How negative emissions can help organizations meet their climate goals

As governments and businesses take up the urgent task of reducing carbon emissions, they should also consider another essential means of limiting the rise in global temperatures: removing carbon from the atmosphere through the creation of negative emissions.

As is now well known, keeping warming below 1.5°C by stemming the buildup of atmospheric CO2 is critical to limiting the world’s exposure to the physical hazards resulting from climate change and to averting potentially catastrophic feedback loops in the Earth’s climate that lead to permanent warming.

It’s also well-established, though less well-known, that keeping warming to 1.5°C will now be possible only with significant negative emissions achieved by solutions that remove carbon from the atmosphere and store it over the long term.

There are a wide range of negative emission solutions. For example, “natural climate solutions” (NCSs) such as reforestation use biological mechanisms.

“Engineered removals” such as bioenergy with carbon capture and storage (BECCS) and direct air capture and storage (DACS) sequester CO2 geologically—for example, in sealed rock formations underground.

Negative emissions are needed for three purposes: to offset residual, hard-to-abate emissions in industries such as cement; to lessen atmospheric CO2 if emission reductions aren’t delivered quickly enough; and to remove historical emissions from the atmosphere on a path to a stable long term climate.

Many major scenarios for a pathway to 1.5°C, including McKinsey’s, include a substantial scale-up in negative emissions (Exhibit 1). In those scenarios, negative emissions complement extensive efforts to reduce emissions rather than replacing or detracting from such efforts.

However, the world is far off from the trajectory toward sufficient negative emissions. Based on the current pipeline of negative-emissions projects, the identified need will be missed by a vast margin (Exhibit 2)..

Exhibit 2

Even if all CO2-reduction targets are met, unless negative emissions are scaled, the world will likely exceed a 1.5°C carbon budget before 2040, adding more atmospheric CO2 than scientists consider permissible for a 1.5°C pathway.

Does that mean the world is condemned to more warming? On the contrary, a recent analysis by McKinsey for the Coalition for Negative Emissions suggests that it’s possible to scale negative emissions with a portfolio of sustainable solutions.

For example, NCSs and BECCS- and DACS-based solutions could deliver eight to 12 gigatons of negative emissions, even after applying stringent environmental- and economic-sustainability filters.

Our analysis shows that each of the three solutions can be sustainably scaled to more than one gigaton of production in coming decades without destroying existing carbon stores (such as current forest stocks), damaging sensitive ecosystems, or diverting resources from essential economic activities, such as food production.

It also shows that a portfolio of at least these three solutions will be needed and that components will serve different purposes over time (Exhibit 3). Some NCSs can scale up rapidly in the near term but tend to saturate over time, while solutions involving geological storage offer lower risks of reversal (that is, release of sequestered CO2) in the longer term but may be uneconomical in the near term. These are just three possible solutions, and many others under development (for example, oceanic solutions) will need to be considered.

Exhibit 3

While NCS, BECCS, and DACS negative-emissions methods are available today, building them to the required scale will be a monumental endeavor. Achieving a 1.5°C pathway could mean constructing more than 200 gigawatt-scale BECCS power plants and thousands of DACS facilities and creating shifts in land use for NCSs of around nine times the size of the United Kingdom.

Other enabling efforts, including expanding biomass supply chains, developing capital-project-delivery skills, and creating CCS networks, are also critical.

Our research shows that the costs of such build-outs are likely to be significantly lower than the present costs imply. Experience suggests that the costs of BECCS and DACS should reduce significantly as they become deployed more widely because of economies of scale and because additional know-how will make deployment more efficient.

Once negative emissions are deployed at gigaton scale, the average cost of carbon removal could be around $40 to $140 per ton of CO2 in 2050. In that case, a negative-emissions portfolio sufficient for a 1.5°C pathway would be $4.2 trillion to $8.4 trillion cheaper to deploy than it would be at present costs.

Negative emissions offer significant opportunities for businesses that purchase them, as well as those that participate in creating carbon-removal industries. On the purchasing side, some companies have set themselves the goal of becoming not just carbon neutral but carbon negative in the coming years.

Microsoft, for example, is committed to purchasing a portfolio of negative emissions as part of its effort to become carbon negative by 2030 and to remove by 2050 all the carbon it has emitted, directly or from electricity consumption, since the company’s founding in 1975.

