REYKJAVÍK (BLOOMBERG) - In Iceland's barren landscape, a new container-like structure has risen alongside plumes of steam near the Hellisheidi geothermal power plant. Its job is to undo some of the damage carbon-dioxide (CO2) emissions are causing to the planet.
The facility, called Orca and built by Swiss startup Climeworks AG, will suck CO2 out of the air. Icelandic startup Carbfix will then pump it deep into the ground, turning it into stone forever.
Of the 16 installations Climeworks has built across Europe, Orca is the only one that permanently disposes of the CO2 rather than recycling it.
The plant will capture 4,000 tonnes of CO2 a year, making it the largest direct-air capture facility in the world.
But that only makes up for the annual emissions of about 250 US residents. It's also a long way from the company's original goal of capturing 1 per cent of annual global CO2 emissions - more than 300 million tonnes - by 2025. The company is now targeting 500,000 tons by the end of the decade.
The company still hopes to one day reach its 300 million-tonne target, "but the timeline has changed as it takes longer than we originally anticipated to build up an entire industry," said Jan Wurzbacher, one of Climeworks' co-founders.
"Already the demand for carbon removal at Orca is so high that we have decided to scale up this plant and build a roughly 10 times larger plant in about three years."
Investment is pouring into carbon capture as companies and governments search for ways to tame global warming that's already causing devastating weather events.
Still, activists argue that focusing too much on carbon-removal technologies could become a distraction from the work of immediately reducing emissions.
The main challenge for Climeworks is lowering the cost of its service.
Individuals wanting to purchase carbon offsets can pay the company up to US$1,200 (S$1,613) per tonne of CO2. For bulk purchases, such as those made by Bill Gates, the cost is closer to $600 per tonne.
Climeworks aims to get that cost down to US$200 to US$300 a tonne by 2030, and to US$100 to US$200 by the middle of next decade, when its operations are at full scale, Wurzbacher said. With European carbon prices at 62 euros (S$99) a tonne and many betting it will go above US$100 soon, the lower end of Climeworks's target price would make it cheaper for polluters to use Climeworks than pay the penalty.
Climeworks' targets are reasonable compared with the billions of dollars paid annually in subsidies for electric vehicles, which price a tonne of avoided CO2 at about US$500, said Christoph Gebald, the other co-founder at Climeworks. "If this existed for what we are doing, we would scale up much faster," he said.
Orca cost US$10 million to US$15 million to build, including construction, site development and storage, according to Wurzbacher.
"The cost per tonne of Orca is perhaps less important than what we will learn, to get quicker to the large scale and ultimately lower prices," he said.
Climeworks is backed by a group of private investors, as well as Swiss bank Zuercher Kantonalbank. It also has debt financing commitments from Microsoft Corp's climate innovation fund.
While still unprofitable, the bulk of Climeworks' revenue comes from corporate customers including Microsoft, Stripe, Shopify and Swiss Re.
In addition, 8,000 private customers have also signed up. Wurzbacher predicts that subscribers will eventually provide half of the Climeworks' revenue.
Carbon capture and storage, or CCS, falls in two categories of technologies. Capturing emissions from the smokestacks of factories or power plants before they escape into the atmosphere is a lot cheaper. With current technology, the cost can be as low as US$40 a tonne, according to BloombergNEF That's because the concentration of CO2 in those gases can be as high as 10 per cent, rather than 0.04 per cent in the air.
Climeworks takes the harder route by filtering air itself, meaning there's a limit to how cheap its technology can get because the process is very energy intensive.
The Orca plant draws in large amounts of air with huge fans, bringing the air in contact with chemicals that can selectively remove CO2 while releasing nitrogen, oxygen and other gases back into the atmosphere. The carbon-rich chemicals are then heated to about 100 degrees Celsius to release CO2 as a pure gas.
Carbfix mixes the gas with water and injects it deep into basaltic rock. The dissolved CO2 crystallises into a mineral in about two years, permanently storing it away. The energy for all those steps comes from the Hellisheidi geothermal plant.
Replicating that combination of factors - basaltic rock and cheap zero-carbon energy - at another location won't be easy. It's possible to store CO2 in other geological formations where they don't turn into rock, akin to what happens to oil and gas. But using zero-carbon energy is key, otherwise the process could generate more CO2 than it stores.
Wurzbacher said the location of the next, bigger plant will be confirmed in a few months. Iceland remains "a very attractive location", he said, alongside Oman and Norway.
Carbfix sees opportunity in continuing to expand its collaboration with Climeworks. "We will not reach our climate goals without large-scale carbon capture and storage," said Edda Sif Pind Aradottir, chief executive officer of Carbfix. Iceland alone could store more than a 100 times what's needed globally to meet the Paris agreement, she said.
The United Nations-backed Intergovernmental Panel on Climate Change considers CCS a crucial technology to help meet climate goals. In most scenarios, the world will have to capture and bury billions of tonnes of CO2 each year to keep global warming below 1.5 deg C relative to the pre-industrial period, in addition to drastically reducing emissions.
Climeworks was founded around the same time as two other direct-air capture startups. US-based Global Thermostat, which uses technology similar to Climeworks, abandoned a venture with Exxon Mobil to build a plant that would capture 4,000 tonnes per year - the scale Orca has now achieved.
Canada-based Carbon Engineering has a working prototype that can capture about 300 tonnes per year. It's now working with Occidental Petroleum to build a plant that can capture 1 million tonnes of CO2 from the air annually.
Oil and gas companies, which have been using CCS technology to eke out more oil from aging fields, have the expertise to scale up the technology quickly. That's one reason direct air capture companies have partnered with them, but Climeworks has resisted that urge.
Gebald says it is important for the company to remain independent from the strategic interests of the oil and gas companies, though it's open to partnerships as long as that independence isn't compromised.
"I actually think it's a big advantage because many customers praise us for this and pick us because we don't have these associations," Wurzbacher said.