Incentivizing innovation: How entrepreneurs are Canada’s answer to solving the climate crisis

For Canada to realistically meet its ambitious net-zero carbon emissions goal by 2050, new technologies and ways of thinking will be required.

First, the good news: It seems that we’re no longer hurtling toward a climate apocalypse.

Five years ago, we were on pace to see four or five degrees of warming, a development that would make most of the planet unfit for humans. Today, writes the climate journalist David Wallace-Wells, “thanks to the rapid death of coal, the revolution in the price of renewable energy and a global climate politics forged by a generational awakening, the expectation is for about three degrees.” The apocalypse has been called off — or at least deferred.

Now, the bad news: On the ladder of calamity, the rung below “apocalypse” is “dystopia.” With three degrees of warming, we could find ourselves in a world of ever-intensifying floods, famines, and fires, where coastal and equatorial cities are uninhabitable and climate migration brings mass dislocation and war. To get down to two degrees, according to the research platform Climate Action Tracker, governments worldwide would have to honour all of their current emissions-reductions pledges.

And to hold warming to 1.5 degrees — the ultimate goal — we’d have to do a whole lot more than that. This conundrum has some activists reconsidering opinions they used to espouse. If it was once fashionable to support a kind of abstinence-only approach to climate change (stop emitting, and the world will fix itself!) it now seems that such measures aren’t going to cut it. Efforts to reduce pollution are critical, but they do nothing about carbon that’s already in the air: tomorrow’s reductions, after all, can’t possibly cancel yesterday’s emissions. That’s why, according to a recent report from the Intergovernmental Panel on Climate Change, we must find ways to actually remove carbon from the atmosphere — an endeavour known as negative emissions or climate restoration.

This is, inescapably, a business proposition. Entrepreneurs must invent negative-emissions technologies and bring them to market, something they won’t do without the proper incentives. To that end, market interventions, like carbon pricing and clean-fuel standards, are immensely useful. They incentivize innovation, by transforming the economy into what we need it to be — an engine for decarbonization. Since the Industrial Revolution, we’ve found ever-more-ingenious ways to extract carbon from the ground and put it into the atmosphere. Now, we need to extract it from the atmosphere and put it back in the ground — or, if not the ground, then somewhere equally safe.

A few Canadian entrepreneurs — Planetary Hydrogen, Carbon Engineering, and CarbonCure, recent winner of the NRG COSIA Carbon XPRIZE, a prestigious $7.5-million (USD) award — have figured out how to do just that.

Where credit is due

When it comes to decarbonization, the most game-changing — and potentially lucrative — innovations are in the area of carbon capture. Most carbon-capture operations happen on industrial sites: smokestacks are outfitted with pipes that catch CO2 in the exhaust and siphon it into a tank. But a few companies have gone further, inventing technologies that scrub carbon from the wind. Others still have found profitable ways to store carbon, so that once it’s captured it doesn’t go back into the air.

What most of these entrepreneurs have in common is that they depend on the carbon-credit market. The logic of carbon credits is simple: if you come up with a new way to produce negative emissions, other companies will subsidize you, and, in return, they’ll get credit for the work you do. To understand why such a system is necessary, you have to understand one basic fact: some companies can decarbonize quickly and others simply can’t. If you’re a mining company, you can reduce your carbon footprint by electrifying your operations. If you’re a trucking company, you can introduce no-idling policies, whereby drivers must turn off their engines whenever they’re not moving. And if you’re in manufacturing, you can stop relying on fuelled-based backup power and instead buy cheap electricity during off-peak hours, which you can store in on-site batteries.

But what if you’re an airline company? Can you sub out your petroleum-burning planes and sub in electric planes instead? Nope, those don’t exist, and even if they did, where would you find the capital to replace your entire fleet? What you can do, though, is buy credit. In effect, you’d be paying other companies for their negative emissions — and then counting those negative emissions against your positive emissions, thereby decreasing your carbon footprint. Under such a scheme, everybody pitches in, either by decarbonizing or subsidizing somebody else’s decarbonization. “Climate change and climate policy is forcing energy productivity across the economy,” says Lisa DeMarco, founding partner of DeMarco Allan LLP, a Toronto law firm specializing in climate change. “That’s why business leaders who were resistant to emissions reductions in the past are less resistant now. They’ve realized that there’s an opportunity here.”

