Despite wide agreement to limit global warming to 1.5°C, we remain on the wrong trajectory; what’s needed now is drastic action to reduce carbon emissions, complemented by efforts to kickstart the carbon removal industry
Zurich, Switzerland (July 8, 2021) – Scientists are clear what it takes to meet the targets of the 2015 Paris climate accord. We need to reduce global emissions by 50% by 2030. And we must get to zero emissions by 2050. In addition, we have to counteract legacy emissions throughout the second half of the century.
But despite increasing recognition that we need to do more – and much talk of a green post-pandemic recovery – global emissions are still rising. In some hard-to-abate sectors, total decarbonization may well be many decades away.
So, if absolute zero by 2050 is out of reach, the only way out is net-zero; balancing the unavoidable emissions with an equivalent amount of negative emissions. To that end, carbon removal – capturing CO2 from the atmosphere and storing it permanently – has become a necessity, not an option.
A new report from the Swiss Re Institute, The Insurance Rationale for Carbon Removal Solutions, makes it clear that a stable climate depends on the rapid scaling of carbon removal solutions in parallel to, not instead of, massive emission reduction efforts.
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“We all need to reduce, reduce and again reduce our emissions, while building the carbon removal capacity required to achieve the Paris target over the long run,” says Mischa Repmann, Senior Environmental Management Specialist at Swiss Re and co-author of the report.
“Or – to put it another way – do our best, remove the rest.”
Building up the necessary carbon removal capacity will require the mammoth task of scaling up from 10,000 tonnes of negative emissions today to as much as 10 billion tonnes by 2050, according to the research. This equates to an increase by a factor of 1 million over three decades, or a compound annual growth rate of close to 60%.
Deploying carbon removal solutions
Nature provides some excellent carbon removal solutions which benefit the natural environment as well as the climate. It can sequester carbon in forests, wetlands, oceans and soil while also restoring ecosystems and supporting local communities.
“Nature often provides multiple benefits. For example, investing in coral reefs or mangrove restoration helps protect the coast and coastal properties because they reduce the impact of waves if tropical cyclones or tsunamis hit the region”, says Oliver Schelske, co-author of the report and Swiss Re Institute Natural Asset and ESG Research Lead.
On the other hand, land being increasingly used for carbon sequestration may compete with the use of land for food production, grass-roots economies or with conservation policies. “Therefore, it is important to perform nature-based carbon removal solutions in such a way that they also achieve co-benefits for local livelihoods and biodiversity. Insurance has an enabling function here because it provides a financial umbrella. For example forests and coral reefs can be insured against sudden extreme weather events”, adds Schelske.
Unfortunately, we may have gone past the point where we can plant enough trees to get us out of the decarbonisation problem – and ecosystem restoration, while necessary, is complex and takes time to be successful.
“Had we started 20 or 30 years ago with reducing emissions, we would not need negative emissions at all,” says Repmann. “Had we started 10 or 20 years ago reducing emissions, we probably could have lived with what nature offers us in terms of carbon sinks, and enhancing those processes would probably have done the job.”
Nature-based solutions will have to be complemented with technological solutions to deliver carbon removal at the required scales after 2050. For example, it is possible to filter carbon dioxide directly from the air and store it underground, in rock layers similar to oil or gas reservoirs. Other possible solutions include the conversion of some carbon dioxide into long-lasting products such as concrete.
Technological solutions are more costly than natural alternatives, because they are largely nascent and not yet operational at scale.
“It’s a super-daunting challenge − at no time in history have we built an industry of this size, within only three decades,” says Repmann.
And, given the size of the challenge, we have to take action now, he adds, ensuring our progress through separate interim targets for both reduction and removal.
Putting a price on emissions
One of the biggest hurdles to developing the carbon removal industry is economic viability. The removal practices and technologies are mostly under-deployed and sometimes under-developed, which makes them expensive.
Together with this, there is no real financial cost to carbon emissions. In the absence of meaningful carbon pricing initiatives around the world, carbon will continue to be released.
Companies and individuals are used to the concept of having to pay to have their refuse removed, and prior to the introduction of landfill taxes there was little incentive to drive the shift to recycling. We need to start thinking about our carbon ‘refuse’ in the same way.
Repmann uses the following analogy: “I live in Zurich, which has a beautiful lake so clean that you can drink the water while swimming – even though it’s surrounded by the city. Now, I could take my trash and dump it in that lake, and I save the USD 2 that I pay for a refuse bag that is collected and transported to a waste-to-energy plant. But I don’t oppose paying that cost, because I think it makes sense that my trash does not end up in the lake together with everybody else’s trash.
“That mindset is not applied to carbon because we don’t see the effect of carbon pollution as obviously as we would see with regular waste.”
The role of insurers
In much the same way as the re/insurance industry has supported the growth of sectors such as renewable energy, there is an important role to be had in underpinning carbon removal.
Firstly, through risk knowledge and insurance capacity, insurers can improve the viability of carbon removal projects, covering the loss from potential adverse events during construction and operation.
Secondly, as institutional investors, re/insurers can provide capital for carbon removal initiatives.
Thirdly, they can be early buyers of carbon removal services to balance emissions from their own operations. Since re/insurers’ operational carbon footprint is small, they are better positioned to pay the first-mover price than other sectors.
And, equally as important, re/insurers can use their voice and participate in the dialogue between regulators and project developers, shaping discussions around the extent to which risks can be taken around carbon removal.
Ultimately, insurers that engage early in the carbon removal sector will be well-rewarded. On-the-ground experience built up over the next decade will see front-runners profit as trusted and established business partners, once the market reaches its anticipated trillion-dollar status.
Access the Full Report
- How the re/insurance industry can turbocharge the transition to net zero
- Nature-based solutions
- Carbon removal offers trillion-dollar opportunity: UN-backed investor body
- Managing wind and solar energy risks
- Only sustainable business is good business in the long run
About Swiss Re
The Swiss Re Group is one of the world’s leading providers of reinsurance, insurance and other forms of insurance-based risk transfer, working to make the world more resilient. It anticipates and manages risk – from natural catastrophes to climate change, from ageing populations to cyber crime. The aim of the Swiss Re Group is to enable society to thrive and progress, creating new opportunities and solutions for its clients. Headquartered in Zurich, Switzerland, where it was founded in 1863, the Swiss Re Group operates through a network of around 80 offices globally. For more information, please visit www.swissre.com.
SOURCE: Swiss Re