Swiss Re will pay Climeworks US$ 10 million

Swiss Re and Climeworks have signed a purchase agreement for carbon removal. According to a press release, the reinsurer has committed to paying Climeworks US$ 10 million within the ten-year term of the contract. The agreement between the two companies covers the direct air capture and storage of carbon dioxide. Climeworks has developed the first commercially scalable plant that performs these functions.

The goal of the leading specialist in this field is to capture one percent of global carbon dioxide emissions from the air by 2025. To achieve this, around 250,000 direct air capture plants are estimated to be necessary. In 2017, the first Climeworks plant for direct air capture and underground storage went into operation in Hinwil, Zurich. The world’s biggest climate-positive facility to date, Orca, will be launched in Iceland on 8 September. Microsoft also recently invested in Climeworks. The construction of another plant in Oman is also currently being explored through tests.

The spin-off from the Swiss Federal Institute of Technology in Zurich (ETH) states in its press release that the newly concluded strategic partnership with the reinsurer “is unique and so far unrivalled in the voluntary carbon market for high-quality carbon removal”. This decisive milestone is a “unique lever to support the development of the direct air capture and storage industry”.

The collaboration will include developing risk management knowledge and risk transfer solutions. It will also explore future investment and project finance opportunities. The partnership with Swiss Re is of integral importance to Climeworks: the reinsurance industry is at the forefront of assessing complex risk structures, including those of climate change. Reinsurers are capable of structuring those risks and allocating them in an efficient way.

Both the length of the term of ten years and the total value of US$ 10 million are so far unmatched in the voluntary market for this type of high-quality carbon removal, Swiss Re explained in a press release. This sends “an important demand signal to developers, investors and other buyers”. To mitigate the risks of climate change “the world needs to scale-up carbon removal on top of, not instead of emission reductions,” said Christian Mumenthaler, Swiss Re’s Group Chief Executive Officer and Co-Chair of the World Economic Forum’s Alliance of CEO Climate Leaders. “By partnering with Climeworks we can play to our strengths in this endeavor, as a risk taker, investor, and forward-looking buyer of climate solutions.”