This is Dana Perkins, and you're listening to Switched on the B andF podcast. Today we're going to talk about direct air capture, which we're going to refer to often in today's show, just as dak and quite simply put, it is sucking carbon out of the air. You know that thing that plants do during photosynthesis where they breathe in carbon, but this time with a machine. It's a fairly new concept, first theorized in nineteen ninety nine, but
increasingly becoming reality. They're clean tech companies out there pioneering this technology and other technical solutions which we'll actually get to talk about in the show today. And then there are larger companies that are investing in this and looking at how to reach their net zero targets in the long term. Let me just emphasize that really quickly, the net part of net zero. They're thinking about how to reduce their greenhouse gas emissions and then find ways to
subtract carbon from the atmosphere. So who are the companies that are giving this a closer look, both on the technology side and as investors, and what does it cost? I'm going to give you a bit of a hint here it is not currently inexpensive when you compare it with other forms of voluntary carbon credits. But then how long will it take to get closer to cost parity and what is the learning rate we'll need to see?
I think it might surprise you. Also, what do we do with the carbon once it's been removed from the air, and what do we need to consider when it comes to the chemicals that are found in these machines. To talk about this and more, I speak with two members of our sustainable materials team that are based in New York, Sharon Moustri and Brenna Casey. They are going to go through some of the highlights that are found in the recent research note titled direct air Capture Market and cost outlook.
As always, if you like this podcast, make sure to subscribe and you'll receive an update when we publish future episodes. And if you give us a review on Apple Podcasts or Spotify, that's going to make us more discoverable by others. But right now we're going to jump into my conversation with Sharon and Brenna about direct air capture. Brenna, thank you very much for joining today.
Thanks for having us.
Dana and Sharon, thank you for joining as.
Well, thank you Dana.
So we've got you both here to talk about direct air capture today, and I promise we will get into that. But there's a few things I would really like us to talk about in order to give it some context. So the first one is carbon markets, So the difference between voluntary and compliance carbon markets and its most basic sense, because I see direct air capture as intrinsically linked with voluntary carbon.
The short explanation is, there are compliance markets where usually a government sets up a whole system where different companies have to pay in and their emissions are cupped and they have to pay to admit above that cup, or there are other types of systems. For voluntary there's no one regulating these emissions except the companies themselves internally, so they will say we've committed to net zero in order
to get there. Part of our strategy is to buy carbon offsets out of this voluntary market, and that's where direct air capture fits in as its kind of main business model at the moment.
So direct air capture in its simplest sense, are for the companies that really care an awful lot about carbon math and we have had entire shows dedicated to voluntary carbon with Kyle in the past, so we will go too far down the road on that, although we will talk about some prices today for direct air capture. Another show, though that we did in the past, was one on
this technology. It's a couple of years back, and we have decided to revisit the topic from a research standpoint as well as revisit the topic here on the show, And the question for you and for the listeners is why is now the right time for us to revisit direct air capture and essentially what was that catalyst for us to go in a little bit deeper this time.
Yeah, So there are two things that we found interesting that are changing in the market. The first is on the technology side, there's a lot more information about new technologies and a lot more companies that are trying to bring those technologies from lab scale onto commercial scale today, so we're learning much more what the benefits of these technologies are at a large scale. The second is that
we also needed to know more about the market. So the prices we thought that we're expected for director captured today they are now much higher, and we're trying to understand why and revising our whole projections for prices and for supply and demounts based off of that.
So in its simplest sense, can you explain what these machines look like, and if there are different competing technologies, maybe kind of try and paint a picture in our minds of what we're looking at. If we're looking at essentially a machine that is sucking carbon out of the air.
Really simply what DAK is, it's these massive fans that blow ambient air in through this content where a sorbent or solvent solution sits, so it can be either be liquid or solid DAC and we'll get into that in
a second. That CO two, once it comes into contact with the sorbent or solvent, is then absorbed or absorbed onto that medium, and then it requires because that solution only has a finite capacity for the CO two, the cutwo has to be stripped from that and then regenerated, which can take large thermal requirements anywhere up to nine hundred degrees celsius depending on the type of technology that
you're using. The ambient air that is now free of CO two is just blown out, and then the CO two is either stored underground or it can be utilized. So there's a couple major companies that are doing this climb works which we've all heard of carbon engineering. There's Remover, which is using a zeolite, and then Airloom carbon capture is doing it's like a passive DEACK, so it doesn't
require these massive fans. The key difference between liquid DAC SO absorption and solid DAC absorption is really the energy requirements. So liquid DACK requires these covalent bonds. There'sus high affinity for it's like this aqueous alkaline sorment, so high affinity for that to the CO two. So it requires these extremely high temperatures, like I said, up to nine hundred degrees celsius, and then there's also a lot of waste heat,
so it's not terribly energy efficient. SOLIDDAC on the other hand, you can use low grade heat sources because the zeolites, the membranes, things like that, they bind to the CU two with weaker physical interactions, and so you can use PV or wind, geothermal or even hydro to kind of move these to capture and regenerate the CO two. And so generally it's a bit cheaper because of those lower thermal requirements.
I'm going to need a quick definition. What is zeolite?
Zeolites there? You can actually find them on Amazon, which is which is really interesting. They're kind of little there balls almost. They are these highly porous structures, like crystalline structures that absorb CO two basically through those tiny pores, and you can manipulate the pores to different sizes to either accept CO two or kind of select against other molecules like nitrogen or things like that that are also in the atmosphere.
Have you ever seen Orbi's no, So these are these things that my kids play with, and they're essentially these little balls colorful I'm guessing the ones in a direct air capture machine are not colorful. But they're these colorful balls that if you submerse them in water, they absorb all of this water and expand to a much bigger size and then the kids just play with them. They actually don't do anything particularly useful other than that they're
fun by for the kids to play with. But I'm picturing these balls that you're explaining these zeo lights for them to be what roughly the size of a dime or a ten cent piece and pence much smaller.
They're almost like the size of bebes from a BB gun. That's kind of how they look. One of the developers let us hold onto a couple of them, and yeah, they're really really tiny.
They're pretty close to what an ORB sizes. Then there are orb's but filled with carbon instead instead of water. Well, okay, so you have these solid and liquid technologies. It does seem well, you've explained that on the solid side, the energy requirements are lower and you're able to use a wider range of clean energy in order to actually make
these machines work. On the liquid side, Does that therefore mean that these machines are actually being powered by what we'd consider more traditional base load power sources like Dare I say coal in this circumstance or nuclear coal?
I think is too far out of the question, because the carbon intensity of just running that process negates the benefit of DAK completely. So the levelized cost of avoidance is going to be you're going to basically break even essentially if you're using coal to power one of these facilities. What we're seeing right now is that carbon engineering is
actually using natural gas to power DAK. There's a lot of contention around the topic of using something like that when it comes down to like the opportunity cost of using a dirty grid or even nuclear or even natural
gas to power dack. When you could place a dack plant somewhere with a clean grid or where there's hydro or geothermal and just run this on clean energy, But the cost to run something on natural gas are really high, and then your bottom line dollar per ton cost is always going to be contingent on a natural gas price, and so it'll be easier to reduce the cost and scale these technologies if you're not reliant on something using coal using.
Gas, and presumably then also from a natural gas standpoint, the net carbon or greenhouse gas emissions benefit is lower, So there's an inclination to want to co locate these with clean energy exactly. So let's talk a little bit about actually some of the companies that are operating in this space. I want to know a little bit about
how big these companies are. Are they small largely what you would consider to be technology startups that are funded by VC community, or are they big sophisticated, publicly listed companies that are you know, in a very different lead. Tell me how big these companies are and really then who is funding and investing in them?
