Asset owners must immediately scale investment into impactful carbon management and negative emissions technologies both inside and outside of value chains, according to a new position paper from the UN-convened Net-Zero Asset Owner Alliance.

Following the recent special report by the Intergovernmental Panel on Climate Change (IPCC), the Alliance recognizes that fostering rapid and deep cuts to GHG emissions across all systems should remain a primary focus for investors.

The paper highlights how carbon dioxide removal (CDR) solutions – including a mix of land-based carbon sinks, nature-based solutions, and technological carbon removal approaches, complementary to fostering deep cuts to GHG emission across all systems – must be scaled massively and rapidly to align with a 1.5°C pathway. It reports that CDR solutions will need to remove 0.5 to 1.2 Gt of CO₂ per year by 2025, and as much as 6 to 10 Gt of CO₂ per year by 2050 (compared to global emissions of 42 Gt of CO₂ in 2020), alongside decarbonization efforts to keep global average warming to 1.5°C.

The IPCC recently warned that the world is on a 3°C pathway and affirmed that: “All analyzed pathways limiting warming to 1.5°C use CDR to some extent to neutralize emissions from sources for which no mitigation measures have been identified…. The longer the delay in reducing CO₂ emissions towards zero, the larger the likelihood of exceeding 1.5°C, and the heavier the implied reliance on net negative emissions after mid-century to return warming to 1.5°C.”

The paper warns that under-investment and failure to develop nascent CDR pathways now risks them not being available as an important resource when needed at scale.

The range of mitigation strategies and tactics laid out in the position paper focuses on abatement, compensation, and neutralization of GHG emissions. While for the next 5-10 years abatement is the top priority within value chains, the Alliance calls attention to compensation, including purchasing of carbon credits.

The Alliance calls and expects policymakers to fix the carbon-pricing issue as a priority, but – as a complementary measure –will support voluntary carbon markets, which require a significant ‘quality boost’.

The use of carbon credits as complementary instruments to abatement strategies requires an immediate increase in the quality of carbon credits, leading to higher carbon prices. In essence, this means formalizing the use of carbon credits as a market proxy for a global carbon tax. This market proxy will grow, institutionalize, and increase the transparency and integrity of voluntary carbon markets – the best available solution in the absence of rising price corridors and policy support mechanisms.

Günther Thallinger, member of the board of management, Allianz SE, says:

“The importance of carbon dioxide removal techniques and technologies in addressing unabated emissions must not be underestimated. Massive investment in these solutions both inside and outside the value chains of investee companies, combined with a drive toward more mature carbon markets, are now critical to achieving the Paris Agreement goals.

“What we are missing in the mix is strong policy support. Financial incentives, through a price on carbon, subsidies or tax rebates have been vital to accelerating the deployment of sustainable technologies thus far. We believe that the “incentives + mandate” approach must also be applied to the development of CDR technologies and deployment of nature-based solutions.”

Large-scale CDR is a key component of most climate change mitigation pathways that limit global warming to 1.5ºC. The timeline for implementation of CDR technologies will have a significant impact on not only the likelihood of achieving net zero by 2050, but on the ability to course correct in the event of those targets being missed. Investment now, combined with strong policy support for the tightening of a complementary carbon credit market, will drive progress towards our shared goal of an accelerated green transition.

Download the position paper here

About the UN-convened Net-Zero Asset Owner Alliance

The members of the UN-convened Net-Zero Asset Owner Alliance have committed i) to transitioning their investment portfolios to net-zero GHG emissions by 2050 consistent with a maximum temperature rise of 1.5°C above pre-industrial levels; ii) to establishing intermediate targets every five years, and iii) to regularly report on progress.

The Alliance is convened by UNEP’s Finance Initiative and the Principles for Responsible Investment (PRI). The Alliance is supported by WWF and Global Optimism, an initiative led by Christiana Figueres, former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC).