Ep97: Julio Friedmann "The Carbon Wrangler"

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Michael Liebreich  Before we start, if you're enjoying these conversations, please make sure that you like or subscribe to Cleaning Up, it really helps other people to find us. Cleaning Up is brought to you by Capricorn Investment Group, the Liebreich Foundation and the Gilardini Foundation. I'm Michael Liebreich, and this is Cleaning Up. Welcome to the final episode of season six. My guest today is Julio Friedman, an expert on carbon capture and storage and direct carbon capture. Julio has been a policymaker with the US Department of Energy. He's been a scientist with the Lawrence Livermore National Lab. He's been a research scholar with Columbia University. He is now the Chief Scientist, and calls himself the chief carbon-wrangler, with Carbon Direct, a consultancy that helps companies manage their carbon footprint, which also makes investments in carbon removal and carbon management. Please join me in welcoming Julio Friedman to Cleaning Up. So, Julio, welcome to Cleaning Up.

Julio Friedmann My pleasure to be here. Thank you, Michael, for having me.

ML  So, this is the last episode of season six. We are approaching our 100th episode, you're following in very illustrious footsteps. I've really been looking forward to this conversation. In your role, you describe yourself as the carbon-wrangler. Let's just take a moment for you to explain what that means, because this episode is going to be all about carbon management, carbon capture, carbon direct air capture and removal. Could you explain why you call yourself the carbon-wrangler?

JF  Absolutely. There's nothing wrong with carbon or even carbon dioxide. We like it just fine in our bodies, which are made of carbon, and in beer. The challenge is if there's too much of it in the wrong place. And that's the job of a wrangler; a wrangler takes something that's in the wrong place, and puts it in the right place. And that's what carbon management is all about.

ML  I'm thinking in a different universe, maybe you'd be called the carbon whisperer?

JF  Well, I want to be more proactive than that. I have spent most of my career either keeping carbon dioxide out of the atmosphere, or removing carbon dioxide from the air and oceans. That's wrangling as an active verb. In point of fact, the kind of technologies we're likely to talk about today, things like carbon capture and storage, or direct air capture, are the act of carbon wrangling. It's one of the many things that we need to do to create a stable climate and a net-zero world.

ML  Just give us a thumbnail of that history. You said you spent most of your career wrangling carbon in one way or the other. Give us the high points of that trajectory.

JF  So, I've been looking at climate really for about 30 years since graduate school. One of the things you realize immediately is it's a problem of stocks and flows. Every year, we add flow to the atmosphere - right now about 40 billion tons of carbon dioxide every year, about 50 billion tons of greenhouse gases total - and there's a stock: what stays in the atmosphere. So, even from the early days, you needed to reduce the flows, and remove the stocks. That was the work. If you could do arithmetic, you could figure this out. Fast-forward to about 2002, I became interested in carbon capture and storage or CCS, because I thought this is one of the things we need to do. We need to shut down power plants and steel mills, we need to replace them with zero carbon versions, but we're going to have places where we need to capture CO2 from existing facilities, or from new facilities. So, that's one of the jobs. From 2002, I've been very active in this field, including my stint at the Department of Energy, where, among other things, I managed the research program on this topic. In about 2011, that same arithmetic led us all to an uncomfortable conclusion: that reducing was not sufficient, that removal was going to be an important aspect of this. It's just area-under-the-curve, volume of time and simple arithmetic and you realize that to balance the budget, we need some removals. I am sorry to say that since 2011, that has become increasingly clear to everybody to the point where this year the IPCC, the Intergovernmental Panel on Climate Change, declared that we must remove on the order of 5 to 10 billion tons of CO2 a year, every year, to balance our carbon budget. That's because we have not been fast enough. It's just one of the many things we need to do. To be clear, it is not a substitute for renewables, we will still need to deploy huge amounts of renewables. It is not a substitute for efficiency, we are still going to have to do a huge amount of efficiency improvements. It is not a substitution for biofuels, or hydrogen, or any of these other things. It is one of the tools in the toolkit. We are going to have to reduce emissions by capturing them at sources that exist, and we must remove emissions from the air and oceans that are that “stock” that is sitting out there. Today, that stock is about 1.6 trillion tons, and they ain't going anywhere.