Yeah, the whole DUC universe has dozens of companies, most of which will be really small startups that are still trying to prove their technology in the lab. But they're really important because, as Brenna mentioned, we need the second generation technologies for Duck in order to bring costs down and also make sure we're capturing as much carbon net
in the process. So those are important, but really the ones we focus on in our note are the ones that are bringing the capture capacity online by twenty thirty
and those are just four companies. So this space is quite dominated by a few players, and the top ones are Carbon Engineering that's from the US and Carbon Capture, also based in the US, and then climb Works that's originally from Switzerland, although they're building one of their new plants is going to be in the and Remover that's originally from Norway.
So you mentioned the cost, What is the cost per ton right now? On this voluntary you know, anybody can set the price and you buy the carbon out there on that sort of a market.
Yeah, so this is kind of what was shocking and what brought us back to doing more and more research on this. Originally we thought the price was around six hundred dollars per ton. This was, let's say, before COVID times.
Were during COVID times, we had had an update and then we saw that a lot of the contracts in the market were selling much higher, and after conversations with companies in this space, the average price right now seems to be a little bit above one thousand dollars per ton, which is really it was really amazing to us because it's almost double what we were expecting and that was
already quite high. So this is going to be one of the biggest challenges for the market is bringing this price down as a scale up.
Because one of the things we're thinking about when it comes to other forms of voluntary carbon is that those prices really want to get closer to one hundred a ton, which makes them a bit more competitive with some of
the compliance markets. Now, I know it ranges widely, and we're seeing things all the way up to three hundred and sometimes five hundred a ton, but in the thousands is really shocking for me, which then makes me think, you know, what sort of companies are looking at well, And essentially willing to pay this price because they believe so strongly in this technology.
There are a ton of companies actually, and part of what we did in our research is try to figure out what is the size of this demand for removals, and what we found is that the total demand for removals is much much higher, like an order of magnitude or more higher in the next couple of decades than what director capture can supply. So we think there's an appetite for this technology out there, but the problem is
that the prices. As I mentioned, so at the moment, the companies that have been historically interested in this are companies that have pretty high revenues and pretty low emissions relative to these revenues. So it's been tech companies or financial companies, and they've done a lot of deals in the past that were relatively small to get to these pilot scales. But the market is changing, so we saw
in the last year or so really big deals. The first one came from Airbus that was for four one hundred thousand tons of CO two captured, and it was also important because it was an airline coming in and demanding deck and exploring that as one of the decarbonization
technologies that industry can use. And then we saw also recently Amazon coming in to do another really big deal of two hundred and fifty thousand tons over ten years, as well as Microsoft a bit above three hundred thousand tons, and those deals are important also because of their scale.
They're starting to compete with this very big air Bus deal, but because of the length of them, So ten years is enough for these companies to have a very secure off take and then go and get the financing they need for these projects.
So what sort of learning rate would we need with this technology in order for it to well essentially for it to reach close to one hundred or thereabouts by let's say twenty fifty, when we need net zero to actually be a reality, and when this importance of carbon accounting and for us to be able to balance out the net part of net zero to be a reality. What sort of learning rate are we looking at here?
When we were trying to find out whether or not the market can actually get to one hundred dollars per ton, we assumed for the learning rate about seventeen percent, which is not unreasonable for a lot of technologies that scale and our modular Obviously, there are some questions on whether DAK will be as easy to scale as things like solar batteries, but we think it's not unreasonable, especially as
newer technologies come online. But we have other assumptions that we also took into account in order to get these costs down. So one was that the supply of the market would increase twenty five percent calgar, so y're on your and that's a pretty high kind of rate of increase, especially in a market that has had quite a lot of delays recently. And then the other one is that they reach about four hundred dollars per ton by twenty thirty, which is what we've heard on average from the players
in this space. If they scaled to the one million tons scale by then.
I mean, that's a pretty dramatic drop off in a fairly short period of time.
