Standard Chartered, the international bank has set the trend by giving out a commercial debt to a Technological Carbon Removal Firm. This milestone comes after the signing of a purchase power agreement between British Airways (BA) and the project developer UNDO that would see BA purchase over 4,000 tons of carbon credits in advance. This was disclosed by the bank in a statement to Reuters indicating the deal was on.
Climate change mitigation initiatives across the world require Carbon removal technology. Yet, majority of these technologies are still relatively new and have not been proven that they are effective on a large scale. Previously, carbon removal projects were built funded from grants, prepayments, and venture capital resources. Two other projects cited for the same are usually considered to be high risk and therefore unsustainable through traditional bank funding.
In order to fix this, Standard Chartered arranged the following deal; which minimizes the credit risk for UNDO: British Airways’ use of insurance guarantees for advance purchase of carbon credits for probable shortfalls in the supply of carbon credits later on. It also makes it possible for banks to increase their funding to carbon removal projects due to this breakthrough brilliance approach.
Innovative Carbon Removal Technology
UNDO utilizes a process that is called “enhanced rock weathering.” This process involves putting silicate rock dust on farmlands. During rainfall the dust particles envelope and sequester carbon for over 100000 years. This is a promising technology that will help to combat climate change.
The partners are: CUR8, an intermediary for Carbon credit offtakes, insurance partner CFC and broker WTW. They presume that such financing will lead to other developers to emulate this structure and thus facilitate the growth of the carbon removal market. While the financial terms of the deal were not disclosed, the goal is clear: to increase the deployment of carbon dioxide removal technologies and apply conditions that would reduce their cost.
However, he added, ‘We require a technological fix that can decarbonize at scale: Carbon dioxide removals need to be cheap across the market in order to deliver the net in net-zero.’
Carrie Harris, the director of sustainability at British Airways, underlined the significance of carbon removals, noting that they are “a key part” of what the airline is doing regarding climate change.
It has been estimated that in order to meet global climate goals by mid-century, 10 billion tons of carbon needs to be taken out from the atmosphere each year.
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