The world’s first long-term purchase agreement for direct air capture and storage of carbon dioxide has been signed by Swiss Re and Climeworks.
The reinsurer has teamed up with the specialist in carbon dioxide air capture technology, in a deal which is worth $10 million over ten years.
Swiss Re, described the collaboration as a milestone towards its goal of reaching net-zero emissions in its own operations by 2030. It added the partnership was also “a sign of Swiss Re’s support for the carbon removal industry” giving the group early access to the new carbon removal risk pools and asset classes.
“To mitigate the risks of climate change, the world needs to scale-up carbon removal on top of, not instead of emission reductions. By partnering with Climeworks we can play to our strengths in this endeavour, as a risk taker, investor, and forward-looking buyer of climate solutions”, said Christian Mumenthaler, (pic) Swiss Re’s Group Chief Executive Officer and Co-Chair of the World Economic Forum’s Alliance of CEO Climate Leaders.
Both the length of the term of ten years and the total value of $10 million are so far unmatched in the voluntary market for this type of high-quality carbon removal, sending an important demand signal to developers, investors and other buyers, added Swiss Re. The companies also agreed to collaborate on developing risk management knowledge and risk transfer solutions, as well as to explore future investment and project finance opportunities.
The technological carbon removal solution offered by Climeworks in Iceland filters carbon dioxide (CO2) from ambient air using geothermal energy. The captured CO2 is then sent for permanent storage in nearby rock layers. It is dissolved in water and pumped deep underground, where it reacts naturally with the surrounding basalt rock to form stable carbonate minerals – the CO2 literally turns into stone. This is considered the safest, most durable form of all carbon removal solutions that are commercially available today.
At a price point of several hundred dollars per tonne of CO2 removed, it is at present also one of the costliest options. Larger, more economical air-capture and storage facilities can only be realised if customers are committed to long-term purchasing agreements. They guarantee a future revenue stream to the developers, making new projects fundable.
Christoph Gebald, co-CEO and co-founder of Climeworks, said: “We are very proud to have established the basis for a unique long-term partnership with the leading risk knowledge company Swiss Re. This is a decisive milestone for the scale-up of Climeworks and the direct air capture industry.”
Carbon removal projects can use nature-based solutions like afforestation, which comes with many co-benefits, such as improved biodiversity. They are, however, limited by other types of land use and are vulnerable to the re-release of the stored carbon, e.g. through wildfires. This is why technological carbon removal solutions like direct air capture and storage are necessary to limit global warming over the long run.
“Bringing climate solutions to scale not only requires the right demand signals, but also de-risking and financing,” said the reinsurer. “The insurance sector is uniquely positioned to offer support on all three fronts: through long-term purchase agreements, providing insurance capacity for evolving risk pools, and investments in new asset classes, as described in the recent Swiss Re Institute report on the insurance rationale for carbon removal solutions.”
Swiss Re added it has committed to achieve net-zero emissions in its insurance and investment business by 2050, and in its own operations already by 2030, following its ’Do our best, remove the rest’ approach that aims to first of all reduce emissions as much as possible before balancing any residual emissions through carbon removal.