Yeah, I mean, they're kind of in a complicated moment today, which is why prices are so high, because the first of a kind of anything, you're usually going to have higher costs than you expected, and that kind of unsettled the market. But they seem to be confident that they can bring those down rapidly as they get to these really big scales.
On the technology side, another assumption that we're using to understand this market more is kind of how DAK is a little bit parallel to what we saw with batteries. So there were so many different battery chemistries that were being designed at the nacency of that industry, and then
over time we saw the industry coalesce around one. So this lithium ion chemistry, obviously there's variance within that, but that helped bring it to scale, and that helped bring costs down pretty substantially, and so we're expecting to see
some sort of market change like that. So rather than focusing on all of these different types of dacks, so liquid solvent, zeolite or solids heoltes, molecular organic frameworks, we're expecting to see maybe one or two of these technologies really take the forefront for the market to just take those two or three, develop them, build out the supply chains, and then bring those to scale. There are a couple different things that developers really are looking to achieve to
bring these learning rates down. It's one optimizing the contactor itself. Because these fans are massive, they take up a lot of space, and if you optimize the solvent. With the contactor, you can maximize the surface area while also minimizing this pressure drop, which keeps costs low but also reduces the amount of steel you need. And with inflationary pressure, the cost of steel right now is extremely high, so this helps keep capex costs for these sorts of plants low.
Can you explain what you mean by take up a lot of space? Because land use is something that I think we're all looking a little bit more closely at than we ever have before when it comes to various parts of carbon intensive technologies and then increasingly also with competition with agriculture. So what does take up a lot of space look like? Are these units the size of, let's say, an air conditioning unit or are they size of a boeing.
They're basically the cargo containers, yeah, exactly that you see on a ship or on a train. But they're modular, so you stack them on top of each other and then you can build them outwards to the megaton scale. So when we're thinking about a scale like this, it obviously depends on the type of renewable energy that you're using, whether it be PV or wind or geothermal, but we see the land area DAC ticks up at around two
kilometers squared for solid DAC. When we compare this to other forms of removals, so BES, for example, it's around three hundred kilometer squared, and then reforestation or a forestation to deliver the exact same amount of removals, it actually is around eight hundred kilometer squared. So while DAC does require a little bit of land, it is far less than some of the other removal types that we're seeing.
So you mentioned some competitor technologies, BEX being bio energy with CCS, let's talk a little bit about, well, essentially, what else is going to be out there from a supply standpoint and competing with that you've already established is very high demand for carbon removal technology. Give us a quick definition of what this Bech's bio energy with CCS is.
BEX. Basically, you take biomass, which, once burned, is technically a biogenic form of CO two because it's already drawn carbon down from the atmosphere. So when you burn it and capture that biogenic COO two, you can actually claim a negative emission. What's really interesting about BES is that because DAC, it's just a waste management technique. Essentially, bex can also produce and sell power to the market while also delivering removals, so you have this double revenue stream.
So that's why it's really compelling right now.
And is this bio energy essentially is it coming from things that have been farmed specifically for this technology or is it waste product?
So it's a little bit of both. In the EU, they have a landfill directive which incentivizes the use of municipal waste for use to be burned. This it's a very contentious topic because there are regulations that define what sustainable biomass is which exclude old growth forests large trees like areas with large primary forests. I guess, however, what we're seeing is that companies are actually going in and cutting down those trees, procuring the biomass from the primary forest,
or this unsustainable biomass. When you look at the life cycle assessment of the process, you can actually instead emit COO two rather than produce COO two from the atmosphere. So there needs to be more stringent frameworks in place to make sure we're doing this right.
Let's next go into reforestation, which you brought up. I'm sure that some people listening are thinking about, well, why
not trees. They certainly do a very similar job when it comes to removing carbon from the air as these machines, and I know a lot of the tension around talking about some of these technologies does then link back to voluntary carbon markets and this need to prove additionality and to show what it is that you're removing over what period of time, and to basically properly account for how
much carbon is being removed. So let's talk a little bit first of all about what reforestation the term specifically addresses, and then under the circumstances that one I prefer dax technology to trees are first and best known form of carbon removal.
