Sajid Javid was the then Business Secretary at the time and he had to sell Green Investment Bank. In his annual Mansion House address, Sajid Javid went on the sales pitch to get the City interested. He told the financiers that “green is really the colour of money”.
It was a long and complicated process, but the sale finally happened. A consortium led by Macquarie Bank, an Australian bank, paid £2.3billion for the GIB. Shaun Kingsbury’s exit from the company was satisfying. He said that the GIB showed it was possible to both work towards climate goals and turn a tidy profits.
The GIB was a major player in the supercharging of Britain’s offshore-wind boom. Capacity has risen from less than 1 gigawatt (in 2009) to almost 14GW today. The bank invested £1 and private investors matched it with £3. Power generated by these projects was 70 percent cheaper. Once a sideshow, offshore wind has become an asset class.
Kingsbury believes he can do it again. Just Climate was launched in partnership with Generation Investment Management (founded by former US Vice-President Al Gore). The London-based company raised $1.5 billion in June in order to help other industries clean up their act, but they are stuck in the same financial no-man’s land. Infrastructure investors find it too risky and venture capitalists too expensive.
Kingsbury is a part of an early group of investors and entrepreneurs that have moved beyond the easy money in transport and energy and are now taking on more risky bets. Lowercarbon Capital in Wyoming, founded by billionaire software entrepreneur Chris Sacca, raised $250 million last year to invest solely in nuclear fusion, which is, according to most experts, decades away, if not impossible.
Frederic Lalonde is another risk-taker. The billionaire CEO of Hopper has launched Deep Sky. Its ambitious goal is to remove from the atmosphere every tonne CO 2 released since the Industrial Revolution. This amounts to more than 860 trillion tonnes.
Just Climate focuses on areas that are “hard to go green”, such as agriculture, heavy industry and real estate. Investors ignore these sectors, which account for almost half of global emissions. They only get about 10% of capital allocations because they are hard. Kingsbury said, “We have to invest in the hard things.” “I was fortunate to have seen how this worked before, creating a style for investing in GIBs that people admired and copied. This is the model we are trying to achieve.”
Just Climate, like the GIB is an experiment. Just Climate is a stand-alone fund that has a timeline of 15 years, as opposed to the usual 10-year time frame for these funds. It can also invest in individual projects or companies, with the aim of transforming “uninvestable technologies” and “unprofitable enterprises” into asset classes that will be supported by “fully caffeined” investors. What is next? Kingsbury asked: “Is it low-carbon concrete, long-term energy storage or sustainable aviation fuel?” If we can build the first-of-a kind plants and create the technology, there is a lot of work to be done.
Lalonde, of Deep Sky, is focused on the much bigger challenge of removing carbon. In effect, his goal is to turn back the clock by three centuries, to the days before factories were built that emitted fumes. He said, “We’re an oil and gasoline company going backwards.” “Instead pulling fossil fuel to generate energy, instead of consuming energy we are removing carbon from the air” and burying it underground.
Lalonde, along with his co-founder Joost Ouwerkerk, travelled around the world visiting carbon-removal facilities. When the opportunity presented itself, they licensed the technology. “We went to any place where someone had built a system to remove CO 2 from air or water and asked, “How much would it cost to build one of these?” And if the answer was $2 million, then we bought one.
They plan to ship the reactors to Quebec, where Lalonde believes that it will be the first “reactor factory” in the world to remove CO and 2. They will be tested here to determine which one works best and then scaled up into full-sized facilities.
Lalonde replied, “We are software guys.” ” How do you do seismic? How can you drill so that you only get the smallest viable thing possible? My brethren, I think, are better suited for this time of urgent need. This is a problem that requires a new way of thinking. Deep Sky is the 2.0 version of industrialization, with the sole purpose of removing carbon from the air.
The company is close to securing a “seed” round of funding worth $70 million. One of the technologies that it will test is from Captura. A California-based start-up, Captura has developed an electrolysis method to remove CO 2 from water. Ocean water absorbs around a third global emissions. Mission Zero is a London-based start-up that uses a technology to remove ambient CO 2 from the air with as little energy as possible.
Direct air capture can be extremely difficult and expensive, mainly because CO 2 is so weak that it takes a lot of energy to remove any significant amount. A method that drastically reduces energy consumption would be a major step forward.
Virtually all agree, however, that carbon capture and storage at “point sources” (CCS), where a system fitted to a chimney of an industrial facility to clean exhaust before it’s expelled into atmosphere, is essential. Kinsbury stated: “It is very difficult to achieve a net zero budget without carbon capture and storage.”
It has been a joke for years because it was hailed as the Holy Grail, without which achieving CO 2 targets would be impossible. It has been a complete waste of time and money for many years because it’s purely a financial issue. Carbon credits and subsidies have been the only compensation for the building and operation of these plants, but they are far below the $70 per ton threshold the industry says it needs.
This is changing. The Inflation Reduce Act of America, a $1 trillion package that included tax cuts and climate technology subsidies, was passed by Joe Biden last year. It increased the subsidy for each tonne CO captured from $50 to $85, whereas European Carbon Credits are traded at $90. The once uneconomical projects are now attractive. In March, Britain’s chancellor announced that it would invest £20 billion in CCS projects to jump-start them.
Lalonde said that subsidies or not, worries about the high costs of these endeavors will soon fade as climate impacts multiply — whether it’s a water shortage in Uruguay or a heatwave in Europe or the collapse in insurance models incapable of dealing with extreme weather events. All you need to do is wait. The next five years will be so bad that funding issues, social acceptance issues and other problems will disappear.
Lalonde continued: “If you invested in oil and gasoline in the 1930s you took infrastructure risk while getting stock market returns. It may seem a bit dark to compare the decline of civilisation with that, but it is the best way to look at the problem.