Swiss Re has entered into a pioneering deal which will involve the capture and storage of carbon dioxide from the air.
Re-insurer Swiss Re has signed the world’s first and largest 10-year carbon removal purchase agreement with fellow Swiss company Climeworks worth $10 million, the companies said Wednesday.
«Both the length and the total value of the partnership are so far unrivaled in the voluntary carbon market for this type of innovative high-quality carbon removal,» the Climeworks statement said.
As part of the deal the two companies committed to a strategic partnership. This will include developing risk management knowledge and risk transfer solutions, as well as exploring future investment and project finance opportunities.
New Plant
Powered solely by renewable energy, Climeworks’ direct air capture plants capture CO₂ from the air. In Iceland, Climeworks’ partner Carbfix mixes the CO₂ with water and pumps it deep underground where it reacts with the basaltic rock formations and mineralizes.
Climeworks said it is planning to launch its new «Orca» large-scale direct air capture and storage plant in Iceland, making large-scale direct air capture technology a reality.
Sending Signal
The companies said that the deal provided a structure for interested buyers to enter into similar purchase agreements with Climeworks.
«Swiss Re is sending a key demand signal to carbon removal solution providers and investors,» the statement said.
Scaling Up
In July analysts from the Swiss Re Institute said one of the ways the insurance industry could help scale up the carbon removal industry was through financing, adding that carbon removal was a long-term investment opportunity through which insurers could balance their long-term liabilities and run a net-zero emissions asset portfolio strategy.
Controversial
However, carbon removal and the voluntary carbon offset market are controversial.
The Swiss Re Institute report pointed to the risk of moral hazard because of the perception that supporting carbon removal may deter action to reduce emissions.
In response to this concern Swiss Re CEO Christian Mumenthaler said: «To mitigate the risks of climate change, the world needs to scale-up carbon removal on top of, not instead of emission reductions.»
Others point to the lack of transparency in the market.
CEO and founder of London-based carbon risk management and procurement company Redshaw Advisors, Louis Redshaw, said recently that there was no single standard for measuring the prevention of putting a tonne of CO2 into the atmosphere, or its removal and the issuance of a carbon credit to prove it. This meant there was no single transparent price of carbon.
