A version of this Spotlight from S&P Global Platts Analytics was first published Sept.9.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
Climeworks began operations Sept. 8 at its Orca direct air capture facility in Iceland, which is designed to pull 4,000 mt of CO2 out of the atmosphere annually. This is the largest DAC facility currently in operation and increases the world's DAC capacity by over 40%.
The Orca facility is uniquely placed, both in terms of its feedstock electricity and underground geology. Iceland's power generation is over 99% carbon free, led by substantial hydro generation (~70%), but also considerable geothermal generation (~25%) and growing wind and solar generation. While there are other inputs that are not necessarily carbon-free, the facility uses power from a local geothermal plant, and uses this carbon free electricity to pull CO2 out of the atmosphere, helping make the facility a true net negative for emissions. As for the unique geology, the facility is cited atop underground basalt rock formations which is ideal for the mineralization of CO2 into a solid.
Converting CO2 into a solid makes the sequestration of carbon permanent, as opposed to injecting the gas underground with the potential for leakage. Other direct air capture projects currently in the planning stages can also leverage the captured CO2 into commercial applications.
While this facility is certainly a milestone for larger-scale DAC technology, there is still a long way to go for DAC to move the needle in terms of net carbon emissions, and competitiveness with other carbon abatement techniques and carbon pricing.
As noted above, the Orca facility pulls 4,000 mt of CO2 out of the atmosphere annually, which is equivalent to less than 20% of the emissions that Iceland still produces with its oil-fired power generation, which is less than 1% of its electricity mix. Even though Iceland has one of the lowest total CO2 emissions from energy sector combustion in the world (largely from oil use in transport) it still emits between 2.5 million-3.0 million mt/y of CO2, requiring 550-700 facilities like Orca to completely offset its emissions. There are plans to scope out a much larger 40,000 mt plant based on Orca's design in the coming years.
Climeworks claims that the cost of removal are $600-$800/mt of CO2, roughly 10 times higher than the recent record high European EUA carbon allowances (Eur62, or $74) and the IEA's estimate of post-combustion CCUS in power generation ($40-$80/mt), and about 100 times higher than Platts' assessment of voluntary CORSIA-eligible carbon credits ($7/mt).
However, Climeworks believes that costs could decline to the $200-$300/mt range by 2030, and to $100-$150/mt by the late 2030s. While even this figure is still considerably higher than most traded carbon markets in the world, DAC is virtually the only way to pull CO2 out of the atmosphere outside nature-based solutions like reforestation.
There are now over 60 countries that have net zero commitments as official policy targets or enshrined into law, and most of those nations will require greater carbon sinks to offset reduced, but still lingering gross emissions in sectors that are hard to abate. The global push to find carbon capture solutions (including CCUS associated in the blue hydrogen production process), will undoubtedly drive costs lower, but a greater degree of subsidies will likely need to be provided to DAC and other technological and nature-based alternatives. Developed economies with net zero commitments will need to lead the charge in CCUS, as well as other tiles in the mosaic of solutions for decarbonization.