More Investments Needed to Achieve NZEs by 2050

Removal of Carbon dioxide (CO2) is a crucial step on the path to achieving net-zero emissions (NZEs). However, this requires hefty investments, several experts from McKinsey & Company, a global consultancy firm, said on Tuesday.

The report entitled “Carbon removals: How to scale a new gigaton industry,” is a collaborative effort by Senior Partner at McKinsey & Co Mark Patel, Peter Mannion, Emma Parry, Erik Ringvold, and Jonathan Scott, representing views from McKinsey Sustainability and McKinsey’s Global Energy and Materials Practices.

The report said that to meet 2050 net-zero goals, as much as $16 trillion in cumulative investment in CO2 removal may be needed—but investment so far is only $5 billion to $13 billion. The gap between expected investment and what is need by the end of this decade to achieve 2050 targets is $400 billion to $1.6 trillion.

The Intergovernmental Panel on Climate Change (IPCC) has made it clear that CO2 removal (CDR) is a critical tool for achieving net zero by 2050 because they could enable businesses to neutralise residual carbon emissions once all such efforts have been exhausted. Thus, CDR competency could be a core part of management responsibilities across all sectors by 2050, the authors said.

This report provided an analysis of the market potential for CDR, the investment requirements, and market trends. It also identified which actions are the most likely to lower barriers to scaling CDR and delineates potential advantages for first movers in different stakeholder groups.

Reducing emissions remains the primary, most effective, and preferred response to climate change. But decarbonisation alone could prove insufficient to reduce the residual “hard to abate” emissions that may persist in the medium term.

Once decarbonisation options have been expended, CDR could play a vital role in neutralising residual emissions; therefore, most scenarios aligned with the Paris Agreement project substantial CDR capacities.

Estimates from the Smith School of Enterprise and the Environment’s The state of carbon dioxide removal report, for example, show that six to ten gigatons of CO2 in annual CDR capacity would likely be needed by 2050 for most Paris-aligned net-zero pathways.

This capacity could not be delivered quickly, however, so efforts would need to begin as soon as possible to ensure 2050 scenarios are achievable.

“Some estimates require an additional 0.8 to 2.9 metric gigatons of CO2 per year of removals capacity by 2030—three to ten times more than the volumes currently estimated to be on stream by that date. Biotic feedback loops could also further accelerate the most severe effects of climate change, consequently increasing the speed at which CDR would need to be scaled,” they said in the report.

Given CDR’s potential importance to achieving net-zero commitments, removals could become a routine consideration for businesses across sectors. For companies to claim they have reached net zero under the Science Based Targets initiative’s (SBTi’s) Corporate Net-Zero Standard, for example, after they have exhausted decarbonisation actions, they must neutralise any residual emissions.

Closing the removals gap to achieve net zero would require a range of CDR solutions comprising both nature-based removals (NBR) and technology-based removals (TBR).

NBR removes carbon by restoring, enhancing, or actively managing ecosystems. Because they tend to cost less per metric ton of CO2 removed than emergent TBR, NBR could offer a more cost-effective path to increasing near-term CDR capacity.

NBR could also play a role in removals over the long term, to ensure flexibility and balance in removals capacity. However, TBR generally delivers more “durable” removals by storing CO2 permanently with minimal risk of rerelease into the atmosphere and durable solutions are generally preferable to ensure removals efforts remain effective in the long term, so increasing volumes of such solutions would be needed.

A CDR industry capable of delivering gigaton-scale removals at net-zero levels could be worth up to $1.2 trillion by 2050. This industry would require input and support from a range of players—including investors, suppliers, buyers, traders, and other intermediaries—with substantial potential value pools estimated for each.

These are long-term business opportunities that would require early action to build removal volumes to scale by 2050, the report added.