Full speed ahead for carbon capture – investors need to get onboard

The UK has pledged to reduce net carbon emissions to zero by 2050. Most environmentalists emphasise the need to reduce our CO2 emissions, but few talk about carbon capture. This is emerging as an important new industry, writes Victor Hill.

Climate goals

One of Mrs May’s last acts as Prime Minister of the UK was to commit the country to become carbon neutral by 2050. This means in practice that CO2 emissions should be brought down to a level that could be entirely offset by carbon capture and storage (CCS) technology. The previous government-stated goal was just to reduce CO2 emissions by 80 percent from peak levels.

CCS can consist of huge filters that suck CO2 out of the atmosphere and bury it deep below the Earth’s surface, running obviously on renewable energy. There is one such plant already operational in Iceland at Hellishedioutside Reykjavik using technology supplied by Swiss start-up, Climeworks. This is powered by geothermal energy thanks to the country’s volcanic substructure but it only extracts about 50 tons[i]of CO2 per year – approximately the emissions of just 10 cars. To put this in perspective, Germany’s Mercator Research Institute has calculated that we shall have to remove one trillion tons of CO2 from the atmosphere by the end of the century in order to limit global warming to 1.5 degrees Celsius[ii].

At the other end of the technology scale, CCS can be achieved by the low-tech business of planting trees. That means giving over land now used for agriculture to forestation – though very little land in a densely populated advanced country like the UK is “idle”. This is therefore a tall order when the population is growing and food miles must be reduced. The other side of the coin is that we should discourage deforestation. (Indeed, what should we do about Senhor Bolsonaro who wants to pave over the entire Amazon rainforest?)

Most of the environmentalists whose work I read focus on the emissions side of the equation and talk at length about our collective carbon footprint (the precise calculation of which is beset by all kind of problems in carbon accounting – something I shall unpack elsewhere). Yet they seem to have very little to say about CCS and how we will ever know how much CO2 we are extracting from the atmosphere to offset our emissions. So nobody seems to know how many CO2 extractors we need to build or how many hectares of woodland we need to plant each year. (To be fair, the Mercator Institute has done some research on this led by climate scientist Sabine Fuss – but their work has not been widely taken up by governments and does not seem to have figured in Mrs May’s grand gesture).

Let’s be clear: it will never be possible to reduce our CO2 emissions to zero. Even in Neolithic times mankind was generating anthropomorphic CO2. There is an academically respectable conjecture that the Romans induced low-order climate change by polluting the atmosphere[iii]. (They made Europe colder with their air pollution.) In order to manufacture wind turbines and solar panels some CO2 will always be emitted. Farming will continue to create CO2 – even if we all go vegan (which is not going to happen). Wood burners, beloved of my country neighbours, produce about twice as much CO2 as gas boilers of equivalent calorific output. Of course, there is huge scope for improving our energy efficiency – but that is another conversation.

There have been a number of studies recently suggesting that land management is one of the key components of limiting CO2 emissions and thus restraining global warming. A lot of CO2 is obviously locked up in the soil, unable to penetrate the atmosphere. When we till the soil to grow food or excavate the land in, for example, quarrying, that captured CO2 is released – but in precisely what quantities is still uncertain.

One of the worst nightmares of climate gurus like Mark Lynas is the risk of unexpected consequences in the form of feedback effects. Take, for example, the huge expanse of tundra in the Siberian Arctic. Most of the ground there below about two metres deep is permafrost – it is frozen all year round. With temperatures rising, there is already evidence that, as the upper levels of the permafrost melt, so huge quantities of methane – one of the most potent greenhouse gases – will be released into the atmosphere.

Researchers at the Crowther Lab in Zurich, Switzerland, recently published an analysis which suggested that the most effective way to combat climate change would be to plant 2.2 billion acres of tree cover in areas that would naturally support woodlands and forests. That is an area the size of the United States. As they mature, the trees could absorb and store 205 billion tonnes of carbon. That equates to around two-thirds of the estimated 300 billion tons of carbon which have been pumped into the atmosphere as a result of human activity since the industrial revolution.


The research estimates that 11.37 million acres of tree cover in the UK could be created, much of it on grazing land which could continue to support livestock while providing carbon storage. Traditionally, in England, pigs were reared in forest enclosures – which is why there are still wild pigs in the New Forest in Hampshire. I have even seen sheep grazing in Suffolk recently beneath a solar panel array – though I’m sure they would be much happier in mixed woodland.

Professor Thomas Crowther’s study claims to show that reforestation is the best solution for climate change available today. However, it will take decades for any new forests planted to mature. Therefore, the checklist is as follows: (1) protect the forests that exist today; (2) continue to phase out the use fossil fuels; and (3) plant new woodland wherever available.

