Green Markets is a weekly series dedicated to highlighting events of interest or developing trends within environmental markets. The emphasis is on news that could impact investable opportunities in public stock markets.
Climeworks’ New DAC Facility
Climeworks, a Swiss company developing direct air capture (DAC) technology, recently opened their Mammoth DAC facility in Iceland through a collaboration with Carbfix. The plant captures approximately 40,000 tons of CO2 annually.
This facility is 10x the size of Climeworks’ previous, Orca, which captured 4,000 tons.
The company has even larger ambitions for the future, according to Canary Media:
Going forward, the company aims to build DAC plants that can remove 1 million metric tons of CO2 per year — nearly 30 times the capacity of Mammoth — potentially starting with Project Cypress in southwest Louisiana. Climeworks and its partners Heirloom and Batelle recently received an initial $50 million award from the U.S. Department of Energy to begin developing and permitting the project, which is eligible for up to $600 million in matched federal investment.
While Climeworks is in the process of reaching significant scale… its costs have been moving in the wrong direction. DAC is incredibly expensive:
Jan Wurzbacher, co-founder and co-CEO of Climeworks, said it was too early to give a precise number for the per-ton cost of operating Mammoth at full capacity. “On a ballpark level, we’re closer to the $1,000 per ton mark than we are to the $100 per ton mark,” he said on a Wednesday call with reporters. But future facilities using the company’s next generation of DAC technology are expected to approach $300 to $350 per ton of captured CO2 by 2030.
REDD Issuance Reductions
From Viridios’ latest weekly VCM report:
During IETA’s European Climate Summit, it was heard from some organizations that Verra’s new REDD methodology, VM0048, will lead to a 60-70% reduction in credit issuance.
If this is true (it’s likely), efforts to better verify the integrity of carbon credit projects will significantly reduce existing supply. As of November 2023, REDD projects made up approximately 24% of total credit issuances in the carbon markets.
I know I’m beating the drum on carbon credits pretty frequently, but I think you can see why as you review the Green Markets series so far.
Any investor would struggle to find such a large trend… like the energy transition, with an inevitably crucial component (carbon credits) that’s so hated and overlooked.
We have the regulatory authorities in the space (standards bodies, registries) actively curtailing supply, sometimes even invalidating existing credits… while demand is set to grow exponentially for decades.
This sector is an easy sell once people get past their personal beliefs and biases on what should be done about climate change. Every government and institution is feeling the pressure to do something about their carbon emissions.
Through capex-light business models, we can both contribute to the goal of helping the planet and generate strong cash flows and profit margins at the same time. If you thought the EV start-ups were receiving crazy valuations in 2021… just wait.
I don’t profess to know when the sentiment shift will happen, but when it does, I think the numbers we see in the voluntary carbon markets will get ridiculous.
Related stock(s): Base Carbon
New Green Funding Initiatives
Investments in clean technology manufacturing surged to $200B last year, a 70% increase from 2022 levels according to the International Energy Agency (IEA).
Australia is allocating $372M over a 10-year period to mapping and data gathering to find deposits of critical minerals necessary for the energy transition.
Hysata, an Australian hydrogen project developer, recently raised $111M from companies like BP Ventures and Templewater.
Triodos Investment Management and Fondaction Asset Management have partnered to develop a series of natural capital funds focused on investments related to nature, biodiversity, and climate resilience. As of the end of 2023, TIM had an AUM of €5.7B, and FAM managed €325M.
Imperative Global and Freepoint Commodities have established a joint debt facility for early-stage development projects in the carbon markets.