How Swiss Re has partnered with Climeworks to tackle climate change
Inside the world's first ten-year carbon removal purchase agreement
Sara Benwellposted on Thursday, August 26, 2021
Swiss Re has committed to achieve net-zero emissions in its insurance and investment business by 2050, and in its own operations by 2030, following an approach that aims to first of all reduce emissions as much as possible before balancing any residual emissions through carbon removal.
One step in the journey, is a new partnership with Climeworks, a specialist in carbon dioxide air capture technology. Swiss Re signed the world’s first long-term purchase agreement for direct air capture and storage of carbon dioxide, worth USD 10 million over ten years.
The collaboration marks a milestone towards the reinsurer's 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 USD 10 million are unmatched in the voluntary market for this type of high-quality carbon removal, sending an important demand signal to developers, investors and other buyers.
As part of the project, Swiss Re has 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”, said Christian Mumenthaler, Swiss Re’s Group Chief Executive Officer and Co-Chair of the World Economic Forum's Alliance of CEO Climate Leaders.
The technological carbon removal solution offered by Climeworks in Iceland filters carbon dioxide (CO2) from ambient air using geothermal energy.
The captured CO2 is then sent for permanent storage in nearby rock layers. It is dissolved in water and pumped deep underground, where it reacts naturally with the surrounding basalt rock to form stable carbonate minerals – the CO2 literally turns into stone.
This is considered the safest, most durable form of all carbon removal solutions that are commercially available today.
At a price point of several hundred dollars per tonne of CO2 removed, it is at present also one of the costliest options.
Larger, more economical air-capture and storage facilities can only be realised if customers are committed to long-term purchasing agreements. They guarantee a future revenue stream to the developers, making new projects fundable.
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 technological carbon removal solutions like direct air capture and storage are necessary to limit global warming over the long run.
Bringing climate solutions to scale not only requires the right demand signals, but also de-risking and financing. 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.