11 carbon-removal startups to watch, according to investors
- The IPCC says carbon removal is essential to keep global warming below 1.5 degrees.
- The carbon capture and sequestration market is expected to be worth $7 billion by 2028.
- Insider profiled 11 European carbon removal startups that investors believe are about to take off.
The sucking of carbon from the atmosphere by nature and technology is likely to be an important part of the global effort to reduce emissions and avoid the worst effects of the climate crisis.
The UN’s Intergovernmental Panel on Climate Change has described carbon removal as essential to meeting the Paris Agreement’s goal of keeping global warming below 1.5 degrees Celsius, and it is gaining momentum among investors.
According to Fortune Business Insights, the global carbon capture and sequestration market is expected to grow from $2 billion in 2021 to $7 billion by 2028.
Data from PitchBook indicates that there are 55 venture-backed companies in the European carbon capture and sequestration ecosystem. Startups in the sector raised $52.8 million across 20 deals in 2021, a figure eclipsed by this year’s $1 billion across 12 deals to date. Swiss startup Climeworks took the lion’s share, raising $650 million in a single round last month.
Alphabet, Meta, Stripe, Shopify and McKinsey Sustainability have also committed to developing carbon removal technologies. Under a joint initiative called Frontier, the companies said in April they had earmarked $925 million to purchase permanent carbon removal from companies developing new solutions over the next nine years.
Carbon removal companies come in a variety of forms – some are designed to suck carbon straight out of the air, while others extract it from industrial processes before it is emitted. Some startups are taking a nature-based approach to sequestering gas.
Another option is biochar, a form of charcoal that prevents carbon dioxide from entering the atmosphere by storing it in solid form. It is made from organic materials such as crop residues that are exposed to high temperatures and low oxygen content.
Carbon can also be stored in materials such as limestone and carbon fiber, which can be used as building materials and automotive parts.
“We’re going to have to do all of these things, because we’re going to have to go from net zero to net negative,” Michal Nachmany, the founder of Climate Policy Radar, told Insider. Nachmany, whose startup is building a searchable database of global climate policies, added that carbon removal technologies should be used in addition to reducing emissions, “not instead”.
Carbon removal is a nascent industry. Many technologies are new, unproven, and expensive, making them difficult to scale.
Climeworks, which operates a direct air capture plant in Iceland, said it is confident that the global carbon price will stabilize at between $100 and $200 a tonne once the urgency and need to phase out the carbon will be fully understood and that the right policies will be put in place. in place. It expects the cost of its current direct air capture technology to be $250 to $300 per ton by 2030.
Nachmany said investors, governments and businesses need to be optimistic about phasing out carbon despite the high costs. “Investing in R&D and in things that currently seem very expensive and unrealistic – if we don’t start this now, they will continue to be unrealistic and expensive,” Nachmany said.
David Frykman, general partner of Norrsken VC, said cost reduction is the key to success.
“The need for carbon removal is sadly obvious. Fortunately, there’s a lot of innovation going on in the space right now,” Frykman said, adding that he’s been watching the industry but hasn’t made any investment. “Additionally, we need companies that are creating the infrastructure, verification and financing for carbon removal. There are many exciting companies working on these issues, especially given recent gains in momentum around commitments. net zero.”
Insider asked venture capitalists and industry experts to identify the in-portfolio and out-of-portfolio companies that interest them most. Each company is presented below.