The cost of Direct Air Capture, or DAC, technology is expected to drop as low as $250-$300/mtCO2e by the end of this decade for a range of a multi-megaton capacity, Barbara Truyers, manager for strategic partnerships at Climeworks, told S&P Global Commodity Insights.
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Climeworks, which captures CO2 directly from the air, is a pioneer in DAC technology. The company built its first DAC plant in Iceland, the 4,000 mt/CO2e Orca plant, which was launched in September 2021.
Credits from this plant, sold on a forward basis, are already all sold out, Truyers said. While prices of Orca credits have not been disclosed to the market, Truyers said that their price varies by the amount purchased and duration of the contract.
The price of Climeworks carbon credits is strongly impacted by the high cost of developing the plants, Truyers added, but these prices are expected to drop over the coming years, thanks to economy of scale and increased efficiency.
While $250-$300/mtCO2e is the expected cost that the DAC technology may reach by the end of the decade, prices may drop further if further industrialization within the ecosystem of this emerging industry will be achieved, with prices lowering down to $100-$200/t, Truyers said.
However, fast industrial scale up will be essential to reach this price level.
"The key enabler to achieving low cost is the speed of industrial scale-up," Truyers said. "An entire carbon removal industry will need to develop over a period of the next 10-20 years, creating capacities of at least 5 billion tons of carbon removal by 2050," she added.
Asked why Climeworks current customers are happy to purchase DAC carbon credits now despite the high premium price, Truyers said they want to secure high quality supply in their portfolio but also to be part of the players that are bringing this technology forward and "take the lead on climate action".
At the same time, the current forward selling of DAC credits is allowing Cimeworks to raise the financing needed to build new plants.
"Climeworks' forward selling allows the company to raise financing for future plants, but it also sends a signal to investors and policy makers that there is a market for Direct Air Capture credits," Truyers said.
Next target: scale
While Climeworks has already put more than 15 small scale direct air capture plants into operation across Europe, more plants will be built in global locations, Truyers said, with a target of scaling up their dimensions to 10 times bigger than the Orca plant.
These larger scale plants will be ready in two to three years, according to Truyers.
"Climeworks is seeing such a strong market demand for direct air capture that the first next step will be to supply volume to the market with a scale-up factor of 10x based on the first Icelandic plant, Orca's technology within a 2-3 year horizon," Truyers said.