Climeworks Is Becoming a Carbon Trader

Climeworks made a name for itself as the first company to launch a commercial-scale facility that sucks carbon out of the air and buries it deep underground. The Swiss startup is widely recognized as a global leader in direct air capture technology.

But on Wednesday, Climeworks made a surprising move away from hard tech and into carbon trading with the launch of an offshoot called Climeworks Solutions. Under the new banner, it will purchase carbon removal credits from other providers, package them into portfolios that include its own direct air capture credits, and sell the bundles to buyers looking for “high quality” carbon removal.

The credits will have “the stamp of Climeworks quality,” Adrian Siegrist, the company’s vice president of climate solutions, told reporters this week. “It is a very, very selective vetting process.”

Corporate demand for carbon removal is growing. In the past, companies primarily bought a different kind of carbon credit to support their sustainability strategies. These credits came from projects that prevented emissions by protecting forests or distributing cleaner cookstoves, and they were cheap. But they came under fire after countless investigations into the projects turned up flimsy methodologies and inflated claims.

Meanwhile, there’s been a growing consensus in the world of corporate sustainability that even if these credits were based on real emission reductions, they shouldn’t be part of a net-zero strategy. For example, the Science Based Targets Initiative, the leading arbiter of corporate net-zero plans, only allows companies to apply carbon removal credits — and not conventional carbon avoidance credits — toward their goals. The only way to zero-out the climate impact of putting carbon in the atmosphere, SBTI says, is to take out an equal amount.

These two factors, along with a view that supporting the nascent carbon removal industry is the “right thing to do,” have fueled a carbon removal credit market that grew from at least 105,000 tons sold to 50 buyers in 2021 to more than 4 million tons sold to nearly 200 buyers last year.

Siegrist said Climeworks Solutions is responding to a gap in the market. Companies face barriers to purchasing carbon removal, he said. They don’t want to put their reputations at risk and buy dubious credits, but they lack the time and expertise to do careful sourcing. They also want to sign simple one-and-done contracts, but they don’t want to purchase credits from a single supplier — especially not just from Climeworks, which sells top-shelf credits for upwards of $600 per ton.

“Companies asked us, in your opinion, can you tell us what is the best in X and the best in Y?” he said. “That made us realize there's a real need for clarity and for guidance.”

But Climeworks is entering a crowded field. There are already more than half a dozen companies — Patch, Supercritical, Ceezer, Carbon Direct, Watershed, Cur8, Lune — promising to source only the highest quality carbon removal credits for buyers. Each one has a slightly different model, with some acting more as an open marketplace, others more as a brokerage.

Climeworks is relying on its name as a trusted brand to set itself apart. But part of the reason it is a trusted brand is that it has focused on direct air capture — the form of carbon removal that is the most permanent and easy to measure and verify. Now the company will be venturing into the thornier science of other approaches like tree planting schemes and bioenergy with carbon capture. It also plans to source credits from biochar projects, which involve turning plants into a carbon-rich, durable, form of charcoal, and enhanced rock weathering, which speeds up the natural ability of rocks to absorb carbon from the environment.

“If you're saying that companies can come to you and use that trusted brand, what are the standards?” Erin Burns, the executive director of the carbon removal advocacy group Carbon 180, told me she wanted to know. “High quality doesn't mean anything. How transparent are they going to be about what those standards are?”

I asked Siegrist about how Climeworks defines high quality, especially when it comes to nature-based solutions like reforestation, and he said there were “various elements” that signaled quality, such as the use of remote sensing technologies that can more accurately track forest growth. He said they would publish their standards at some point in the future.

But he did share some general principles the company would use to tailor its portfolios for buyers: Fossil fuel emissions should be neutralized with carbon removed and stored for thousands of years, on par with how long carbon stays in the atmosphere. Meanwhile, a company’s emissions from land use could be offset using nature-based approaches that are still effective but inherently less enduring.

Climeworks Solutions’ first customer is Breitling, the Swiss luxury watchmaker, which signed a 12-year contract. It is purchasing a mix of direct air capture credits, to offset emissions from fossil fuel combustion in its factories, and enhanced rock weathering credits, to address emissions in its mineral supply chains. Breitling’s global director of sustainability Aurelia Figueroa said that focusing on high-cost direct air capture credits to compensate for direct emissions created an incentive to prioritize reducing emissions, summing up the strategy as “we do our best and remove the rest.”

Siegrist said Climeworks was already in talks with more than 50 other companies interested in working with them. But it’s unclear where all of this carbon removal is going to come from. The company’s direct air capture credits are already sold out through 2027.

“There's not a lot of high quality CDR happening, and in general, people are buying carbon removal years out,” said Burns. “Depending on how many tons they're being asked to put together for other companies to purchase, they're gonna run up against limits pretty quickly if they've got really high standards.”

Siegrist declined to name any companies or projects that Climeworks was sourcing carbon credits from. But in terms of supply, he said it was a chicken and egg scenario — that the only way to increase supply was to bring in more demand, and that the bigger constraint was limited buyer bandwidth.

I reached out to a carbon removal company called Charm Industrial to ask how developers feel about the rise of all of these brokerage services. Like Climeworks, Charm is another startup that scrupulous corporate buyers with big science teams, like Microsoft and Shopify, have deemed “high quality.” Charm’s head of sales, Harris Cohn, said the fees these services charge matter and vary widely. “There's a risk these services make the market worse if they make transactions harder or feel more expensive to buyers,” he said. But he noted that they have, indeed, already accelerated demand.

Peter Reinhardt, the CEO of Charm, agreed that there was no downside to having more players in the game. “We’ll break the supply constraint fairly soon :)” he added in an email.