The latter will require a much more pro-active approach to land management. Forget the tedious debate about giving over the green belt to Noddyland housing developments – we could easily construct eco-towers one kilometre high in which 100,000 people would occupy barely a square kilometre footprint. (I’ll have more to say about that shortly). The real debate is about how to free up land to plant trees.

Turning CO2 into cash

There is an old Yorkshire proverb (as our distinguished editor will know) that where there’s muck there’s money [comment from the editor: In Yorkshire we say ‘brass’]. There is now a tribe of industrialists who are exploring ways to capture mucky CO2 molecules and to turn them into things that people want. Most people think of CO2 as an undesirable greenhouse gas without any economic value. In fact it has all kinds of industrial applications, from fizzy drinks and animal feed to familiar materials such as breeze blocks and even mattresses.

Deep Branch Biotechnology uses a type of bacterium “to ferment” carbon dioxide with hydrogen in order to manufacture a protein that can be used as fish food. (Despite controversies about hygiene practices, fish farming is a huge and rapidly growing global industry – not least in Africa.) This type of fishmeal is far more sustainable than conventional products which are made out of soya beans – often from plantations in cleared rainforest…

Most fermentation processes require sugar (a compound molecule of carbon, hydrogen and oxygen – chemical formula C₁₂H₂₂O₁₁). Deep Branch, based in Nottingham where they have a close relationship with the University, has worked out a proprietary technology to substitute carbon dioxide for sugar in the fermentation process with huge potential in the field of animal feed.

Strutt and Parker Farms in Suffolk take the muck analogy quite literally. They harvest CO2 from the manure of horses participating in races at Newmarket Racecourses and beyond. (There are a lot of horses in Suffolk). They then refine that CO2 using a special membrane to a very high grade and then sell it to local breweries. I do hope that doesn’t put any readers off the next time they drink a pint of Adnam’s excellent organic bitter.

Last year the European drinks industry was afflicted by a shortage of CO2 when several CO2 extraction plants closed at the same time. CO2 puts the bubbles in beer – so this was a big deal. CO2 can even be turned into alcohol in the form of ethanol (ethyl alcohol, chemical formula C₂H₅OH) which can also be used as a fuel to power vehicles, though obviously not a green one. In 2012, Air Fuel Synthesis of Stockton-On-Tees announced that it could “create petrol from air” in a process that converted CO2 into methanol. The company bombed in 2016.

The Carbon Capture Machine, founded by the University of Aberdeen, was founded in 2017. They start with the premise that 6 percent of all carbon emissions come from the cement industry. Around 4 billion tons of new cement is used every year – and that figure is expected to rise to 6 billion within five years. The idea is to use all new cement structures as carbon sinks. In that way cement can become a “carbon-negative” aggregate.

Econic Technologies, a British start-up spun out of Imperial College London, has developed a process to transform CO2 into polymers by mixing CO2 with oil-based materials. A team at the University of Bath has succeeded in using CO2 to make biodegradable plastics. C-Capture, spun out of the University of Leeds, is extracting CO2 from the Drax Power Station in North Yorkshire. Both Drax (LON:DRX) and BP (LON:BP.) have invested in C-Capture.

Consequences

In June the UK Treasury announced that the move to carbon neutrality by 2050 would require more than £1 trillion of new investment. In acknowledgment, Downing Street, in one of Mrs May’s last acts, promised to review the target within five years in consideration of how many other countries had set similar targets and of whether “British industry does not face unfair competition”. Mr Johnson, the new PM, has said that he supports the goal – but this equivocation gives him some wiggle room.


The UK government says it would retain the ability to use international carbon credits. This might involve the UK paying other countries to cut their emissions – those reductions being used to count towards the UK’s own target. (I have already indicated that carbon accounting is messy.) The Committee on Climate Change (CCC) based in London objects to this, saying that the UK’s target should be met within her own borders. 16-year old Greta Thunberg, the miniature Swedish eco-guru, was scathing about Mrs May’s 2050 target.

In practical terms, Mrs May’s target has been introduced as an amendment to the Climate Change Act of 2008 (pioneered by Ed Milliband MP when Secretary of State for Energy and Climate Change (2008-10). One priority if we are to get close to net zero by 2050 would be to replace natural gas with hydrogen. When we burn hydrogen no CO2 is produced. A report by the Institution of Engineering and Technology in June concluded that using hydrogen for heating homes would be safe. However, we would have to increase the production of hydrogen to ten times the current level.

Do food miles matter?

Farmers will all have to become climate scientists. Dr David Reay of the University of Edinburgh runs a supposedly carbon neutral sheep farm in Kintyre on the west coast of Scotland. He is trying to enhance species diversity, to plant native tree species and to maximise soil carbon[iv].

I mentioned food miles above, and it is a modern mantra that cutting the distance from the farm to the plate is good environmental practise. But it isn’t that simple. Certainly, global agribusiness consumes a lot of energy and probably contributes about 20-30 percent of all greenhouse gasses. Yet most of these emissions result from producing, processing and packaging food – and then cooking it. Relatively little comes from transporting food from A to B. According to the US Department of Agriculture, kitchen appliances generate nearly seven times as much CO2 as food transportation.