ML  Let's take some chunks out of that history. As you were speaking there, I was recalling something that I said at the 2008 New Energy Finance Summit, before it was Bloomberg New Energy Finance. I threw a slide up on the screen, which was a quotation from the Stern Review from 2007. We’re going to get back to removal, but back in 2007/8, people weren't really talking about removal. They were talking about CCS, carbon capture and storage or sequestration. In the Stern Review it said ‘the stocks of hydrocarbons that are profitable to extract under current policies are more than enough to take the world to levels of greenhouse gas concentrations well beyond 750 parts per million CO2 equivalents, with very dangerous consequences.’ When I threw that up on the slide, I had three bullet points that I added: I said we either leave hydrocarbons in the ground, kiss the climate as we know it goodbye, or figure out carbon capture and storage. That was of state of the art in 2007, wasn't it?

JF  Very much so. Let me say that Nick Stern, Lord Stern, had it right on day one, and has continued to be a proponent of CCS on that basis. That arithmetic is really hard to refute or change. It is also the same arithmetic Mark Carney declared in 2016. He said we either need to leave it in the ground, or we need to use carbon capture, which will change the economics. At the time, he was the Governor of the Bank of England. Now he's the UN Finance and Climate Envoy. That arithmetic hasn't changed. It is also the arithmetic of the IPCC. It is also the arithmetic of the Biden administration. It is just that simple. You leave it in the ground, or you have to do carbon capture, or we all suffer. That's the trade space.

ML  So, that's the arithmetic. And yet, we've now got to the point where not only do we have to capture, we have to remove. With capture, it’s every single model, every single year. I've got the most recent IEA sustainable development scenario, where you've got emissions falling to net-zero by 2070. And CCUS, which - I have to use my acronym klaxon - that's carbon capture use and storage, accounts for nearly 15% of cumulative emissions relative to where we're headed right now. So, that brings us up to date on carbon capture. It’s supposed to do 15% of emissions, of emissions reductions. That’s a huge amount, and yet we have almost none of this happening today. Right?

JF  Correct, on both counts. It's required in huge volumes, and we have very little of it today. One of the criticisms of carbon capture is people say, ‘well, how come we haven't deployed more of it?’ There's a very simple answer to that: because we haven't spent the money. We have spent enormous amounts of money on getting the cost of renewables down the curve. All of that money was very well spent. But it's been on the order of $300 billion of investments to get solar and wind from where they were 15 years ago to where they are today. That's a lot of money. Now we are investing hundreds of billions of dollars on an annual basis to keep that stuff deployed. We have made nowhere close to that kind of commitment on carbon capture. To be clear on an average kind of basis over the past 15 years, the annual expense on carbon capture has been less than 1% of what we have invested in clean energy otherwise. And yet, we're counting on it to do 15% of the work. So of course, it looks like the poor, starving step-child. It is. So, that's one of the things we need to do. Fortunately, the arithmetic of net-zero, the Paris commitments, the IPCC warnings, the IEA, the politics have shifted. And we're starting to get to a point where people are recognizing that we must spend these billions or else we're just going to be short.

ML  What do you say to Malcolm Turnbull, whom I met during the COP 26 in Glasgow? He’s working with Fortescue, with Andrew Forrest in Australia, on these absolutely colossal hydrogen plans, to which I think you and I would both say “well, good luck and let's hope they work.” What he was saying is that carbon capture and storage, where Australia has been a pioneer, has been tried globally 20 times and 19 times, it's completely failed. What do you say to that?

JF  Well, that's just bollocks. That's incorrect. I don't know how to be charitable to that kind of comment. Today, there are 27 operating facilities around the world. We are capturing 40 million tons of CO2 a year, we have captured about 600 million tons of CO2 total that would have been in the atmosphere and is not in the atmosphere now. Just last year, there were 130 new projects announced. The technology for carbon capture was first fielded in 1938; we've been doing this for a long time. The way you get CO2 in your beer is we capture the CO2. We've been putting CO2 into the geology since 1972. A solid 50 years, we've been doing this with zero incidents. And for 26 years, since 1996, we've been doing this for the purpose of climate and those projects have succeeded. So, I don't understand the basis on which Malcolm Turnbull would say such rubbish. It's clearly incorrect.