The companies that are the first to use negative emissions can realize environmental ambitions that can’t be achieved through emission reductions alone, which could enhance their standing with customers, investors, and other stakeholders.

Purchasing negative emissions also allows companies to neutralize complex supply-chain or in-use (Scope 3) emissions until they can reduce such emissions and to neutralize challenging-to-abate operational (Scope 1 and 2) emissions, such as certain fertilizer emissions in agriculture and fuel emissions in aviation. These residual emissions are either extremely expensive to abate or lack any feasible technical solution today.

The companies that help build the negative-emission industry can also help produce wider societal impacts, such as job creation and biodiversity protection. Our analysis suggests that the scale-up of negative-emissions technologies could create between four million and ten million jobs by 2050. Engineered carbon removal requires high-skill, permanent operational roles, not just temporary construction or tree-planting jobs.

Importantly, industrial-scale BECCS- and DACS-based solutions could offer opportunities to redeploy experienced professionals from economically productive occupations in oil and gas production.

Our research shows that 70 to 90 percent of the skill base of science, technology, engineering, and mathematics professionals in the oil and gas industries is directly relevant to such professionals in engineered carbon removal.

The environmental cobenefits of negative emissions relate to issues of global and local significance, such as biodiversity, water supply, and soil quality.

Those issues, in turn, have economic implications. For example, 100 meters of restored mangroves can reduce the height of a storm surge by 20 percent, strengthening local flood defenses. Similarly, avoiding deforestation or promoting reforestation can generate negative emissions, as well as support local economies.

Between 40 and 70 percent of the rainfall needed for agriculture originates from forest and vegetation evapotranspiration, so improving forest health also helps farmers.

And some $300 billion a year is spent on tourism in protected areas; enhancing or expanding those areas through investments in negative emissions can help the local communities that derive income from tourism.

Before such benefits can be realized, there needs to be a functioning market for negative-emission credits. Such a market doesn’t exist today. Our analysis shows that in today’s nascent carbon markets, supply, demand, and intermediation of negative emissions are all constrained.

On the supply side, there aren’t clear standards on what constitutes a high-quality negative emission. Therefore, suppliers often self-certify, which undermines buyers’ confidence and creates confusion.

Also, unresolved concerns about safety and environmental impacts can lead to fruitless searches for perfect solutions rather than efforts to define the shortcomings of each solution and to determine how multiple solutions might work together in a well-rounded portfolio.

In intermediation, not enough infrastructure or other services are available to help turn negative emissions into investable assets, so suppliers can’t easily access finance, and buyers can’t make informed choices.

On the demand side, companies and governments are unsure whether negative emissions hold benefits for them and what role they can play in supporting negative emissions. More generally, these institutions are deterred by the complexity of carbon markets.

Addressing those issues is likely to require coordinated effort among suppliers, buyers, oversight bodies, market makers, and the other entities involved in creating, trading, and using negative emissions.

Informed by the ongoing work of the Taskforce on Scaling Voluntary Carbon Markets (for which McKinsey is providing knowledge and advisory support), the Coalition for Negative Emissions’ report outlines five actions that would help establish a healthy market for negative emissions:

• defining high-quality negative emissions
• shaping a robust, liquid, and transparent market for trading negative-emission credits and generating supply-side financing
• ensuring sufficient national commitments to negative emissions (an additional effort to emission reductions), delivered by effective
• government orchestration and intervention to deliver them
• agreeing on a method for transparently tracking and celebrating corporate claims, supported by clear accounting principles and a narrative that highlights the distinct value proposition of negative emissions in addition to emission reductions
• enabling multilateral collaboration, accounting, and trade in ways that help solve the negative-emission challenge globally

As those moves take shape, business leaders would do well to consider how to make negative emissions as part of their net-zero strategies. For companies that will purchase negative emissions, the first steps will be to understand the role that negative emissions will play in reaching net-zero targets and to engage with the market to provide a signal of future demand.

The scaling up of negative emissions will create opportunities for the potential suppliers of negative emissions from solutions that include (but are not limited to) NCSs and BECCS- and DACS-based solutions. It will also create opportunities for the intermediaries that will finance the capital and operational expenditures needed to keep warming below 1.5°C.

Addressing the current shortfall in negative emissions is vital to averting extreme and irreversible global warming. As it becomes clear just how urgent the need for action is, negative emissions could become a priority, along with rapid emission reductions, on the global climate agenda.

Source : mckinsey