With reforestation, I think it's important to say is it is a technology we will need as well, and it has a lot of added benefits like bringing in biodiversity.
So reforestation is one of a suite of what we call nature based solutions for carbon removal, and they do have a place in the market, but as you mentioned, Dana, they have some controversies as well, so it's much harder to manage those projects and account for the carbon that they're actually storing and calculating that additionality, but also ensuring the permanence of it is much more complicated compared to things like DAK, where it's very easy to account for
how much COTO you're capturing. You can literally measure it and then put it down, mineralize it into the ground, and you're not worried about any of this permanence issues as well. So they are kind of like almost two different technologies that should be in two different markets, but we put them together as one in removals, and there's a space for both of them. Also because of a timeline issue, so DAC will take much longer to scale
at the levels we need. As I mentioned, there's a huge supply gap when we look at demand for removals versus DAK supply, and there bex or other solutions like reforestation can come and kind of fill the gap at the moment. As we scale the market and as we put in more stringent regulation, then we see DUCK being a very important player.
Because of this specific need to be able to certify additionality or for another reason.
Yeah, that's a big one. That's the main reason.
How about technologies, It kind of sit. I would say halfway between technical and nature based, and what I'm thinking of specifically here is enhanced rock weathering and then ocean removals. Can you talk a little bit about where that technology is and whether or not it will be competing in a real way with direct air capture in the air term.
I like to think of them not as competing, because, as Sharon says, we're going to need this large portfolio of solutions to actually get to the gig a toon scale of removals that's needed to reach net zero or even net negative in that case enhanced weathering. It's really interesting because I think especially in the US, where we have the comparative advantage is the amount of land that we do have, and so enhanced weathering, biochar things like
that could be a pretty good option. The issue with a lot of these technologies right now, especially with ocean based removal, is that there isn't any long term research right now that shows that doing these techniques changing the biogeochemistry of the ocean and the long term or even local ecosystem impacts that will have that research non existent, and the way the ocean works and the carbon cycle in the ocean works is that you change one thing
and it can have a butterfly and in effect global fisheries, so it can actually have a large impact on the economy as well. And Silicon Valley kind of just in my opinion, really jumped into this because they saw a business model and they saw something that they could make money off of. And I don't think there's enough research or even regulations to manage the large scale deployment of a lot of these technologies. So for now I'm team DAK.
But perhaps looking at it very much the way that I was even forming the question. And thank you for challenging me to think a little bit differently about it, because I'm thinking about these in terms of supply and demand and market dynamics, and you're talking about it in terms of a holistic set of solutions. Really well, so let's continue to talk about some of these solutions. Obviously, the price or direct air capture is a concern, but
are there other things that we need to consider? Are there ways aside from land use, that maybe it impacts the natural ecosystem? What are the other considerations one needs to think about when deploying this technology.
I think the biggest thing is the availability of twenty four to seven clean power. And I'm going to use the US as an example here because it's across the board. Everybody's talking about the US as the epicenter of DAK. But I don't think that we would be talking about the US so much in terms of how it relates to DAK if the government didn't throw so much money
at the technology. And I say this because a lot of the companies right now that are coming out and saying we're going to build these megaton scaled projects in the United States and we're only going to use renewable energy. It's kind of just like, where are you going to get.
That and when did that start? Is this a direct response to something that was a part of the Inflation Reduction Act?
Yeah, definitely. So following the Inflation Reduction Act, the carbon Capture Project five million tons was announced maybe a month or so after in Wyoming, and then we've also seen companies like climb Works or other European companies voice intent to move into the United States market to take advantage of these credits, and they're pretty steep. They're upwards of one hundred and eighty dollars per ton, so it makes sense.