ML  So, there are projects that are working, but the field is also littered with projects that that didn't work There’s Kemper, and we’ve got a whole bunch – Longannet - in the UK. There is also a litany of projects that didn't happen. Even some of the ones that were running and prove themselves have now been switched off, have they not?

JF  Let’s look at some notable failures, because there have been some notable failures. It's important to learn from those. In fact, the Bipartisan Policy Center and the Department of Energy, and others, have written up studies of what we've learned from these things. Let me take, for me, the most pressing example, which is the White Rose project in the UK. Their $130 million was spent to try to get carbon capture and storage off the ground. In point of fact, that went nowhere. It's important to note though, that after eight years of preparing projects, doing front-end engineering, design studies, all that stuff, three days before COP 21, in the Paris Agreement, the Chancellor of the Exchequer took the billion pounds that were sitting there for CCS and gave them to the policeman's union. That's why that project failed. Not because of technology, not because of cost overruns, it was killed with prejudice on a political basis. Another important failure, ZeroGen, which was a big project in Australia, we are all very eager to see succeed. There that failed on technical grounds, but the technical grounds that it failed on was that they couldn't find a place to store the CO2. They actually spent a similar kind of money, $150 million, assessing the geology in Queensland, which is where all the coal was. Turns out, you can't store CO2 in Queensland. So, that project went away. Of course, now we are storing CO2 in Australia in the Gorgon Project at the rate of about 3.5 million tons a year. Bit more successful. Another failure that is noteworthy is the FutureGen project announced in 2002. That one was all set to go until the Department of Energy selected Illinois as the winner. At which point, the President, who was from Texas, said “you made the wrong choice” and took the money back. Two years later, the next President came from Illinois and he said “this project’s back on again.” Unfortunately, the money which was appropriated from Congress came with an expiration date. That project expired on my watch. I was in government when they ran out of time because the law said you had to be ready to go by 2015, and if you weren't, we were taking the money back. It took too long to get that project off the ground. I say all of these because it's important to understand that many of the failures have nothing to do with CCS technology. They have nothing to do with CCS markets. We are currently in a position where, for the past 20 years, the primary model for getting projects on the ground was “here's a big bag of money.” Then they work and work and then they take the big bag of money away. Those projects fail. That's not why Kemper failed – Kemper got their money. Then the technology that they were trying - the TRIG gasifier - did not work. Conversely, that Petra Nova project came in on time and on budget, worked fine. Then, when the price of oil collapsed, they shut the project down because it was financed by oil revenues in part. So, it's pretty straightforward to figure this out. I will add, by the way, this is typical of any advanced technology, there have been many similar kinds of failures around nuclear, there have been many similar kinds of failures around advanced solar technologies. There's a graveyard of these things - we try things and they don't succeed. But when they're necessary, you’ve got to keep trying. The last thing I'll say is where I started. For carbon capture and storage from point sources, really, we know that we need to do this, but engineers don't work for hugs. At the end of the day, they’ve got to get paid. The big policy changes in the world are now enabling that. That's part of the reason we had so many projects announced. In Europe, really it's the ETS that's driving this. There is some money to build infrastructure, like hubs, and pipelines and all these sorts of things, those things matter. But fundamentally, there's an economy wide binding price of carbon that's north of $60 a ton. Hey, at $60 a ton, you can start capturing CO2 and make some money. So, we're starting to see these projects emerge. Things like refinery projects, hydrogen projects, these are starting to come forward on that basis. In the United States, it's the opposite. We love tax cuts in the US. So here, if you build a CCS project, the government will give you a $50 a ton tax cut. Same basic price point. For the record, both of those are about the same thing as the social cost of carbon. The social cost of carbon is about the cost of CCS projects in some places. If that price goes up to $80 a ton in Europe, or if Build Back Better or something like it passes, and we get $85 for the tax cuts in the United States, we will see 10 times the number of projects, because at $85 a ton, you get steel mills, natural gas power plants, and a whole bunch of other applications that matter. So, it is unsurprising to imagine that when we haven't been paying for these things, they haven't happened. Now that we're starting to pay for them, they're starting to happen.

