The importance of Carbon Management.

Our thoughts on the most relevant technologies in the field of Carbon Management.

Negotiators from the EU states and the European Parliament have finally agreed on tightening the climate target for 2030. By then, the European Union's greenhouse gases are to be reduced by at least 55 percent below the 1990 level. The need to drastically reduce greenhouse gas (GHG) emissions through investing in energy efficiency, deploying solar panels and reducing deforestation is crucial for every stakeholder of the environment.

However, the latest climate science indicates that such efforts will not be enough to keep temperature rise below the evil 1.5°C mark, which would circumvent the worst impacts of climate change. To prevent far-reaching catastrophes we need to stop climate change by both emission reduction and actively removing CO2 from the atmosphere.

Within the scope of this article, we want to emphasize three important processes that for us at Strategic Business Innovator Berlin should be an integral part of the solution for this overarching problem: Carbon Capture, Utilization and Storage (CCUS).

Sources: PlanA (2020), Shell (2020), Bundesumweltamt (2020)


CCUS includes the capturing of carbon (the approaches bifurcate into direct air capturing (DAC) where carbon is captured from the ambient air or at a point-source from a localized, industrial site*) as well as the permanent storage of the collected CO2 and/or its utilization. Air capturing increasingly gains traction as a promising carbon removal approach that will be a necessary part of a larger carbon removal portfolio.

Current research suggests that CCUS technologies can keep out 65-80% of CO2 out of the atmosphere. However, the technologies are still in an early stage and therefore extremely expensive, hard to scale, and they still require a lot of additional energy.

* Along with industrial systems that are removing CO2 from air, air capture includes biomass, wetlands, oceans, and minerals (not included in this article).

Air capturing approaches all have an industrial process trying to contact the air, get CO2 off the contractor and regenerate the contractor to collect CO2 again. Such contractors can be liquid sorbents or solid absorbents. When air moves over these contractors, they selectively react with and remove CO2, allowing the other components of air to pass through.

Heat, moisture and pressure drive the downstream processes (companies seek for the most optimal way using the least amount of energy and resources). By for example the appliance of heat, carbon dioxide is released from the solvent or sorbent, regenerating the sorbent or absorbent for another cycle of capture.

To call any kind of capturing technology a negative emission technology, it needs clarity of how the CO2 will be stored in the long term. Every technology integration that captures and uses CO2, should be a process that captures carbon from something for something else.

Sources: IEA(2020), ClimateTech VC (2020)
Source: Climeworks (2020)

Use Cases

In a recent study, McKinsey and company displayed the technical potential of CCUS in 2030. The application of captured CO2 (carbon-to-value (C2V)) covers a wide range of materials.

The captured CO2 can be injected underground for permanent storage in certain geologic formations or used in various products and applications. Permanent storage will result in the biggest climate benefit.

The carbon benefit of use in products such as building materials, plastics or biochar depends on the product itself and ranges from decades to centuries. However, using the carbon for products like beverages would quickly re-release carbon into the atmosphere.

Let’s deep dive into some examples.

Source: McKinsey & Company (2020)
CO2 for building material

The regular production of cement (one of the main ingredients of concrete) is responsible for about 8 percent of GHG emissions because of the incredible amount of energy necessary for mining, transporting and preparing the raw materials. By incorporating CO2 into concrete through mineral carbonation it is one of the best prospects for widespread use of CO2 in the near term.

In case you are interested in the full process, check out this paper from California Polytechnic State University student Nicholas Cramer. Also, see how companies like Covestro are already utilizing CO2 as a new raw material CO₂ and how Mineral Carbonation International wants to lock away 1 billion tons of CO2 in building materials. Other interesting ventures to watch: Carbon Cure, Solidia and Sublime Systems Sublime Systems - Greentown Labs.

CO2 for fuel

CO2 is also used to create synthetic fuels. Captured, purified and pipeline-ready compressed CO2 liquid (using only energy and water) can be combined with non-fossil fuel-generated hydrogen, to produce ultra-low carbon intensity hydrocarbon fuels such as gasoline, diesel, and Jet Fuel-A. One of the most recent approaches on how to transform CO2 into methanol and then to jet fuel is researched by a top-notch team from Oxford University and aims to make the process even more environmentally and economically acceptable by utilizing an iron-based catalyst.

Other interesting ventures to watch: LanzaTech and Sunfire

European ambitions on CCUS

Having even more tightened climate targets for 2030, the EU needs to speed up in utilizing these technologies.  According to the European Gas Regulatory Forum 2019 CCUS can be seen as technology options to cost-effectively meet the climate targets.

Europe is well placed to benefit from CCS and CCU due to its extensive pipeline infrastructure which can be used to transport CO2, hydrogen and synthetic methane, and other renewable and decarbonized gases. Also, Europe has extensive geological CO2 storage capacity and subsea expertise, with countries such as Norway and the UK willing to enable shared access to their offshore storage facilities for CO2 from EU industry.

Following years of a declining investment pipeline (annual CCUS investment has continually accounted for less than 0.5% of global investment in CleanTech) there are plans for more than 30 new integrated CCUS facilities, most of them in the US and Europe. If all these projects were to proceed, the amount of global CO2 capture capacity would more than triple, to around 130 million tons per year. There is a potentially huge market: Carbon 180 has estimated the TAM of CarbonTech companies at around $5.9 trillion globally.

So, what are we waiting for? Where are these high-scale projects everyone is praising?

Potential global investment in carbon capture, utilization and storage (CCUS) between 2020 and 2030, by region (in billion U.S. dollars), Source: BCG, EIA, Environmental Protection Agency, European Commission, Global CCS Institute (2019)

Carbon Management in VC

As one might imagine, the above described technologies do not (yet) display the unfulfilled dream of every venture capitalist in the scene. However, there are a growing number of impact funds, most of them with strict targets on how much CO2 they want to mitigate (latest news: Pale Blue Dot raised additional EUR 34M to the EUR 53M raised for their impact fund last year) that hopefully engage in more deals that might seem hard to scale in the beginning.

Another interesting observation we have made, which (hopefully) contributes positively to the development of such business models, is an increasing supply-demand problem: As mentioned before, many new impact VCs are currently forming strong LPs with the strategic motivation to be an active or inactive part of the solution to the climate crisis – the pool of climate capital is starting to overflow. On the other hand, only few promising startups emerge in the European (and especially German) startup scene in the climate tech space. At present, it still takes years to build a Series B+ company and only months to raise the capital to fund several startups.

All in all, we think that C2V will continue to experience key innovation in the near future and therefore represents a VC-backable field. At the same time we are convinced that carbon capture and storage will attract much more founders because it is such an interesting, impactful and relatively vacant industry.

It should also be noted that the speed of this industry is significantly influenced by what happens in politics. Besides questions and concerns about the unit economics of such technologies, their success and implementation is heavily dependent on the pricing of carbon emission. As long as emitting and offsetting remains cheaper than investing in CarbonTech, it will be hard to commit the big players in the industry to such solutions (@Annalena Baerbock, our bet is on you 😉).