The global community has agreed to limit temperature rise to 2 degrees Celsius, while making its best efforts to limit to a safer level of 1.5 degrees. But so far, the world is currently off-track to meeting the 2 degree target, and really off-track for meeting the more ambitious 1.5 degree target. This means that in addition to directly reducing emissions from all parts of the economy, measures that actually remove carbon dioxide from the atmosphere may become even more important if the world is to stand a chance at achieving these ambitious goals.
However, incentives to ratchet up carbon dioxide removal (CDR) are small or non-existent, even in countries like Canada with robust climate policies. This blog explores concrete options for how governments can create the incentives needed for CDR deployment. It also raises thorny equity questions around who pays when it comes to ramping up CDR at the global scale.
Canada’s CDR advantage
First, some basics on carbon dioxide removal. The Institute’s Canada’s Net Zero Future report highlighted two broad types:
1) Nature-based systems such as reforestation and alternative agricultural practices; and
2) Engineered processes where carbon dioxide is captured from burning bioenergy or directly from ambient air and then stored underground. The first type is called bioenergy carbon capture and storage (BECCS); the second is called direct air capture.
Canada is potentially an ideal place for both types of CDR. Its vast forests and agricultural land make it well-suited for nature-based CDR. For engineered solutions, Canada has an ample supply of biomass, cheap and clean electricity, and ideal geological storage for carbon dioxide in abandoned oil and gas reservoirs and deep saline aquifers in the western provinces (the Western Canadian Sedimentary Basin).
But while Canada has the potential to be a leader in CDR, the engineered solutions in particular are expensive and in the early stages of development. How can Canada drive the development, advancement and increasing uptake of BECCS and direct air capture? And looking further down the road, how can the international community mobilize the resources necessary to build and operate them at a global scale? Driving costs down to enable deployment at scale in the long term might be even more important than using them to reduce emissions in the short term.
The incentive gap, and three ways to close it
Canada has an economy-wide price on emissions, which creates an incentive to avoid paying the carbon price by reducing emissions. But there is no additional reward for getting past the zero mark and generating negative emissions. And while the responsibility for reducing regular (non-negative) emissions generally falls on the one emitting (e.g. the gasoline car driver, or steel factory owner) there is no clear way to assign responsibility for negative emissions to companies and especially households.
There are a few options to address these challenges. One way to drive CDR is to rely on voluntary uptake. There are already instances of private companies voluntarily deploying direct air capture. For instance, Canada’s Shopify recently announced it would offset 15,000 tonnes of carbon dioxide via direct air capture, much of it through a contract with Carbon Engineering Ltd (another Canadian company). Yet, while examples like this are encouraging, voluntary action on negative emissions at a significant scale is highly unlikely.
Another option is to include CDR as a compliance option for companies within existing climate policy, such as through offsets, where companies neutralize their own emissions by paying another party to do CDR. Negative emissions associated with BECCS and especially direct air capture can be counted and verified relatively easily and are highly permanent (unlike nature-based offsets). They are therefore highly amenable to being “bought in” as compliance options under emissions trading systems, such as Canada’s output-based pricing system. So long as the benchmarks in these systems keep tightening, this option could work quite well for decades and help hard-to-abate sectors meet their targets while they transform their processes.
A third option is for governments to design policies that directly incentivize carbon dioxide removal (ie. moving past zero) in addition to the reduction of emissions (i.e. getting to zero). A carbon removal subsidy (in effect, a negative carbon tax) offered per tonne of sequestered emissions could do the trick. This approach would provide more focused support for engineered CDR in the early stages, in contrast to the previous option where high-cost CDR would be competing with lower-cost measures (including nature-based CDR) for companies’ compliance.
Repaying the debt: CDR and global climate equity
While creating incentives for CDR domestically is one thing, doing so at large scale across the globe is a different beast altogether. CDR, especially the engineered forms, can be costly, and only certain regions in the world have the potential to store large amounts of carbon. Meanwhile, CDR can confer big climate benefits to the global community, not only those who deploy it. So, who should pay for this CDR? How could the world mobilize and transfer very large amounts of funds to CDR-capable regions?
While emerging economies like China are some of the largest emitters today, most of the human-sourced carbon dioxide in the atmosphere was put there by long-industrialized countries, including Canada. Meanwhile, industrialized countries have much of the world’s CDR potential, including geological storage of carbon dioxide, extra biomass, and cheap, clean electricity. Will the world tolerate paying relatively wealthy regions of North America, the Middle East, Russia and Australia to do negative carbon dioxide drawdown?
Who pays also leads to practical implementation issues of how to pay. Global emissions credits would be one way to allow some countries to pay for CDR in others. Another is establishing a global drawdown bank account. If the drawdown account were funded by wealthy countries most responsible for past emissions, it would represent a mechanism—in addition to other commitments of climate finance— to repay a climate debt owed to developing nations. If transparently operated and clearly funded primarily by rich nations, this fund could help address concerns of funnelling resources to industrialized but CDR-capable regions.
Act local, think global
At the domestic level, there are ways Canada can—and should—kickstart the development of negative emissions technologies. But deploying and scaling these up at the global scale raises big questions about who pays, and what institutions would be required to manage potentially huge financial transfers between countries. These questions are without clear answers but point to negative emissions being potentially one of the biggest global infrastructure and waste disposal projects of the coming centuries.
Dr. Chris Bataille is an Adjunct Professor at Simon Fraser University, a researcher with the Institut du Développement Durable et de Relations Internationales (IDDRI.org), and a Lead Author in the upcoming IPCC AR6 WGIII Industry chapter, Technical Summary, and Summary for Policy Makers.