ML  Thank you for that. It certainly resonates that there are these bags of money they get offered and then get taken away. It feels to me like one of the other problems with the bags-of-money approach is if you want to have CCS on power generation. On most projects, certainly 10 years ago, everybody was thinking about CCS as being something that you would put onto either an existing or a new power station. You've got to build it, so you've got a big chunk of CapEx, but you also have to run it. There's a parasitic load. If you want to separate mixed gas into two streams of different gases, then you're going to have to put work in. The financing and the policy and the regulation wasn't reflective of that, possibly, because policymakers are not engineers, they tend to be lawyers. So, it struck me that to finance this, we need mechanisms that are both a big pile of money to get something built, and to make sure that it gets run. And then of course, what's happened, just as we're figuring that out, suddenly, Europe, which is one of the big drivers of this, figured out that its electricity system was going to be largely clean without doing this. Therefore, you know, some of those projects no longer had their rationale. If coal plants were closing anyway, why would you do CCS?

JF  You have a pretty sophisticated listener base for your podcast, so your listener base understands that electricity and energy are not the same things. It is true that many people think about CCS in the context of electricity. But for me, that's not the killer app. The killer app is actually things that are much harder to decarbonize than the power sector. Things like cement making, steelmaking, refining, hydrogen production, heavy-duty transportation: there are some things that are just much harder and more expensive to decarbonize. For those, CCS actually offers a fast, cheap way of doing it. The average life of steel mills in the world, right now, is about 15 years. The average life of a steel mill is 40 years. So, they will keep emitting for the next 25 years unless we retrofit. How that gets paid for is still a challenge. I'm not making any apologies on that. Like you said, you have to pay for the CapEx, which is lumpy. These are billion dollar projects, getting anybody to sign a billion-dollar check is hard. Right? But even then, you have OpEx, you have to run the thing. It has operating expenses that are substantial, so you need some guaranteed revenue stream, or some guaranteed price relief or some tariff of some kind, something to support the operating expenses. Well, in Europe, the ETS does that and in the United States, the 45Q tax credit does that. In both cases, it is guaranteed revenue for long periods of time that is durable, and predictable. Based on that, and a little bit of additional financial assistance, you can get the projects up and running. But in the power sector, there are lots of options now. But I think we've seen in Europe, say this year, that the coal plants don't shut down. People imagine we will shut down the coal plants, but we don't actually do it. We don't in Europe, we don't in Asia, we don't need an India, China. And we don't in the US, we shut down some of them. But we don't shut down all of them. They operate.

ML  So, in the UK, we do shut them down. We're going to be fully off coal in 2025, starting from 40% coal in 2012. This is a bit of a special year, given what's going on in Ukraine, so now coal is roaring back, pretty much everywhere in the world. But that's kind of unusual, I suppose. I'm still optimistic that we are going to be shutting down an awful lot of coal. We have been in the US, even during the Trump presidency, when there was supposed to be an end to the war on coal. But I have to catch myself because I'm diving in on a topic that … I react to this idea that we're not removing coals. I think we are, but it may not be the key to the conversation about CCS.

JF  It's not, and one of the big confusions that people have is they think of CCS as a coal technology. It is not a coal technology. We will do CCS on natural gas power systems. We will do CCS on biomass facilities. We're starting to see a lot of that happening now in Europe, say, in Stockholm, where they're doing the Stockholm Exergi project, where they're using forestry wastes and capturing the CO2 from that. Or in Denmark, where a municipal solid waste power system is being retrofitted. Or for bio-hydrogen facilities. We're seeing this in ethanol plants in the United States, the most successful US project is on a bio-refinery. And we're starting to see things like direct air capture facilities appear, which is a completely different way to manage it, but also requires carbon capture and storage.

ML  I think that completes our little history of CCS. As you say, we're now at the point where we no longer see it as a way of decarbonizing coal. Whether it's going to have to play that role in Asia with some of these very young coal plants, of course, is another story, but most of the new projects around CCS are around either industrial emissions, process emissions, cement, steel, and so on, or around hydrogen, or things like ethanol. That's very different from the past, but that's where we are today.

