- Author: Claude Letourneau, President & CEO, Svante
Historically, nature has served as a crucial ally in our fight against climate change, soaking up about half of the 40 gigatons of CO2 emitted annually by human activities. But this balance is now tipping. Catastrophic weather events highlight a grim reality: nature is increasingly becoming a net emitter of CO2 rather than a sink. In just one prominent example, stoked by Canada’s warmest and driest conditions in decades, extreme forest fires in 2023 released about 640 million metric tons of carbon, NASA scientists have found. That’s comparable to the annual fossil-fuel emissions of a large industrialized nation. This alarming trend underscores the urgent need for carbon management as an additional tool to mitigate this existential risk.
With many other industrial waste products, companies are responsible for properly managing its disposal. For example, more and more countries are adopting Extended Producer Responsibility (EPR) policies to tackle plastic waste and prevent it from polluting the environment. EPR mandates that producers are responsible for the full lifecycle of their products, from cradle to grave. Producers pay fees based on the quantity of packaging or other product they put onto the market. What if we treated CO2 like this, too?
Enter the concept of a Carbon Takeback Obligation (CTBO), a novel policy instrument that could revolutionize how we manage carbon emissions by regulating newly produced carbon compounds to be used as energy or raw materials. Similar to EPR, a CTBO would require fossil-fuel producers to ensure that they permanently store or sequester a growing percentage of the CO2 they put into the market. It is not, by definition, incumbent upon the producer or importer to carry out the sequestration or storage themselves, although it is permitted; their primary responsibility is to arrange for it.
Incentivizing long-term carbon storage infrastructure
Under a CTBO, fossil-fuel producers would have to secure storage and pay a carbon storage fee for an increasing percentage of the CO2 generated by their products (including scope 3). This obligation would start modestly, perhaps at 1%, and gradually increase to 100% by 2050. Assuming the CO2 emissions to be about 0.43 metric ton per barrel of oil, and the cost of storage to be approximately $25 per metric ton of CO2, that works out to about $10 per barrel of oil. This year alone, oil prices have fluctuated between about $65-$87 a barrel, so that should be a manageable expense for the industry and consumers.
Raising the cost of the produced or imported carbon source creates an incentive for its efficient use. It also creates demand for CO2 storage, which will make engineered solutions such as carbon capture, utilization, and storage (CCUS) financially more attractive. Initial compliance could be achieved through point-source capture at industrial facilities, with direct air capture playing a more significant role as the obligation increases. Storage solutions could include geological reservoirs, mineralization, or even incorporation of carbon into building materials. Ultimately, this approach will help ensure that an equivalent volume of CO2 is stored for every volume of hydrocarbon produced and prevent additional emissions from entering the atmosphere.
The social cost of carbon – the sum of all the negative impacts from wildfire, drought, flooding, etc. – is projected to rise from $190 per metric ton of CO2 to $300. The public already intuitively holds fossil-fuel companies responsible for climate change. A CTBO would simply make that responsibility official and equitable, updating our social contract with the fossil fuel sector and making them part of the solution, rather than the source of the problem. With nature now faltering, CCUS will become a vital component of carbon mitigation instruments like CTBO.
One part of a broader strategy
To be clear, a CTBO should be just one piece of a broader strategy to address CO2 emissions. This includes transitioning the voluntary carbon market to a mandatory one, which is already expected to happen in many countries as new E.U. rules to address carbon leaks between countries take effect. Yet carbon markets typically encourage investment in nature-based solutions, which, as we’ve seen, can be nullified by events such as wildfires or drought.
So another consideration should be the funding of point-source CO2 capture at industrial plants. By analyzing the profit-to-carbon emissions ratio of top service-based companies, it’s clear that sectors like banking and IT can afford to allocate 1% of their profits to fund carbon-capture initiatives. The level of funds generated would differ between sectors and companies depending on their ability to pay. One estimate says such a fee could raise at least $25 billion a year for climate initiatives while keeping expenses under 1% of profits and below $100 per metric ton of CO2. This could fund removal of up to 250 million metric tons of CO2 per year.
Similarly, wealthier nations that emit more CO2 can afford to manage their carbon footprint more effectively. Europe’s new cross-border policy exemplifies this by setting carbon-intensity targets for various industries. A CTBO would complement such mechanisms, ensuring that the carbon intensity of products is accounted for and managed.
No time to waste
The time to act is running out. Our staunchest ally, nature, is on the ropes. A CTBO is an affordable and accountable policy tool that policymakers should urgently consider. It will help ensure that hydrocarbons placed on the market are, on balance, employed in a CO2-free manner by the time net zero needs to be reached. While it may be based on voluntary commitments, it will be much more effective if it is binding. This would offer a pragmatic solution to the escalating challenge of carbon emissions, complement existing policies, and drive the development of a long-term carbon management infrastructure. As nature’s ability to absorb CO2 diminishes, the need for such policies, backed by innovative and robust engineered solutions, becomes ever more critical.
Learn more about Svante’s innovative carbon capture and removal technology.
