further, tracking and capturing carbon emissions is strenuous. The reasons could be the complexities and huge cost involved.

For e.g. in case of a beverage company (say Pepsico), it is difficult to measure emission for 1 liter of pepsi. Many companies have scope 3 emissions (for e.g. emissions caused by charging an iphone is a scope 3 emission for Apple) accounting for 70-90% of the total emissions which remain untraceable.

In addition to this, the cost of CCSU technologies ranges between $69- $103 per ton making it an unattractive in-house investment despite of the fact that it has the potential to capture up to 90% of the emissions.

This problem of companies creates a gold mine for companies exclusively involved in tracking and capturing carbon emissions. Indeed, they have a ready customer base.

WHAT CCSU COMPNAIES CAN BRING TO THE TABLE?

Companies dealing in tracking & CCSU technologies could help other companies in five ways:

• By creating a data basket for a number of different categories of emissions. For e.g. creating a major category of building emissions and dividing it in emissions caused due to AC, electricity, heating and waste. It will give a unit-by-unit picture of emissions and thus companies could prioritize & develop direct solutions.

• By performing data analytics to assess scope 3 emissions. For e.g. companies like Apple can collaborate with Klima – a company which traces users daily carbon footprint by asking behavioral questions. With this, Apple would not only be able to get the accurate information on emissions rather it can also encourage the consumers to offset their carbon footprint by offering incentives.

• By allowing them to make comparison of emissions over time and assisting them to set realistic carbon reduction targets and deadlines.

• By causing the sustainability competition among the companies. For e.g. as companies would be able to assess their emissions with other companies in the same industry, they will strive to achieve lower emissions level.

• By assisting them in building customized anti-carbon projects. For e.g. companies can get their projects evaluated in terms of ecological impact and make the necessary modifications to ensure calculated harm.

WHAT DOES THE FUTURE HOLD?

Envisaging that future belongs to sustainable companies, it has forced the companies to pay meticulous attention to their carbon footprint.

Companies have started adopting the framework of shared prosperity for healing of both people and planet. Most of the employees are ready to take the pay cut to work at environmentally responsible company.

Gradually the reporting requirements are also getting stringent. Even the investors (for e.g. BlackRock) are preferring environment conscious companies. Soon the carbon accounting would become the buzzword.

It is important to understand that climate risk is actually a financial risk which would cause negligent companies in terms of customer retention, employee retention and investors attraction in the times to come.

By far, the companies like planA, planetly, Watershed, Persefoni and Emitwise are the only players in this market. There is no doubt about the potential of this market but it needs government and public support.

Who else will come up in this market? When we will see eco-marketplace? The answers would appear soon.