JF  Actually, not different from the past. Out of 27 operating projects. 24 of them are not power projects.

ML  Right. But, if you go back to the pipeline of projects in 2009, what you see is a whole slew of projects that were all about retrofitting, largely coal, also some gas power stations, with CCS. And those, frankly, included a lot of the failed projects that we talked about earlier. So, the field, the pipeline of projects has shifted in its nature quite considerably. You are throwing some numbers around about the amount of a tax break that you need. What is the cost we get? We're going to get onto the removal projects, which you mentioned, things like BECCs, which is bioenergy with carbon capture. But before we get there, let's do some economics on carbon capture. What price is a ton? If you need to capture it, and you need to store it forever, what price do you need?

JF  So, this is a vexing challenge for most engineers to get their brains around, and for most economists to get their brains around, because there is no one price. The costs vary considerably as a function of CO2 concentration. So, from an ethanol plant in the United States, to capture CO2 from the byproduct - ethanol - and store it forever is about $40. Quite cheap. $40 a ton, all-in cost. That includes compression, drilling wells, monitoring, end of life. The whole kit and caboodle $40. If you try the same thing from a steel mill, most geologies and geographies, the average cost is $60, or $65 all-in. From a coal-fired power plant it’s comparable, a little more expensive, but comparable. But that varies by coal plant by type of coal used, by elevation, by a whole bunch of other things. From a natural gas plant, it's more like $80 to $100 all-in costs. And that's of course sensitive to the price of natural gas in a very real way. And so, the more dilute the CO2 stream becomes, the more energy you have to put in, the more work you have to do to separate that out. This takes us then to the far extreme of things like direct air capture, where it's separating from air that’s extremely dilute. And here, the costs today are on the order of $500 a ton. I will say in every one of those cases, the costs are dropping. And they're dropping a lot. People think about these things as static, they are not static. Like other kinds of clean energy, the costs have dropped 50% in the past decade, and are slated to drop another 50% the next decade. But you do have to do this work to get it done. It's one of the challenges with CCS, you're not making something new. You're not making new electricity, you're not making hydrogen, you're just paying a fee for a clean world. And most markets don't recognize a way to do that easily.

ML  Okay, we're going to come back to the removal stuff. I'm kind of deliberately parking that because once we start on that, we're going to have a lot of fun. But I have got a couple of other things that I want to push on with the carbon capture - the kind of traditional carbon capture. Since we started on the cost…  you've talked about capturing it from natural gas. It strikes me that most gas used in the power system in future will be intermittent. The key role for gas is going to be to keep the lights on when there's no wind and no sun and, and gas peakers are a very good way to do that. But then that means that gas plant doesn't really lend itself to CCS in a particularly economic way. It feels to me - let me test this hypothesis with you, the expert - much more likely that what we'll do is blue hydrogen. So, take the gas, take out the CO2 and sequester it, store the hydrogen and wait until it's really valuable on the system. That’s how we're going to be doing the CCS when it comes to gas. I mean, is that a fair assumption? Does that accord with what you're seeing?

JF  Well, it accords with what I'm seeing. I think we're going to see quite a bit of that. Certainly, for peakers. I think that peakers will ultimately be replaced with something like you've described. Although I also think in many geographies, including in Europe, there will only be a little bit of blue hydrogen and a whole lot of green hydrogen. As the prices for green hydrogen come down, you can start with blue hydrogen, and then start replacing the blue hydrogen with green hydrogen, eventually, or some other clean hydrogen variety. But in some of the natural gas systems, depending on the price of gas, depending on the geology, depending on the capacity factor of the power plant, not necessarily. With an intermediate load system, say running 40% capacity factor, it still might be cheaper to do a retrofit and do post-combustion capture. That ends up being sensitive to the technology type. So, one of these big liquid solvent towers that we're used to thinking about. For these, probably not, but something more like a modular, sorbent-based system that doesn't have to run hot, can ramp up and down with renewables, that might actually be a system that works. You'll still face the point that you made, which is capital efficiency, which is that if you're building this plant, you're only running it 40% of the time, the dollars per ton cost goes up quite a bit. And at some point, you have a crossover where it doesn't make any sense. But I wouldn't rule out the gas turbine system yet. Even at something like 40% to 60% capacity factor, it could work in the right context.

