Carbon Dioxide Removal as a Future Market: “The Conditions for Switzerland Are Outstanding”

Emissions avoidance remains the most important lever. Emissions trading systems such as the European or Swiss emissions trading systems will therefore remain the key carbon markets for the foreseeable future. At the same time, it’s clear that this, alone, isn’t sufficient.

To achieve net zero, we have to remove CO₂ from the atmosphere. The market currently exists, but the technologies are still developing, the range of credits is limited, and the demand too weak for a liquid market. The process of removing CO₂ from the atmosphere is technically demanding and energy intensive. Additionally, the CO₂ must be transported and stored safely. This is why the costs are high.

Nature-based solutions, such as CO₂ removal through forestation, or hybrid solutions, such as biochar, are somewhat cheaper than industrial processes and remain important since they can already contribute today.

Over the long term, a variety of different technologies will be needed. For the gigaton amounts that we are expected to reach by the middle of the century, industrial processes such as DACCS and BECCS will be indispensable – but have so far been significantly more expensive. The sector is now attracting substantial investment. Around the world, DACCS and BECCS projects are being developed at near-megaton scale – the industry is moving beyond the pilot phase.

That figure took on a life of its own and isn’t realistic for large volumes of permanent CO₂ removal. For instance, in the case of DACCS, our research estimates medium-term total costs of roughly 230 to 550 dollars per ton – including transport and permanent CO₂ storage. How quickly costs come down is primarily dependent on how fast these technologies can scale.

Political signals, more than anything else, are what drives this development. Funding programs, long-term offtake agreements, and the prospect of regulatory markets provide the certainty needed to invest hundreds of millions of Swiss francs in new facilities.

Voluntary markets are an important starting point. By buying large quantities of CDR credits today, companies from the tech sector, aviation, or finance facilitate the construction of new facilities. But that won’t be sufficient over the long term.

A study that we recently published shows that practically all larger CDR companies expect regulatory markets to become a key driver of growth from 2030 onwards, or by 2035 at the latest. They are transforming a niche market into a genuine market. Today, companies buy CDR credits voluntarily. In contrast, in an emissions trading system, for example, there’s a legal obligation to purchase a credit for every ton of CO₂ emitted. If high-quality CDR credits are approved, it would create reliable demand for the first time. This fundamentally changes the investment rationale.

Our modeling indicates that investments in BECCS could become economically viable as early as the early 2030s, with investments in DACCS following a few years later. At the same time, the price of CO₂ credits would stabilize since unavoidable residual emissions could be partially offset via CO₂ removal.

It is important that not only CO₂ is removed, but that its permanent storage can be confirmed even decades later. Especially when it comes to technologies that rely on biomass, sustainability in land use is also important. This requires binding standards for measurement, monitoring, and liability. The EU’s new standards for carbon removals and carbon farming could play an important role in this regard, even beyond EU borders.

CDR is a typical public good. Everybody benefits from it, but individuals lack the economic incentive. That is why the federal government needs to not only enact reliable regulatory guardrails, but also actively grow the sector. Markets and regulation complement each other.

Financing costs play a role since many of the technologies are capital intensive. But earnings prospects and planning certainty are crucial: If investors can be confident of sufficient revenue in a stable long-term market, the capital will follow.

Technological advancement is often underestimated. The development of wind power globally shows how quickly costs can decline if a clear political will and the innovative power of the sector converge. I believe that we will experience a similar learning curve with CDR as we did with wind power.

I expect that CO₂ removal will already be a part of standard climate protection infrastructure by 2035. Avoiding emissions remains absolutely vital. However, wherever emissions would be very expensive to avoid, CO₂ removal will become a natural alternative, including in European and Swiss emissions trading.

The conditions are excellent: Cutting-edge research on cleantech, innovative CDR start-ups, and a solid financial center. What’s missing is a clear regulatory path for CDR, particularly for the time after 2030. Once this comes in, Zurich can take on a leading role in establishing international CDR markets.