Quick carbon removal demand math

Carbon removal demand continues to be a much-discussed topic within the field. This is understandable. The numbers for carbon removal get very big, very fast. And, despite significant progress over the last few years, the question of “are all of these voluntary market efforts going to be a bridge to nowhere?” still looms large.

I wanted to share some quick math suggesting that it is not completely crazy that the world would be able to raise enough money to remove all of the tons of carbon dioxide needed—in total—to stabilize temperatures around 1.5C in the next ~100 years (this is, of course, assuming the world also does the requisite emissions reductions). (Please note the numerous disclaimers/caveats described at the end of this piece.)

(1) In total, the world needs to do ~1 teraton of carbon removal over the next ~100 years to effectively stabilize global temperatures around 1.5C. 

• ~1 teraton to remove all the emissions we will put into the atmosphere en route to net zero, in addition to the necessary emissions reductions (source).

• Another ~2 teratons of removal if we want to turn back the clock to pre-industrial temperatures (source: combination of this for historical emissions, and this for effects of net negative emissions).

(2) It’s not completely crazy to imagine that the world would pay ~$100T total to do carbon removal over the next ~100 years.

• Let’s assume carbon removal will be paid for mostly by rich countries. Total GNI of OECD countries was $77T in 2022. 

• One way to think about how much countries might spend on carbon removal is to benchmark it to other ‘altruistic’ activities countries spend on that don’t directly benefit them. For example, the UN has a long-standing target for developed countries to spend 0.7% of GNI on development aid. (In reality, countries spend closer to 0.37% of GNI).

• The world will very likely get richer. By 2100, the IPCC models scenarios with GDP growing 2.7x at the low end and 10x at the high end. We’ll assume 1.5% annual growth (equivalent to the 3x scenario used by the IPCC). (Note: GNI and GDP are similar enough for the purposes of this exercise, we’ll use this multiple with our GNI number).

• So we can calculate the carbon removal spend in each year (t) as  ($77T * 1.015%^t) * 0.7%. Summed up over the next 100 years, this is approximately equal to $100T (technically $123T, but, let’s round down). Very simple spreadsheet if you want to change assumptions. 

• Of course, if GDP grows faster, this number could be much bigger (and the burden of expenditure on contributing countries much lower). If countries don’t actually want to spend on carbon removal, this number could be much smaller.

(3) Removing 1 teraton of carbon with $100T means it must cost <$100/ton.

• $100T / 1 teraton = ~$100 per ton

• $100T / 3 teratons = ~$35 per ton (in reality, we’d be removing these additional 2 teratons in years ~2100-2200, so there’d be more years of available GDP to work with)

(4) So, what does this mean?

• Getting rich countries to start ramping up to spending ~0.7%+ of GNI on carbon removal sustained over over ~100 years would be roughly enough to fund the carbon removal needed to stabilize at 1.5C, provided that countries also rapidly reduce emissions.

• Supply needs to get to <$100 a ton, but of course, the cheaper the better. At <$35/ton we’d have a good shot at being able to turn back the clock to pre-industrials levels. More importantly, cheaper carbon removal is an important hedge against the (very real) possibility that the world does not get to $100T, and we want to do as much carbon removal as possible with the $ available. 

(5) Is this inevitable? Absolutely not. Is it likely? Not without a lot of work from a lot of people. Is it possible? I think so, yes.

Disclaimers:

• These numbers are intended to be directional. I’m trading some precision for intuition & simplicity. And, there are obviously multiple scenarios—adjust the numbers as you like/based on what seems believable to you.

• Just because this can happen, of course, doesn’t mean it will happen. And: as with every funding decision, there would be tradeoffs in spending on carbon removal versus other things. I’m not attempting to address those here.

• This sketch outlines one path to paying for carbon removal at scale (gov’ts funding directly) but there are very likely multiple paths to funding carbon removal (i.e. mandating others pay, etc.). We should continue to build a portfolio of demand ‘bets’. 

• This is a (very) zoomed out lens and shouldn’t detract from the fact that companies need customers today so that we are even in the realm of gigatons and teratons in the future. 

• Even with these caveats, I think that having some directionally-correct-ish numbers can serve as a useful reminder that, while not at all inevitable, it is not completely unbelievable.