ML  I guess I'm looking at it and saying that I'm not seeing gas run 40%. Once we've got a fully built-out… those countries that want will have some nuclear, but mostly it's going to be intermittent renewables. And that I see as being 70%, 80%, 90% of supply, and therefore, you're really talking about things that run, you know, 10%, 15%, 20% of the time. And at that point to me, CCS on that is kind of out of the question.

JF  In that kind of a system, the fully-evolved green system, yes, you are correct. At some point, in the future, we will not be doing CCS on power generation, even natural gas plants, ever. That might be 2030. For some grids, it might be 2050 for other grids, but at that point where you really have 70% renewable penetration, no, I don't think you're going to be doing a lot of post-combustion capture. And for that matter, you might not even have much hydrogen in that system. You might, but you might not. I think, though, that people underestimate how long that transition will take.

ML  I tend to do a lot of thinking around 2050, and then work back, because 2050 is only 28 years away. By the time you've spent five years or seven years trying to get planning for a project, trying to assemble the capital, and you'll build it, then you've got a project that's got a 15-20 year life, maybe a 30 or 40 year life. So, we kind of need to know where we want to be in 2050. Also, it's very hard to get somebody that motivated about 2050, or an investor that excited. So really, we're talking about 2030, and working back.

JF  I want to return back to something you said earlier in this exact context, which is an International Energy Agency study from 2019. They've made studies since then, and they all basically say the same thing: if you use the existing infrastructure, we're cooked. The carbon budget of the existing infrastructure blows a two-degree budget. So in the future, what you describe is true, but we have to get to the future! The existing stock of assets kind of craps that out. Now, in Europe, where we are wealthy and blessed with hydropower, and great offshore wind resources and Northern Africa sun, you can move much more quickly because you have the money and the resource base to get to a cleaner grid much more quickly, right? In the United States it is going to take longer, because we don't have the transmission system that we need to get the high renewable loading. If we fix that, then we could go a lot more quickly. In India, no. Not going to happen that way. And not going to happen that way in China, or Southeast Asia, or developing Africa. So those volumes… I'm thinking stocks and flows here. I'm thinking also about the non-power systems, the steel mills, the cement plants. Industry is 37% of emissions. That's the big lever. Actually, we don't have a lot of options for that. I love talking about the power system, but I really think you need to couch this in the full context of everything else. The last thing I'll say about this, and I promise to revert back to you here… The International Energy Agency, the IEA, keeps coming back to CCS. They keep saying the number you said, which is between 12% and 20%. That number, 12% to 20% of the total load is very robust. From 2008 to today, it's been 12% to 20% of the total volume. That hasn't changed. That's because of this global challenge. Because of these systems challenges. Because of the non-power applications, that volume ends up being the same. And that looks like 5 billion tons a year, 5 billion tons is the same size as the oil and gas industry. The oil and gas industry moves 5 billion tons of stuff every year. So, we're talking about a potential industry the size of the oil and gas industry that works in reverse. For a service, not a product. That's incredibly hard to do. Anybody who thinks that's easy is not paying attention. I've been in this 20 years, it is super hard, but it's still what we have to do. So, I really think that a lot of what we've been talking about is ancillary to that central question, how do we get to there?

ML  In fact, in the sustainable development scenario of the IEA it’s actually 10 gigatons per year, because that's to get to net-zero, consistent with a one-and-a-half or slightly over one-and-a-half-degree scenario. So, it is it is absolutely like a couple of oil and gas industries operating in reverse, producing nothing but carbon benefits and costing hundreds of billions of dollars per year. Before we chase the realism or otherwise, of that, I have a couple of other things on costs. There’s one other issue I want to bring in on the costs. You had a bunch of things that were $40, $60, $80. What level of carbon capture does that include? That's a trick question, because there's this big discussion about producing blue hydrogen. So, that's fossil-based hydrogen but capturing the carbon. If you do that with a steam methane reformer, then likely you only capture 60%, 70%, 80% of the CO2. But if you move to autothermal reforming, then you can produce really clean, blue hydrogen, very high levels of capture. But does it cost more?