And then also only a couple of months ago, the US announced Kapech subsidies, so it's not only support on the opic side with the IRA, but then they're literally giving you each They chose kind of two broad projects and they're each getting in total a billion dollars, so that's enough for them to probably build these really big plants. And just like de risking, the financing bit of DAK in the US is working out to attract all of these companies.
So this is essentially a technology that is in some sense synonymous with the United States. But are there other parts of the world where companies are looking at this more closely and you think it could potentially take off.
In Iceland, there's lots of geothermal, that's where we saw a couple of the Climwork's pilot plants. And then they also have these ultramafic rocks, so you can do carbon mineralization there, which turns the CO two into just carbonate essentially stone in only two years, so you don't have to sit there and monitor the well forwards of one
hundred years. And so Iceland's a really great spot. I know, well, Sweden is a little bit different, but Sweden has a reverse auction scheme for BEX and then there's also Norway that's planning to do that for DAK. And then we've also been seeing projects in Kenya, so there was I
think it's Project Hummingbird. It's a thousand ton plant that's due to come online this decade because they have a lot of geothermal So I think actually Kenya could be a really great spot to just build up DAK capacity in because they have this fundamental renewable energy and we're not using natural gas, so we're not going to try and permit a nuclear plant to power DAC, which is dystopian and in some.
Respects direct air capture could actually help the geothermal industry grow.
Yeah, there's a lot of synergy.
And you mentioned a term and I just want to kind of circle back on another definition ultramatic rocks picturing some sort of a ward a kid would get in high school for a math competition. So what's an ultramatic rock?
Basically they are these it's volcanic rocks, so lots of magnesium, lots of cat eye that will readily react with the CO two to just turn it into that stone. So there's Iceland as a hot spot for that, but we also see places like Washington State having a lot of these sorts of rock, so that could be another place where carbon mineralization really takes off.
I've never been to Iceland. Have you guys been to Iceland?
No?
No, we've got to.
Do a show and I I was just about to say, Dana, Yeah, this.
Is other than the invariably dubious parts of our emissions with our flight getting there, but hopefully we can get the direct air capture to make it a net neutral experience.
Jumping into another question that really is kind of burning in my mind when you mentioned both of the solid and liquid technologies, is this presence of chemicals and really what the profile is of those chemicals from both an emission standpoint and from an end of life standpoint, because this really brings to light really thoughts of other areas
that we also cover. Let's talk about batteries, for example, there's a lot of conversation at the moment regarding not only circular and stripping the batteries of those very important metals that can be used to make more batteries, but then also the proper treatment of this waste at the end. So the question behind the question is are these chemicals in and of themselves hazardous? What is their emissions dissociated with them, and really what's going to happen to them at the end of life.
Short answer, a lot of these are toxic and highly corrosive, especially for liquid DAC. So those aqueous solvents that I mentioned earlier are not biodegradable and actually really harmful, and so that's one of the key components developers are working on. That's where they're putting a lot of the R and
D efforts into. So it's making these solvents a bit more biodigradable in general, but also increasing the lifetimes of them, so rather than having maybe to dispose of them every couple cycles, or maybe extending the lifetime of these materials for five and ten years. And actually a really good example of this is the zeolites, because the zeo lights actually are biodegradable and they have lifetimes of three to
five years if I remember correctly. And so it's really just developing new sorts of materials and new source of technologies.
Let's now go back to prices, because really that is the lynchpin for scaling technology at least with the way the world is currently run right now, and you brought up another technology that is a parallel of sorts in that it's heavily technology reliant or machine reliant rather than a nature based solution, which is this bioenergy with ccs.
What are the prices right now and what are our forecasted prices for that technology for essentially some of the companies out there that are looking to figure out what their next moves are in the voluntary carbon space.
