Complete your registration today for a chance to win £50 John Lewis vouchers in our weekly draw Enter now
Baillie Gifford
Updated 15 Mar 2024
Save Article

Disclaimer

This is a non-independent marketing communication commissioned by Baillie Gifford. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

As with any investment your capital is at risk.

We can’t beat climate change simply by reducing the carbon dioxide we produce. We must also strip vast amounts of existing CO₂ from the atmosphere.

Swiss company Climeworks is at the forefront of a new industry, carbon removal, enabled by ‘direct air capture’ (DAC) technology.

The process involves specialised sponge-like filters that capture and bind CO₂ molecules from the air, which are then heated to release the captured gas and finally stored deep underground.

Removing the final 10 per cent

Gebald notes there are two sides to achieving climate targets. While reducing our carbon emissions is “90 per cent of the journey,” Climeworks is focused on the final 10 per cent – removing carbon from the atmosphere to counteract unavoidable emissions.

Currently, only two options are available – planting trees or, as Climeworks does, removing CO₂ from the air and storing it underground.

Climeworks is the first company to deliver a commercial solution. Gebald explains that although there are many parties talking about doing carbon removal, “we for the moment are the only ones delivering and actually verified by a third party.”

“The total volumes that must be taken out of the air with a technology like ours are estimated to be 5 to 15 billion tons [annually] by 2050.”

That means a steep learning curve.

Climeworks’ DAC facility in Iceland, Orca, which started operating in 2021, currently removes a couple of tons of emissions per year, equivalent to “the unavoidable emissions of roughly 10,000 electric cars”.

Mammoth, the company’s next Icelandic facility due to start operating this year, will scale that by ten times – a capacity of 30,000 to 40,000 tons.

From there, Climeworks is targeting multi-million-ton carbon removal by 2030. The US Department of Energy is on board. It recently announced $600m in support to build a further ten-times-scaled facility in the US.

By 2050, the company aims to achieve an overall capacity of a billion tons of carbon annually.

Gebald thinks it’s achievable, “That is exactly the amount of scaling that, for example, the renewable industry, both solar and wind, did between 2000 and 2020.”

By 2030, he hopes Climeworks can be on par with where solar capacity was in 2000 so that “To our kids and grandkids, the image of an air capture plant will be as normal as today a wind farm or a solar farm is to us.”

Gebald believes that with the right policy incentives and supply chains in place by 2030, Climeworks could then scale its DAC technology “by 1,000 times over the next 20-year timeframe”.

Oil and gas in reverse

While the cost is currently $800-$900 per ton to remove CO₂ from the atmosphere, Gebald believes that a realistic long-term estimate is $200-$300 per ton.

If you multiply that price by the predicted need to remove 5 to 15 billion tons of carbon annually by 2050, “you end up with a trillion-dollar market”.

“Essentially, 30 years down the road, this market will be as big as oil and gas is today.”

“If you look at how the oil and gas industry is set up today, it’s 10-20 huge companies acting in this market. I expect that in 2050, we’ll have the same number [of carbon removal companies] operating on a global scale, having hundreds of billions of revenue.”

“It’s impossible that a single company will be able to deal with [15 billion tons each year],” admits Gebald. So, he welcomes others to the industry.

But Climeworks’ head start means it has been refining its technology and gathering valuable data to improve its processes before others have deployed workable solutions.

“What’s important is our ambition to lead the pack,” says Gebald. “Leadership defined by the money raised, the people employed, the agreements closed. This is where Climeworks is in the pole position.”

Climeworks’ founders, Dr Christoph Gebald and Dr Jan Wurzbacher, met in 2003 as mechanical engineering students at ETH Zurich. From the outset, they shared a passion for improving the world through entrepreneurship.

In 2007, they began to “scout very proactively for topics with the potential to be commercially deployed.” Having researched direct air capture and optimised the technology, they were “so fascinated by the results” that they founded Climeworks in 2009, “right after handing in our thesis”.

Making a difference

Scottish Mortgage holds a 0.35 per cent stake in Climeworks which, as deputy manager Lawrence Burns highlights, is “at the much smaller end of everything we do” – both in terms of holding size and the growth stage of the company.

Burns explains that to consider such an investment, “the opportunity set has to be really large so that … it can make a big difference, potentially, for clients.”

“We’re very open that there’s a wide range of outcomes with some of these earlier stage investments, but … if they work, we’ll happily devote more capital to them and grow them and own them for the next 10 years.”

In the meantime, Burns is excited to participate in Climeworks’ “journey of creating a new industry” for a more sustainable future.

Important information

This communication was produced and approved at the time stated and may not have been updated subsequently. It represents views held at the time of production and may not reflect current thinking.

This content does not constitute, and is not subject to the protections afforded to, independent research. Baillie Gifford and its staff may have dealt in the investments concerned. The views expressed are not statements of fact and should not be considered as advice or a recommendation to buy, sell or hold a particular investment.

Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed on the London Stock Exchange and are not authorised or regulated by the FCA.

Unlisted investments such as private companies, in which the Trust has a significant investment, can increase risk. These assets may be more difficult to sell, so changes in their prices may be greater.

A Key Information Document is available by visiting www.scottishmortgage.com

Welcome to Kepler Trust Intelligence

Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.