Markets can handle climate change
Despite the concern about manmade climate change, surprisingly little attention is paid to emerging technology that could extract carbon dioxide from the atmosphere and turn it into useful products like petrochemicals and synthetic fuels.
Top-down policy solutions like carbon taxes and the recently defeated “Green New Deal” plausibly could reduce greenhouse-gas emissions, but, as with all government mandates, would be costly to implement and would undoubtedly generate unintended consequences that do more harm than good.
While environmental lobbyists push their favorite plans for doing something — anything — to avert catastrophe, the private sector is quietly finding innovative ways to limit the rise in the average global temperature to 1.5 degrees centigrade (compared to pre-industrial times).
According to the UN’s Intergovernmental Panel on Climate Change, 100 billion to 1,000 billion tons of carbon dioxide must be removed from the atmosphere this century to meet that warming target. At first glance, extracting carbon might seem like a pipe dream, but a process for doing just that is nearing commercialization.
Three startup companies seeking to deploy direct-air-capture systems have attracted substantial capital since global emissions hit a new high last year. One of the startups, a Canada-based company, has raised $68 million in private equity from investors, including multibillionaire Bill Gates, the venture arms of oil companies Chevron and Occidental Petroleum, the mining company BHP Billiton, several equity firms, and private family foundations.
While the precise technologies being developed vary among the startups, they all share the basic concept of giant fans pulling air across a contact surface that binds with carbon-dioxide molecules. The contact material is then heated to unbind the carbon dioxide so that it can be collected and used. The Canadian firm is developing a process for using carbon dioxide to achieve industrial-scale production of synthetic fuel.
A Switzerland startup has raised $50.1 million and now operates 14 plants around the world. A New York-based company has raised $42 million and is in the middle of further fundraising.
Until recently, extracting one ton of carbon cost $600 to $700 per ton, but the Canadian company says its process can reduce the cost to less than $100. It expects further cost reductions as the systems are deployed and the manufacturing process scales up. The company plans to announce the sites of two commercial direct-air-capture plants later this year. It says facilities can be placed in any country and in any climate.
While other ways of reducing carbon dioxide are possible — for instance, planting more trees and storing carbon in topsoil or the sea — direct-air-capture plants offer cost-effective options, though an estimated 20 or 30 very large facilities would be needed to pull 5 billion to 10 billion tons of carbon dioxide out of the air every year.
While converting carbon dioxide into synthetic fuel itself requires considerable energy, the process could be powered with renewables to reduce its cost. Any carbon dioxide remaining after conversion would be pumped underground into geologic formations and depleted oil and gas wells.
Global consumption of fossil fuels is increasing, especially in India, China and other industrializing nations, along with atmospheric carbon dioxide. But environmental alarmists tend to forget that CO2 has benefits as well as costs. It is essential for plant life, and more of it promises to raise global crop yields, thereby increasing food production. Nowadays, CO2 is being piped directly from a petroleum refinery in Holland to grow roses in a nearby greenhouse.
The bottom line is that the information that price signals transmit about climate change supplies alert entrepreneurs with incentives to search for innovative ways to adapt to projected rising sea levels, droughts, wildfires and other predicted disasters. It is often better for governments to do nothing, especially if what they do is impose new taxes and heavy-handed regulations to address perceived collective-action problems.
But government inaction doesn’t mean that nothing will be done. Figuring out ways to capture carbon dioxide from the atmosphere is just one of many examples showing that, left to their own devices, market processes can discover solutions that even well-intended policymakers predictably miss.
William F. Shughart II, research director of the Oakland-based Independent Institute, is J. Fish Smith professor in Public Choice at Utah State University’s Huntsman School of Business.
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