The competitiveness of BEX is highly contingent on the market because there's different policies in place. There's different obviously carbon prices in each of these markets, and then there's different power prices. You can sell whatever power you're producing at a different level depending on where you are. Another major
thing is the feedstock. So if you're in the UK and you're importing biomass feedstock from the US, you're going to see extremely high prices upwards of three hundred and fifty dollars per ton when compared to Norway or anywhere in the Nordic region where they're able to just use this municipal waste and they can see feedstock costs sometimes
under fifty dollars per ton for backs. In some of these more expensive regions, it's around upwards of two hundred dollars per megawat hour, and then if you're in the Nordic regions where you have access to cheap feedstock, you'll see costs like in the one hundred dollars per megawat
hour range roughly. But when we took a global average, a global weighted average of all the different costs of backs, what we found is that the offset price required to make this technology feasible was at around one hundred dollars per ton right now, falling to around eighty dollars per ton come twenty thirty, and then around forty dollars per
ton in twenty fifty. So if you're comparing it to DAK, just based on the offset price required, it's far more doable, especially near term when DAK it costs eleven hundred dollars.
But just to rein a bit on Brennus, yeah, parade. There are some risks with BECs that could undermine kind of this trajectory downward. So the first one is availability of biomass, which we think we're doing a lot of research on this because there's a lot of sectors competing for biomass in order to decarbonize, and we think this will tend to push prices up and biomass will go to only the places that need it the most in
the end. And then the other part is that as renewables come onto the grid, you'll see lower power prices, and probably BECs will be able to recover less of its costs through selling power and will require higher carbon credit prices. So it's a bit of a complicated dynamic with becks, as Brenna said, but we think it has the potential to come down, but we're not sure. Now.
You mentioned earlier on in the show that there were really large companies, some of them tech companies, that were looking at buying this technology, or in fact already have and have bought quite a few tons of carbon removal. Are they buying them all as clients or have any of these companies gone in and tried to actually acquire these companies that are offering these credits or even perhaps buying the specific units themselves as opposed to the carbon removal.
So the parallel that I'm thinking about is when a company puts a solar farm next to one of their sites and they fully own that solar farm and a company just came in and built that for them.
Yeah, the investment panorama for Duck has changed a lot in the last year, so you're right. What we used to see it was mostly dominated by vcs and that funding was enough for these like lab scale, demo scale projects. As I was mentioning, now that we're going into the ten thousand ton applications and then very quickly into the one million ton projects, we need much much more money.
So what's happening is we're seeing yes, a lot of it is coming from the government and government support, but also what you just mentioned, so more private players coming into the space and investing. And probably the largest deal we've seen so far was Oxy acquiring Carbon Engineering for
a bit above a billion dollars. And now we have this oil and gas company that owns this director captured technology and is also associated to the direct air capture company that is trying to scale up the quickest and to the largest degree.
I think something really interesting that we've just plus wanting Sharon here is that oil and gas and DAK have become inextricably linked over the past year, and so we've seen Chevron, Exon and again Oxy all invest in DAK, and it's mainly in the US where we're seeing this, and so I think the DAK narrative and all these oil and gas companies are becoming intertwined. And we're seeing a lot of these, especially occidental claim that they can utilize DAK in order to prolong fossil fuel use for
the next seventy eighty years. And I think, especially while it's just these first of a kind plants that are up and running, that's kind of setting the stage for where the technology is going to go. And I think they're playing a little bit of a dangerous game exactly.
And just to go back to your kind of challenges to the market question data, one of the big ones we're seeing is permitting. And this is really closely linked to what Brenna was just talking about, because there's less and less community acceptance or let's just say more skepticism and people looking more closely into how these things are
being used. So we need to make sure that even for DUCK, where there is this like good accounting and additionality and permanence for these removals, that we are using them in the right way, and that it builds confidence on this technology.
