Equity needs long-term view of carbon capture - Aniruddha Sharma

The net zero economic transition is already underway in Scotland through its pioneering adoption of technologies and support for innovative projects.

Aniruddha Sharma is co-founder and CEO of Carbon Clean.
Aniruddha Sharma is co-founder and CEO of Carbon Clean.

Carbon capture technology is among these. For example, the next generation of Carbon Clean’s carbon capture technology, that is set to accelerate the adoption of carbon capture worldwide, is currently being developed in Scotland. We are demonstrating this revolutionary modular technology at Doosan Babcock’s Emission Reduction Test Facility in Renfrew. We are also carrying out the Front End Engineering Design services for the Acorn Project at the St Fergus gas terminal – one of the most mature carbon capture and storage (CCS) and hydrogen projects in the UK. This project alone is set remove at least half the CO2 emissions set out in the UK Government’s Ten Point Plan for a Green Industrial Revolution by 2030.

Scotland could, in fact become a global leader in CCS technology, with clear economic benefits including a share of the multi-billion-dollar market; current IEA projections consider the market opportunity to exceed $1 trillion.

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The Acorn Project, and projects like it, are important catalysts for clean growth, helping to transform previously carbon intensive industries and sustain jobs. A recent report by Element Energy estimated that an average of 15,100 jobs could be supported between 2022-2050 by the Scottish Cluster – a cross-sector group of businesses delivering CCS, hydrogen and other low carbon technologies (including the Acorn Project) to help Scotland, the UK and Europe meet net zero goals.

A view of the cooling towers of the Drax coal-fired power station near Selby, northern England on September 25, 2015. Energy company Drax has abandoned a 1 billion GBP installation of carbon capture technology to cut emissions, citing the UK government's reduction of subsidies for renewable energy. AFP PHOTO / OLI SCARFF (Photo credit should read OLI SCARFF,OLI SCARFF/AFP via Getty Images)

But engineering excellence is not enough for Scotland to seize its place as a global leader. Capital matters as much as technology. Financial leadership will be a powerful catalyst for the further growth of our sector. However, we need financial institutions to be ready to take informed risks, in recognition of the huge opportunity that is presented by decarbonisation.

UK equity markets have a longstanding history of undervaluing technology assets: prioritising quarterly financial performance over long-term opportunity. Long-only fund managers, based in Scotland and the rest of the UK, will need to develop models that reflect the potential of clean technology. This will be a challenge, given the pace of change within the sector, but COP26 in Glasgow will play a critical role. Concrete 2030 emissions reductions commitments will help establish the basis for valuation models that capture the potential of CCS and other emerging technologies.

Reforms to increase the availability of capital to industrial decarbonisation technology will also be necessary to ensure that founders and investors have access to a broad range of funding tools to support capex and international growth. The Advisory Group on Finance for the UK’s Climate Change Committee estimates that net zero investment needs to grow from approximately £10 billion a year today, to £50 billion in 2030, before peaking in 2035. Government has a role here – uncertainty around policy raises the cost of capital – but it will be incumbent on fund managers and alternative assets firms in the UK to recognise the opportunities presented by global green investment.

Work by bodies such as the Climate Financial Risk Forum, co-chaired by the Financial Conduct Authority and the Prudential Regulation Authority, will be critical to creating a culture of clean technology investment in the UK. But savers also have a role to play. It is now common for consumers to make pension decisions based on the ESG credentials of fund managers. But we will need to provide savers with the information necessary to put positive pressure on investors to back clean tech. The full power of global capital will be necessary to drive this green industrial revolution.

As Scotland prepares for COP26, it can be proud of its achievements so far and ready itself to further build on its clean technology leadership position.

Aniruddha Sharma is co-founder and CEO of Carbon Clean



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