Reaching the Paris climate targets won’t be possible without a carbon removal industry the size of oil & gas, according to a new report from Swiss Re.
The reinsurance giant has said that reducing CO2 emissions should be a priority, followed by removing any other unavoidable emissions from the atmosphere and stored permanently.
The report notes that global emission levels will need to be cut in half by 2030, reach net zero by 2050 and stay net negative throughout the second half of the century.
Swiss Re claims that this will require up to 10 to 20 billion tonnes of negative emissions per year in and after 2050, this will mean an increase in carbon removal capacity by 60% every year over the next three decades, an unprecedented growth rate for a new industry.
Technological carbon removal solutions can use engineering tools to filter CO2 from air and store it permanently in rock layers deep underground or in long-lived products like concrete.
Even though the costs will be higher than nature-based solutions, such as forests, wetlands, oceans and soil, the resource limitations and risk of reversal are lower.
The main barrier to deployment of carbon removal is economic viability. In the absence of sufficiently high carbon pricing, or other emission policies like mandates, there is little incentive for society to cut, let alone collect and store emissions.
The private sector can improve economic viability by de-risking, financing, and purchasing new carbon removal services.
The insurance sector is uniquely positioned to support all three fronts by providing risk management, risk transfer solutions and insurance capacity. It can also provide capital as an institutional, long-term investor, and stimulate the market as an early buyer of carbon removal services.
Many elements of the carbon removal value chain are familiar to re/insurers. Existing Property & Casualty lines of business can already cover a suite of risks during the operational phase of carbon removal projects.
What remains a challenge are potential long-term liability exposures arising from the risk of storage reversal.
Christoph Nabholz, Chief Research Officer at Swiss Re Institute commented: “Carbon removal will need to evolve into a multi-trillion-dollar industry akin to the value of the oil and gas industry today if we are to hit the climate targets set out by the 2015 Paris Agreement.
“Serious investment in this nascent industry must start now. Failing to tackle climate change could result in global GDP loss of 18%, which we showed earlier this year. No action is not an option.”
Mischa Repmann, Senior Environmental Management Specialist at Swiss Re added: “We all need to do our best and remove the rest. In other words: reduce, reduce, reduce, and in parallel, balance the unavoidable emissions through carbon removal.
“When it comes to removals, let’s use nature-based solutions wherever sustainably possible to achieve their wealth of co-benefits for the natural and human environment.
“At the same time, we need to invest in the more scalable and durable technological solutions like direct air capture to limit global warming over the long-run.”