So I want you to give a solution to a skeptic and let's just go down that road for another minute, which essentially is, let's think about a company that is using the direct air capture technology to prolong their existing high carbon business as opposed to transitioning away from carbon, using it as a short term solution, and then essentially in the long run, only applying this technology to meet those hard to abate sectors where we maybe haven't fully
figured out the solution completely yet. And I'm thinking in those circumstances things like even with sustainable aviation fuel the airline industry or cement as opposed to traditional energy sources and some of what the oil and gas community sells their products to. What interventions do you think will be required in order to ensure that DAK truly is filling that void in the market that makes the carbon accounting,
you know, get to that net zero place. Is it policy intervention or do you think that this will really take care of itself as a solution in the market.
One important place to start is just having the conversation with people about what it means to implement this technology. So if you are going to decarbonize, DAK is your last option, especially now, the costs are super super high, so you wouldn't really use DAK in order to offset all of your emissions. You use it as a last resort.
But I think what people are missing is in order to buy that argument, is this regulation that ensures us that they are going to bring whatever kind of hypothetical company we're talking about, that they are going to bring these CO two emissions down. Because a lot of what we've seen so far is companies internally regulating themselves and committing themselves to net zero, but then sometimes stepping back and saying, oh, we're going to change this timeline or
we're not so sure anymore. So just giving that security I think would help people know thats are going down and DAK is not really what you're gonna use for most of those emissions, but you do need it in the end for the last like let's say maximum ten percent, where removals make sense or it's just not possible to get maybe to full zero, so you need net zero.
So something that we're seeing right now in the EU is that they've sat down. I guess we can compare it to the US, because with what the US did is we just threw a bunch of money at DAK in order to increase investor confidence, which obviously has worked. But what the EU is doing they took a couple steps back and sat down, taking a couple of years to just define and understand what good carbon removal looks like.
And then once they have that baseline and that framework is when they're going to start throwing money at it. So it's kind of the exact opposite of what the US is doing. But I think obviously there needs to be that money to get this technology up and off the ground, but there has to be this framework of what does good look like to make sure this market stays regulated and then scales in a sustainable way.
So we've been talking a bit about policy here, and really my final question comes down to as this technology grows, because demand is likely to spur it on, and with the learning rates that we're predicting, it does have a bright future, do you expect to see more policy intervention both spurring this technology on and also ensuring that it's applied to the parts of carbon and drive to net zero that really make it occupy the most useful space for us.
It's hard to predict, but I do hope that there is more policy that comes online or more support from the government. These projects are huge. I mean they each cost roughly a billion for a one million ton plan, so it requires a lot of money for a technology that's still really new. And we often think about this in general to all like decarbonization solutions, to just throw
everything at the board and see what sticks. And DAK does have the potential to scale, to bring casts down and to offer a reliable solution to removals in the future, which I do think we will need to some degree or another. So I think it's worth trying to make sure the policy supports the industry but also regulates it and brings the best possible technologies online because of the ones we're operating with today are not the most efficient, as Brenda mentioned.
So I know I said my last question was my last question, but I was just kidding. I do have one more that just came up, which essentially I'm wondering, well, how these projects are financed and whether or not there any financial instruments that we can think about as a potential way of essentially inspiring this industry to grow.
How these projects get financed today is usually a lot through government support, and then the rest is the company has raised this money, for example in the case of clim Works, through kind of vcs and kind of general tech startup methods. So in the future that is likely to change. And probably what we will see is that as the technology is proven, more traditional investors will come
in and finances. So I'm not sure if they will use like a specific kind of bond or loan, but we do think that traditional banking might get into this space once we know okay, you can do it at a really big scale, and you could do it at reasonable costs, and that the market is there for it. And even though we say there's like a huge potential demand for removals, what the companies say themselves is yeah, but we need to actually have the contracts and the
off take because otherwise we don't get those loans. So all of this is playing out and all of the moving parts will come together probably in the next five years, and we'll see, Okay, was it real, like did you actually build this huge plant and did the costs actually come down?
Thank you so very much for joining today, for sharing an update on what's happening with direct air capture and really broadly linking back into what's happening with the voluntary carbon space, which I know we're all watching closely. It was great to have you both on the show.
Thanks Na, it was great to be here.
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