JF  I'm glad that you brought up this distinction. Let me start by saying when we start a conversation about blue hydrogen, we must deal with fugitive methane emissions, or else we're not doing the job. So we are assuming for say, hydrogen, less than 0.2% annual upstream leakage. And we've delivered that in big chunks of the economy. In big chunks of the economy, we have methane leakage below 0.2%. So, we know we can do it.

ML  I hope you've pointed that out to Professor Jacobson, who thinks we haven't.

JF  I try not to talk to Dr. Jacobson, if possible. Or Dr. Horvath. Other people have pointed this out. There is a rich literature on this that I would point people to, I'm happy to give you links for the website when we move on. So, if you go to an existing steam methane reformer, it is cheap and easy to get about 60% capture. That's the byproduct from the steam methane reforming process, that’s concentrated steam. You can do that for $40. You can, however, retrofit the rest of it too. We're not stuck at 60% for an SMR. You can use one of these post-combustion capture systems and get 95%. It is cheaper though to replace that system with an autothermal reformer and get 95% out of the gate. It's important to know that $4 gas, $4 per million BTU, which is not what we have in the world today, but which we've had for a long time… At $4 gas, you can do a new build autothermal reformer with very low upstream leakage and 95% capture for below $2 per kilogram of hydrogen. The stretch goal for green hydrogen is already achievable with blue hydrogen, and the lifecycle footprint of that is better than a solar-based project. It's not better than a wind project, but it is better than a solar project and about the same as a hydro project. So, you can get really clean hydrogen. And I'm pleased to say that the new projects that are being announced are all auto-thermal reformer projects like this. The ones that are being announced in Edmonton or in Rotterdam, or in the Gulf of Mexico, are all new auto thermal reformers with 95% capture. That's how it should be.

ML  Given what you've just said, what would you say to those people who are convinced that the only source of clean hydrogen is green hydrogen?

JF  I think that that is not honest accounting. I think there's a lot of value to green hydrogen, and I'm a huge enthusiast and our company has put money into a green hydrogen companies in Germany. So, we voted with our feet on this. I've written a green hydrogen report published last year at Columbia, which talks about all the good values for green hydrogen and why we need it. And last but not least, I wrote one of the comments on the back of Marco Alverà’s remarkable book Hydrogen Revolution, because I believe in green hydrogen. It is also the case that it doesn't work everywhere. There are plenty of places where you don't have renewable resources that really can be used. It is also the case that it can end up being very expensive in certain geographies. Even in places where you have really cheap solar and wind today, you don't have really cheap green hydrogen automatically. You need high capacity factors. You need really cheap supplies, and the number of places in the world where those exist, say Western Saudi Arabia, Namibia, Chile, Northwest Australia, are limited. We can do a lot there. We should do a lot there. We will do a lot there. It's not the volumes we need. We're going to need bio-hydrogen with or without CCS, we're going to need blue hydrogen, we're going to need green hydrogen that's made with nuclear electricity instead of renewable electricity, and hydro and geothermal. We're going to need all these things. And I think, if you look at a full lifecycle accounting for these things, blue hydrogen can be as clean as any other kind of hydrogen. But just like anything else, you can do things stupidly, or you can do things well. And it's up to us to do things well.

ML  Just very quickly, to those who would come back and say “do your green hydrogen in Saudi Arabia, Chile, Namibia, Australia, wherever and then just import it” like we do with LNG - do you have a single figure for $4 per kilo, that you can throw back at them and say that that's going to add this much to the cost?

