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We need to increase demand and finance for CDR dramatically to reach gigaton scale. In this series, I cover the main policy tools at our disposal, often leaning on our experience of how we financed the development and scale-up of renewable energy.
š See below for previous posts on tax credits and contracts for difference.
What are Feed In Tariffs (FITs)?
š§ Market-based economic tool which provides a fixed price for renewable energy, usually higher than retail thereby creating an incentive for individuals/companies to generate and feed back to the grid.
š¼ The price is guaranteed for a set period of time, usually around 20 years, creating stability and predictability for investors and encourages investment and development that otherwise might not take place.
š FITs are designed to decline over time, reflecting the decreasing costs of technologies as they mature which incentivizes early adoption and innovation while gradually reducing the financial burden on consumers.
Sound familiar? This is how it applies to the CDR market:
š This model could similarly support smaller producers, such as farmers employing carbon-negative practices, by offering a fixed price for their contributions to negative emissions.
š¤ This mechanism could encourage diverse participation and equitable value distribution in the emerging negative emission market, mirroring the incentivization seen in renewable energy sectors.
š° FITs could help facilitate the gradual repayment of initial investments, vital for capital-intensive technologies such as direct air capture and storage (ĆDACS) and pyrolysis-based processes like biochar carbon removal (#BCR).
Case study - Luxembourg:
š±šŗ Legislators in Luxembourg have proposed the Luxembourg Negative Emissions Tariff (#LNET) Bill, which aims to adapt the FIT model to support negative emissions technologies.
š If passed, the bill would allow eligible CDR projects (including outside Luxembourg) to enter into five-year contracts with the government, receiving subsidies based on the quantity of CO2 removed or sequestered.
šļø While the bill still has not passed, Luxembourgās initiative serves as a model for how other nations could legislate for CDR to help it scale (see my blog post about it in comments)
Shout out to those working in Luxumbourg: Jan Philip Wassenaar The OpenAir Collective Christopher Neidl, and JƩrƓme Thomas.
I am super excited about FITs and their potential. Countries across Europe, particularly Germany, have plenty of experience with FITs and we know they work. Hopefully we can add them to the arsenal of potential policy tools we can present to governments to scale demand for CDR.
ā What are your thoughts and what other policy tools would you like me to cover in this series?
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