Putting carbon to good use

For Jennifer Wagner, president of the Dartmouth, Nova Scotia company CarbonCure Technologies, that opportunity lies in the carbon itself. Once CO2 has been captured, either from smokestacks or from the air, it can be put to good use. “There’s no environmental benefit to capturing CO2 and storing it in bottles,” says Wagner. “You can’t have an infinite number of bottles. You have to transform the carbon into something else.”

CarbonCure’s clients are concrete producers. If you’re in the concrete business and you’re looking to decarbonize, you don’t need to radically retool your factories or overhaul your supply chains. Instead, you can call CarbonCure, who will arrive with a microwave-sized unit and install it onto the side of your mixer. You can then feed CO2 — which you purchase from a carbon-capture company — into the unit. The unit, in turn, will inject the carbon into your mixer at exactly the right moment so that it reacts with the cement in the concrete and forms tiny deposits of limestone. These deposits will fortify your concrete, enabling you to make a stronger, more durable product, available to consumers at normal market prices. (Wagner says the money from the NRG COSIA Carbon XPRIZE — awarded to two international companies who find new industrial uses for carbon — will go toward CarbonCure’s goal of pulling 500 million tonnes of carbon out of the atmosphere each year by 2030.) “Effectively, we take CO2 that would go into the atmosphere and turn it into limestone,” says Wagner. “Our technology offers both environmental and economic benefits.”

Such canny strategizing is also essential to the work of Planetary Hydrogen, a startup with offices in Ottawa-Gatineau and Halifax. The company does two things: it produces hydrogen, a clean fuel source, and it deacidifies the oceans. The production process involves a number of phases. The first is a standard chemical reaction, whereby water, salt and electricity come together to form oxygen, which the company vents into the atmosphere; hydrogen, which it sells; and hydroxide, a strong base with a PH level of 14. (It’s nasty stuff, used in mining and pulp-and-paper operations.) The company then subjects this noxious hydroxide to a second, proprietary chemical process, which converts it into a milder base that can be safely added to the ocean.

In fact, it’s not just safe; it’s restorative. Due to climate change, our oceans are more acidic than they should be, a malady that causes, among things, the bleaching of the Great Barrier Reef. “When you put our hydroxide base into the ocean, it will get neutralized with the only acid that’s around,” says Mike Kelland, CEO of Planetary Hydrogen. “And the only acid that’s around in any quantity is CO2.” And so, thanks to an infusion of low-PH hydroxide, the ocean becomes less acidic, and it pulls more carbon out of the atmosphere. “The ocean is already the largest store of carbon on the earth’s surface,” says Kelland. “We’re further increasing its carrying capacity.”

Accelerating change

What both CarbonCure and Planetary Hydrogen have in common is that they’re not only selling a product. True, CarbonCure gets most of its money by licensing its technology to concrete producers, just as Planetary Hydrogen aims to turn a profit by selling hydrogen, a by-product of its chemical process. And yet, these two companies have a second revenue stream: carbon credits. In short, other companies pay them for their negative emissions. For instance, Shopify, the Canadian e-commerce giant, has pledged — along with many other multinationals, including Amazon, Unilever, and Microsoft — to get to net-zero in the next few decades. To help achieve this goal, it is buying credits from CarbonCure, Planetary Hydrogen and other negative emitters. In March, it announced it was also purchasing 10,000 tonnes of carbon removal from Carbon Engineering.

