In addition, Swiss Re is the first multinational to introduce a triple real internal carbon tax on direct and indirect operational emissions. The Carbon Steering Levy, which the firm says is "a strong incentive to further reduce its operational emissions," is set at US $ 100 per tonne of CO2 from 2021 and will gradually increase to US $ 200 per tonne by 2030.
Swiss Re is leading by example as the world moves towards a low carbon footprint. By keeping global warming well below 2˚C from pre-industrial levels, the goal is to reduce greenhouse gas (GHG) emissions to net zero by 2050. To achieve that goal, climate science says that 10-20 billion tons of carbon emissions will have to be removed from the atmosphere each year, which is a rather daunting but doable task.
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“The quest to decarbonise the economy clearly starts with clean energy (and) energy efficiency,” said Patrick Raaflaub, Group Chief Risk Officer at Swiss Re. "But even if all of our efforts in those areas are successful, there will still be significant CO2 emissions that must be removed directly from the atmosphere."
Residual emissions must be removed from the atmosphere by biological or technical means and stored permanently. This can be achieved through the use of negative emission technologies (NETs), which generally fall into three categories: nature-based processes that use natural plants to capture carbon dioxide from the air; technological processes that use technical tools; and a hybrid approach to natural and technological processes.
"Carbon removal solutions are currently a very interesting and dynamic technological field, but they are also in their infancy," said Raaflaub. “There are a few promising technologies, but at the moment the only place where they work is in a laboratory or in a very small context. In the next phase, these technologies will be further developed to a point where they can operate at scale. "
Nature-based solutions such as blue carbon (the carbon stored in coastal and marine ecosystems such as mangroves, salt marshes and seagrass meadows) and afforestation (introducing trees to an area that was previously not forested) are now widely recognized for their role in climate change mitigation, and the technology needed to support these solutions is quite mature. But as Raaflaub noted, these solutions also compete with other essential uses of nature, such as food production, which means that the world will have to rely on technological processes to achieve carbon removal.
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Engineering-assisted carbon removal solutions are in a "budding" phase, Raaflaub said, but there are some technologies that are starting to pay off. For example, bioenergy with carbon capture and storage, or BECCS, has become one of the most critical NETs in recent years. BECCS works by burning biomass (such as crops and biological waste), while the emissions are captured and stored underground, eliminating the addition of greenhouse gases to the atmosphere.
"When you think about NETs – where they are in their development and how quickly they need to scale up in the coming decades – it is clear that we see a very important opportunity for the insurance industry," said Raaflaub. “All of these solutions need insurance protection for traditional property risks, technical risks, and so on. They will challenge us to understand them, and they may even (to some extent) question our risk appetite. But it is not the first time that the insurance industry has marched side by side in a major technological development, and I think it will be necessary. "
There are also reputational risks associated with the potential failure or reversal of NETs, especially if they leak carbon dioxide back into the atmosphere over time. Raaflaub added, “If you finance a nature-based solution, such as afforestation, and burn that forest in a wildfire, that stored carbon is released. That is a challenge, but it is also an opportunity for the insurance industry to provide some protection. "
Raaflaub expects the carbon removal industry to be just as big by 2050 as the oil and gas industry is today. "That's not an unrealistic expectation," he said. "It gives you a sense of the scale of this industry, and I believe anyone who researches, pioneers and leads the way in this field will really benefit a lot from the early experience."