This article is sponsored by Rubicon Carbon.
According to the United Nations’ Intergovernmental Panel on Climate Change, reaching our global net zero goals by 2050 requires removing and permanently storing around 10 gigatons of carbon dioxide equivalent from the atmosphere. While carbon removal credits are vital to achieving this success, the current carbon removal market is constrained by high prices, a low supply of durable storage options and a complex landscape that is difficult for corporate buyers to navigate.
According to cdr.fyi, since first emerging, the carbon removal market has seen 5 million tons purchased, 215,000 tons (3.9 percent) actually delivered, 250 suppliers, an average purchase size of about 20,000 tons, and about 80 percent of credits purchased by the top five buyers. These numbers reflect a market that is still figuring it out — most carbon removal purchases are early-adopter moonshots designed to support the emergence of new technologies and projects.
We must move past this awkward adolescence to scale the carbon removals market. To achieve this, it needs to be easier and more accessible for buyers to finance carbon removals, which requires new investment tools. Rubicon Carbon’s actively managed carbon removals portfolio can help unlock carbon removals at a meaningful scale.
A portfolio approach to unlocking carbon removals at scale
Carbon removals involve drawing down ambient atmospheric carbon dioxide and storing it through nature-based methods such as forests and oceans or engineered methods such as direct air capture. Rather than simply reducing or avoiding carbon emissions, carbon removal credits represent a ton of carbon dioxide equivalent removed from the ambient atmosphere.
Carbon removal portfolios leverage tools and approaches that are widespread in other, more mature financial markets. These instruments help create more liquidity by actively managing risk, thus making them more accessible to a broader set of corporate buyers with different levels of risk tolerance. Let’s look at some specific examples of how the portfolio approach can address barriers to participation in carbon removal markets.
1. Diversifying carbon removal portfolios creates a more accessible price point
Removals comprise a small portion of the broader voluntary carbon market, accounting for just 3 percent of credits sold in 2022. Removal credits with durations of 100-plus years cost anywhere between $110 and $1,700 per tonne, making them inaccessible for many companies with limited sustainability budgets.
With price as the most significant barrier to entry for most companies, diversification across project types with a range of durability (nature-based on the low end, direct air capture on the high end) enables a blended price point far more accessible for the average corporation. With more companies able to buy in, the market can scale faster.
2. Active portfolio management means buyers aren’t locked into single technologies at current prices
As we’ve seen with renewable energy becoming ever cheaper over time, the track record of green technology suggests that many (although not all) carbon removal technologies will come down in cost to reach a competitive price point. But the market is currently dominated by future offtake agreements with delivery risk, putting early buyers in the position of locking themselves into deals with unproven providers testing new technologies and project types.
A portfolio of delivered credits that is actively managed can quickly shift toward the technologies that show the greatest scalability over time. In any emerging industry, it’s challenging to project which technologies will become the most cost-effective. Betting on a wide range of project types in
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