Technology can help to slow or reverse climate change, but not without the state
By Craig Berry
With every passing moment, the chances that, by cutting CO₂ emissions alone, humanity will reach ‘net zero’ by 2050 and/or restrict the global average temperature rise to 1.5°C, seem ever more remote. At least some of the work is going to have to be done by plucking already-emitted CO₂ out of the atmosphere.
The UK alone will need to remove 100 million tonnes of CO₂ from the atmosphere each year, in order to get close to net zero. This is similar to the volume of emissions from the UK’s largest emitting activity, that is, road transport.
This explains the enthusiasm among the scientific community for greenhouse gas removal (GGR) technologies and practices, deployed to offset continuing emissions that cannot be cut quickly enough. But is GGR really going to help? Are we falling into a techno-optimist trap? Cameron Hepburn and Steve Smith — two of the UK’s leading GGR experts — warned last year it could be ‘a dangerous distraction’ from the real task of preventing emissions in the first place. GGR overlaps with and builds upon carbon capture and storage (CCS) technology, but the development of the former is clearly an admission that the latter has not had the required impact.
Techno-optimism is an ever-present concern. In this case, however, the prospect of a technological solution is actually a realistic one; but is being inhibited by the persistence of market-optimism. The state, not the market, will need to drive the rollout of GGR.
The GGR diffusion journey will be treacherous
There are essentially two forms of GGR. First, the greater use of biomass, ranging from afforestation to new bioenergy plants integrating CCS (i.e. BECCS).
The availability and suitability of land is a major barrier to greater biomass use (and indeed most approaches requiring carbon storage). There is also the possibility that techniques such as afforestation and soil sequestration will actually damage the natural environment — causing social as well as ecological harms — and that BECCS could undermine GGR effects due to energy-intensive biomass transportation and processing.
Given these difficulties, it is increasingly apparent that, secondly, direct air CCS (i.e. DACCS) technologies will be required too, involving gigantic fans and complex filtering processes to extract CO₂ from the atmosphere.
However, we are a long, long way from the rollout of DACCS at the required scale. As Mark Workman and others have pointed out, the first mover dilemmas are considerable (perhaps insurmountable). The problem is partly technological (with the development of DACCS still in its infancy), and partly infrastructural (a barrier to all existing CCS options).
But the main problem, for all forms of GGR, is an economic one. There has been very little consideration of the economics of GGR, that is, the conditions that will drive demand (and therefore revenues), so that the innovators are incentivised to continue to develop and diffuse GGR technologies.
‘Negative emissions’ will not work
Perhaps this is because the discourse around GGR has to date been, quite understandably, science-led. But we can also speculate that it is because the conventional economics of innovation have little relevance to GGR. While there is scope for entrepreneurship in the development of GGR services, GGR is an unusual innovation. It is focused above all on achieving its own obsolescence, and it seeks to neither supplement nor supplant existing technological goods — rather simply to clean up their externalities.
It is difficult therefore to foresee what a sustainable market for GGR might look like.
Yet because markets are pretty much all we know, policymakers seem intent on trying to create an artificial market to incentivise GGR innovation. They are putting their faith, in short, in negative emissions trading.
Emissions trading has been one of the main policy responses to the threat of climate change, allowing polluting sectors and firms to purchase additional entitlements to emit CO₂, with their own allowances nominally capped. Applying the same approach to GGR would be a case of evidence-free policy-making, scaling up what doesn’t work.
In a negative emissions scheme, GGR providers will be awarded credits based upon the amount of CO₂ they extract (which will be difficult to measure). Polluting firms can then purchase these credits, to offset their own continuing emissions.
This approach would intensify some of the worst features of emissions trading schemes. First, even if the approach works, it clearly creates a symbiosis between hero and villain. GGR providers would rely on the persistence of CO₂ emissions in order to generate revenue. (Selling its emissions allowances to conventional car manufacturers is, for instance, the main source of Tesla’s profits).
Second, given the variety of policy interventions (and consumer preferences) rightly acting upon polluting sectors to reduce emissions, there would be a great deal of uncertainty around the long-term trajectory of the market for negative emissions credits. The absence of guaranteed demand will inhibit innovation — despite the fact that all possible paths to net zero depend on the contribution of future GGR innovations.
The state must take responsibility
It is clear that the state must become ‘the investor of first resort’ in efforts to address climate change. What does this mean for GGR? The UK government, for instance, is already providing R&D subsidies for the emerging GGR sector (albeit not at the scale required). It could also use its regulatory and monetary policy powers to encourage or compel the finance sector to increase the amount of credit available to firms developing GGR services.
“It is clear that the state must become ‘the investor of first resort’ in efforts to address climate change”
But the problem here is that there would be a lack of reliable demand — despite the urgency — even if GGR technologies were supported to commercialise. Governments therefore need to go much further, becoming the principal customer for GGR services. Conditionality in return for this support would then allow the sector to be shaped in the public (and planetary) interest.
In the UK, Treasury brain disease means policy-makers are averse to using public procurement strategically to shape markets. Yet the role of public procurement in driving innovation is now firmly established internationally.
One of the ostensible benefits of a negative emissions trading scheme is that ‘polluter pays’. The principle is sound, but irrelevant if it is not applied effectively in practice. A much more effective way of making the polluter pay is for the state to tax polluting firms and sectors much more heavily, thereby helping to finance its own procurement of GGR.
The Guardian recently showcased Frontier, a $925m advance market commitment (AMC) financed by some of Silicon Valley’s finest (Stripe, Alphabet, Shopify and Meta), alongside McKinsey. AMCs are designed to provide guaranteed demand for innovations which are yet to reach the market. But $925m is obviously not nearly enough. And the explicit aim of Frontier to is to drive down the cost of GGR services, to allow a conventional marketplace to emerge.
Cheaper is usually better… but cheaper for whom? Fundamentally GGR needs a reliable, long-term customer. We already know that relying on cost reductions alone to drive demand for green technology is not delivering the required transformation quickly enough — as Martin Wolf has recently argued in relation to renewable energy.
Learning from the renewable energy sector, the very least that the state should be doing is providing a system of publicly-funded incentives for the private sector to become a reliable customer for GGR. But this approach is unlikely to be sufficient. We need a more interventionist form of industrial policy if we are going to learn from mistakes in the management of renewable energy.
This is not to suggest that an industrial policy for GGR will be easy to institute. Many of the conditions required for industrial policy to succeed are absent, or only present in part:
- There is a lack of political leadership and commitment, especially viewed internationally.
- There is no clear link between GGR and national security, or even national prosperity or resilience. GGR can become a profitable sector, but it is unlikely to ever become a major part of the economy of any highly developed economy. Moreover, no single nation has an incentive to develop GGR prowess alone, since all parts of the world would benefit equally from carbon emissions being removed from the atmosphere.
- Related to this, while GGR can be a source of job creation, this effect will be limited — and this helps to explain the limited political interest in GGR investment.
On the other hand, addressing climate change (which will almost certainly require a scaled up GGR sector) serves a clear public purpose, and enjoys public support. Furthermore, the prospect of public investment in GGR also benefits from swerving one of the conventional downsides of industrial policy: there is little chance of public investment ‘crowding out’ a private market in GGR, since without the former, the latter will simply never emerge.
