Yahoo Finance Insurance company pays $10m to take carbon directly out of the air
Reinsurance giant Swiss Re has agreed to pay $10m (£7.3m) to reduce its carbon footprint by sucking CO2 out of the air in what the company says is the first deal of its kind.
The 10-year contract with Switzerland's direct-air-capture (DAC) start-up Climeworks will help Swiss Re achieve its goal of becoming carbon-neutral by 2030, the company said.
DAC technology is still in its infancy and involves drawing carbon dioxide out of the air and then pumping it into the ground far below the seabed, where it eventually turns into rock.
Mischa Repmann, senior environmental management specialist at Swiss Re, said the deal could inspire other businesses considering the use of carbon capture technology.
"It's a call for action, and we're hoping that others will follow," he said.
Climeworks' DAC plant is in Iceland and the facility will eventually be able to capture and store 4,000 tonnes of carbon dioxide a year.
Climeworks' facility is relatively small, however, and scaling up the technology is crucial to make it commercially viable.
British company Storegga is working with Canada's Carbon Engineering to create a massive DAC plant in Scotland that could potentially remove one million tonnes of CO2 from the air each year when it becomes operational in 2025.
A similar plant is being built in Texas by another company and due to come on stream a year earlier.
Storegga signed a memorandum of understanding with Virgin Atlantic last week whereby the airline will pay the company to offset its carbon emissions. That followed a similar deal with Petrofac earlier this month.
It is in talks with more than a dozen other companies that want to pay to offset their carbon emissions. "The number of companies we are dealing with is growing quickly," said Alan James, chief technology officer at Storegga.
"There are plenty of challenges but the environment looks very positive. Swiss Re's deal with Climeworks is hugely encouraging and is setting the direction of travel that DAC will come forward very quickly."
The cost of DAC is still eye-wateringly high, however, at several hundred dollars a tonne, though this could come down as the technology matures.
Mhairidh Evans, principal analyst at Wood Mac, said DAC was "really still on the fringes of the sector".
"I am on the fence on it only because it is so unproven, you could even say its conceptual still and needs much more R&D for it to be a serious commercial enterprise at scale," she said.