This insight has all kinds of consequences. One UK government study found that tomatoes that had been transported to the UK from sunny Spain had a lower carbon footprint than tomatoes grown in heated greenhouses in the UK. (Check out Thanet Earth in East Kent, one of the biggest greenhouse facilities in the UK which uses entirely hydroponic food-growing technology.) Moreover, there is the issue of helping developing nations, not by giving them “aid” – but by buying their foodstuffs. Every time I buy Kenyan green beans or pineapples I think of the hard-working farmers I encountered when I was there last year.

Of course, how food is transported does matter. Kilo for kilo, air freight produces more than 75 times more CO2 than sea freight. (So maybe we should avoid those beautiful Kenyan fresh flowers grown in the huge greenhouse arrays by Lake Naivasha – even though their workers are just as hard-working.)

There is a heated debate going on too inside the environmentalist community about the implications of home delivery of supermarket groceries and, for example, veg boxes delivered by organic farmers to your door. Many box schemes entail carbon-hungry cold storage. A recent study found that something like 10 percent of all UK electricity consumption is accounted for by supermarket chillers. And then about one third of the food purchased from those chillers gets chucked in the bin. It then has to be disposed of either in landfill (massive methane emissions for years to come then) or by incineration (significant CO2 emissions plus asthma-inducing particulates).

This journey to carbon neutrality is going to prove much more challenging than it sounds.

Carbon taxes – fuel for populism?

Tax incentives will play a critical role in encouraging more eco-friendly land management and carbon capture. In this respect, perhaps surprisingly, Mr Trump’s America leads the way. In 2018 Congress passed the so-called 45Q legislation that increases tax credits for corporations which sequester CO2 and/or use it productively. As a result, some US oil companies are pumping CO2 into wells to extract oil – thus creating more fossil fuels but reducing net CO2 produced in the process. Naturally, this practice has excited controversy.


One of the principal catalysts for the gilets jaunes (yellow jackets) protests in France which started last November was the threat of additional taxes on diesel vans for environmental reasons. This was perceived adversely to affect the less-well-off, semi-skilled element in society (the French equivalent of white van men – often called artisans over there). Millions of people proclaim the “climate emergency” – but few people want to make economic sacrifices to alleviate it.

Implications for Investors

Norway’s parliament voted in June to divest the country’s $1 trillion sovereign wealth fund out of oil and gas and to move those funds into renewable energy. Traditional oil giants have been diversifying into alternative and renewable energy sources and to brand themselves as “green” energy producers. But opinion differs as to how sincere they are about this. The Norwegian fund will sell off, over time, its estimated $8 billion stake in some 134 oil and gas firms.

Greens will argue that the transition to renewable energy is economically beneficial. As the cost of storing energy comes down through better battery technology, the marginal cost of new energy generation through renewables falls to near zero since wind and sunshine are free. This is in contrast to hydrocarbon fuel, which can only be extracted at great cost.

In forthcoming articles I want to explore how the “climate crisis” (if that is what it is) is impacting our travel behaviour. We have probably already reached peak air travel. My thesis is that there is already massive overcapacity in the airline industry. Also, I perceive an interesting new trend in the US and elsewhere towards eco-friendly communitarian living arrangements. (Don’t worry: I’m not taking refuge in a Buddhist monastery yet – though in my dotage that might be preferable to a care home…)

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I had a visit from the Ordinance Survey (OS) the other day. When I bought my house in Norfolk, the land was unregistered – the property had not changed hands for many years. A very engaging bearded gentlemen in a Hi-Viz jacket appeared with a kind of drone strapped to a broomstick. Apparently, it was a state-of-the-art GPS which, so he told me, could verify the boundaries of my property to within one centimetre. (The satnav in your car is five metres out, by the way – deliberately, because the US military built errors into the original system).

I asked him if he could kindly tell me the altitude of my house. He pressed a button and told me: seven point five metres above mean sea level. That puts us about 10 metres above the Cambridgeshire fens down the road. We should be OK for the rest of my lifetime, then. The renovations can proceed…

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In the September edition of the Master Investor Magazine I’ll be taking a look at how the global automotive industry is adapting to the challenge of electrification – and which of the global giants have the technological edge. The automotive sector is facing a wave of disruption unprecedented in its 125-year history. But where there is disruption there will be winners as well as losers.

[i]I am using “tons” to mean metric tonnes equal to 1,000 kilos.

[ii]See: The Last Resort by Richard Conniff, Scientific American, January 2019, page50.

[iii]Reported in New Scientist, 31 May 2019. See: https://www.newscientist.com/article/2205025-ancient-roman-air-pollution-caused-climate-change-in-europe/

[iv]New Scientist, 15 June 2019,