Swiss Re has said that the world’s net zero ambitions are doomed to failure unless the world can remove CO2 from the atmosphere.
In a new report, ‘The insurance rationale for carbon removal solutions’, the reinsurer said the pathway to tackle climate change is clear: Reducing CO2 emissions is the priority and then any unavoidable emissions need to be removed from the atmosphere and stored permanently.
Mischa Repmann, Senior Environmental Management Specialist at Swiss Re said: “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.”
The scale of the problem is daunting. Global emission levels need to be cut in half by 2030, reach net zero by 2050 and stay net negative throughout the second half of the century. This will require up to 10 to 20 billion tonnes of negative emissions per year in and after 2050. It will require a new industry the size of today’s oil and gas industry to deliver carbon removal services at such a scale. Therefore, the scaling of carbon removal must start now, in parallel to – not instead of – massive emission reduction efforts.
The study explained by 2050, the world will need to remove up to a quarter of the CO2 we currently emit globally – equal to 10 billion tonnes of CO2 per year – from the atmosphere. To achieve this, the world must increase our carbon removal capacity by 60% every year over the next three decades – “an unprecedented growth rate” for a new industry. Eventually, carbon removal will have to grow to the size of today’s oil and gas industry over the next three decades.
“The scale of the problem is daunting,” it added. “Global emission levels need to be cut in half by 2030, reach net zero by 2050 and stay net negative throughout the second half of the century. This will require up to 10 to 20 billion tonnes of negative emissions per year in and after 2050. It will require a new industry the size of today’s oil and gas industry to deliver carbon removal services at such a scale. Therefore, the scaling of carbon removal must start now, in parallel to – not instead of – massive emission reduction efforts.”
The least cost-intensive means of carbon removal harness the power of nature to sequester carbon in forests, wetlands, oceans and soil. However, the report cautions it is important to perform them in such a way that they also achieve co-benefits for livelihoods and biodiversity.
Technological carbon removal solutions use engineering tools to filter CO2 from air and store it permanently in rock layers deep underground or in long-lived products like concrete. The costs are higher than for the nature-based solutions, but resource limitations and risk of reversal are lower, according to the report.
“The main barrier to deployment of carbon removal is economic viability,” Swiss Re said. “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.”
It added 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,” it added. “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. The report discusses some considerations to overcome this challenge.”
Christoph Nabholz, Chief Research Officer at Swiss Re Institute explained: “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.”
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