Swiss Re AG, one of the world’s leading providers of reinsurance, insurance, and other forms of insurance-based risk transfer, and compatriot Climeworks AG, a leading specialist in carbon dioxide (CO2) Direct Air Capture (DAC) technology, are partnering to combat climate change. The partners signed the world’s first long-term purchase agreement for carbon capture and removal (CCR), worth US$10 million over ten years.
For Swiss Re, the collaboration marks a milestone towards its goal of reaching net-zero emissions in its own operations by 2030. The partnership is also a sign of Swiss Re’s support for the carbon removal industry and gives the Group early access to the new carbon removal risk pools and asset classes.
Both the length of the term of ten years and the total value of US$10 million is, thus far, unmatched in the voluntary market for this type of high-quality carbon removal, sending an important demand signal to developers, investors, and other buyers.
The companies also agreed to collaborate on developing risk management knowledge and risk transfer solutions, as well as to explore future investment and project finance opportunities.
To mitigate the risks of climate change, the world needs to scale up carbon removal on top of, not instead of emission reductions. By partnering with Climeworks we can play to our strengths in this endeavour, as a risk-taker, investor, and forward-looking buyer of climate solutions said Christian Mumenthaler, Swiss Re’s Group CEO and Co-Chair of the World Economic Forum’s Alliance of CEO Climate Leaders.
Carbon capture and mineralization
Powered solely by renewable energy, Climeworks’ DAC modular plants capture carbon dioxide (CO2) from the air. The CO2 is either it is returned to Earth, stored safely and permanently – carbon capture and storage (CCS), or it can be upcycled into climate-friendly products such as carbon-neutral fuels and materials – carbon capture and utilization (CCU).
The technological carbon removal solution offered by Climeworks in Iceland filters CO2 from ambient air using geothermal energy. Climeworks’ partner CarbFix dissolves the captured CO2 with water and pumps it deep underground where it reacts with the basaltic rock formations and mineralizes – carbon capture and mineralization (CCM).
The formation of carbonates is considered the safest, most durable form of all carbon removal solutions that are commercially available today. Climeworks’ technology is scalable and in September 2021, the company plans to launch its new large-scale DAC and storage plant “Orca” in Iceland, bringing large-scale DAC technology to reality.
We are very proud to have established the basis for a unique long-term partnership with the leading risk knowledge company Swiss Re. This is a decisive milestone for the scale-up of Climeworks and the direct air capture industry, said Christoph Gebald, co-CEO, and co-founder of Climeworks.
Uniquely positioned insurance sector
Carbon removal projects can use nature-based solutions like afforestation, which comes with many co-benefits, such as improved biodiversity. They are, however, limited by other types of land use and are vulnerable to the re-release of the stored carbon, eg through wildfires.
This is why, Swiss Re says, scalable technological carbon removal solutions like DAC with storage are necessary to limit global warming over the long run. But at a price point of several hundred dollars per tonne of CO2 removed, it is currently one of the costliest options.
Larger, more economical air-capture and storage facilities can only be realized if customers are committed to long-term purchasing agreements as these guarantee a future revenue stream to the developers, making new projects fundable. Bringing climate solutions to scale not only requires the right demand signals but also de-risking and financing.
In this respect, Swiss Re notes that the insurance sector is “uniquely positioned” to offer support on all three fronts: through long-term purchase agreements, providing insurance capacity for evolving risk pools, and investments in new asset classes, as described in the recent Swiss Re Institute report on the insurance rationale for carbon removal solutions.