“Our goal is to produce the cheapest hydrogen fuel in the world,” says Kelland of Planetary Hydrogen. The company will do this by subsidizing its hydrogen production with the money it gets from the carbon-credit market. CarbonCure, meanwhile, has a revenue-sharing arrangement with everybody who licenses its equipment. “We give some of our credit revenue back to our customers,” says Wagner. “The more money we put in their pockets, the more they’ll want to use our technology — and the more CO2 they’ll reduce.”

Mining, in reverse

If it were true that carbon pricing and other emissions-reduction strategies are deadly for business, then British Columbia would be a have-not province by now. In 2008, the government of Gordon Campbell became the first in Canada to introduce a broad-based carbon tax. The province has since added other policies, like motor-fuel taxes and a clean-fuel standard, which forces companies to either decarbonize or buy credits. Did these constraints transform British Columbia into an economic wasteland?

On the contrary, they were a spur to innovation. “Much of Canada’s clean-tech sector has located in British Columbia,” says Tom Green, a policy analyst with the David Suzuki Foundation. B.C. has leading companies in clean fuel, clean building materials and even clean apparel. And it has clearly benefited from a first-movers’ advantage. “Part of the reason we’ve done so well in clean-tech,” says Green, “is that we started carbon pricing before most other provinces.”

Perhaps the biggest B.C. success story is Carbon Engineering, one of the world’s leading innovators in direct-air capture — that is, technology that scrubs carbon from the wind. Currently, the amount of carbon in the air is 400 parts per million. In climatic terms, this is perilous: never in the history of our species have we had such a dangerously carbonated atmosphere. But when it comes to carbon capture, 400-parts-per-million is still a relatively low ratio. “It’s like a drop of ink in a swimming pool,” says Steve Oldham, Carbon Engineering’s CEO. “We have to somehow find that drop and get it out of there.”

The firm uses a kind of distillation process. At its flagship plant in Squamish, B.C., giant industrial fans pull air into a PVC filter, which is coated in potassium hydroxide. That chemical mixes with the carbon in the air, creating a 4 percent CO2 solution, which drips down into a trough at the base of the filter. That solution, in turn, is mixed with a second chemical, calcium hydroxide, producing little pellets of limestone, which are 40 percent CO2. Those pellets then go into a calciner — that is, a large cylindrical furnace — which heats them until the CO2 gas escapes. The gas can then be buried underground, sometimes in abandoned oil wells — a symbolic inversion of the fossil-fuel-extraction process. (You can think of direct-air capture as mining, but in reverse.)

Carbon Engineering’s flagship plant is an industrial site — a wall of massive fans, resembling a speaker tower for a Brobdingnag rock festival. (The next facility, to be built in the Permian Basin in the southwestern United States, will be much bigger still.) Nothing about these sites are green or rustic or wild. But it’s hard to imagine a solution to climate change that doesn’t include such feats of large-scale engineering. “People often ask, ‘So, you’ve invented a technology to remove carbon from the atmosphere? Isn’t that just a tree?’” says Oldham. “I tell them, ‘Trees are great. But they require a lot of land area and they’re not permanent. At Carbon Engineering, our Permian Basin plant will capture a million tons of CO2 every year. That’s the equivalent of 40 million trees.’”

Carbon Engineering is the kind of company that garners effusive op-eds in magazines like Fortune and Forbes. It’s backed by billionaires and is closing in on $100 million in private funding. Its success rebuts both the fear that decarbonization is bad for business and the fantasy that we can somehow avoid catastrophic climate change simply by consuming less, switching to renewable energy and regreening the landscape. Such goals, of course, are well worth pursuing, but they’re not going to single-handedly get us to where we need to be within the time we have left. “Going from fossil fuels to renewable energy is necessary,” says Oldham. “But it’s going to take decades. And we can’t wait that long.”

There’s no way around this fact: to create a net-zero world within a narrow time frame, we’ll have to permit some emitters to continue emitting. And that’s OK, so long as those emitters are forced to pay, via the credit market, to subsidize an equal number of negative emissions. In other words, net zero isn’t synonymous with no emissions. It can’t be, at least not right now.

“The good news,” says Oldham, “is that one plus minus-one also equals zero.”