JF  So, the best looking green hydrogen we have anywhere in the world, not quite built yet, but I believe these numbers, is in Chile. It's $1.8 per kilogram. Very good, very cheap. And that's with existing Electrolyzer contracts about $600, and with existing solar and wind, and hydro, which Chile has got. Today, in the Gulf of Mexico, the autothermal reformer project pencils out at about the same. So, the very best green hydrogen project today is about the same price as the very best blue hydrogen project today, right? The project in NEOM is coming in more like $2.20. It's a little more pricey. Northwestern Australia, more like $2.60. Those are as good as it can get. Those are really, really good spots, and they are already coming in above the price of the best-looking blue hydrogen projects. The whole point here is that I’m not proselytizing for blue hydrogen, but you’ve got to…  Let's look at this Asian Renewable Energy Hub project, which I love - this big green hydrogen project in northwestern Australia. I love this project. And I love what Fortescue is doing around the world. It's great. That project is going to make 10 million tons of ammonia a year from clean hydrogen, and will cost $40 billion. That is to just decarbonize the steel sector, we need 80 of those. Just steel, just those projects, 80. That's $3.2 trillion. And it'll take us 30 years to build that volume. We don't have that time. We don’t have that money. We could get going with cheaper, faster, better projects if we put some blue hydrogen on the market and move into the decarbonisation space as opposed to production space. Because the work for climate is de-carbonization. It is not de-fossilization or renewabalization, it is decarbonizing. Whatever we can use to get the carbon down quickly is worthy of discussion.

ML  I've started that by asking about the transport costs, because hydrogen, green hydrogen, I also love and I think it's fabulous, but it's going to cost $3 to $5 to ship it. You talked about that Chile project, you talked about the Gulf, Gulf of Mexico, and to get them from one to the other is $3 to $5 per kilo. So therefore, although you've reached parity between blue and green, the green isn’t coming into the Gulf of Mexico cheaply at all. I just want to challenge you on one thing. You've been talking about these projects that are being built today. A lot of those are being funded because they produce carbon dioxide, which is used for enhanced oil recovery. Isn't that just, from a climate perspective, complete self-licking ice cream? You take the CO2, and then you use it to extract more CO2? That's not going to exactly deal with climate change, is it?

JF  I would disagree with that initial characterization. Out of the 135 projects that have been announced this year, almost none of them are enhanced oil recovery projects. The reason why is because of what you just described: in a net-zero world, you really have to get to zero. Many of the projects that began, the early projects, were financed by enhanced oil recovery, because nobody was paying anything else. We didn't have 45Q, we didn't have a high-price DTS, so there was no way to get paid to do CCS. So, the revenues for enhanced oil recovery were an important part of the business model. In a net-zero world, that becomes a liability. So, the new projects that have been announced, for example, this $5 billion blue hydrogen project in New Orleans, that Air Products has announced. All saline aquifer, there are no enhanced oil recovery associated with it. That's really where these projects are going. The very first CCS project was also a saline formation project, the Sleipner project in the North Sea. And for the same reason. Equinor wanted the carbon attributes, and if you want the carbon attributes, then you don't do EOR. So, people keep throwing rocks at CCS because of the EOR. But that's not what's happening anymore. I will say that EOR still does store CO2. The CO2 that goes into the field stays down - that happens, it is actual storage. You do produce more hydrocarbons. At this point, that is the lowest-carbon way of producing hydrocarbons. The carbon footprint for that is much less than conventional oil and gas drilling, certainly much less than heavy oil production, which we still do. But if we're clear eyed about a net-zero world, ultimately EOR is at best transient and at worst, really a distraction. And we really should be focused on just the disposal.

ML  Okay, so projects so far have done a lot of EOR, but the ones going forwards shouldn't. It's a kind of transitional thing, if I understood you correctly?

JF  Which was always the pitch. The pitch was we need EOR for now and someday we won't be doing it. And it seems like we're not really doing much of it these days. Even in China, two of the projects that are going forward are EOR projects, but a new big project is going to be selling information. They're coming around.

ML  Okay, now I want to move on to the question of carbon removal, CDR. We’ve been throwing a lot of gigaton numbers around… 10.4 of the IEA of CCS, then there's the IPCC scenarios, almost all of which have carbon removal in there. How much carbon removal, not just CCS, but actual removal, are we going to be doing?

JF  Right, so let's start by talking about what removal is. Removal is taking CO2 out of the air and oceans. And if you're focused on climate, you're really talking about pulling it out of the air. There's lots of pathways to do that, and approaches. Your audience is familiar with one of those. Trees store CO2, they store it temporarily in their body, but they do remove CO2. You can do a lot of that with soils, with mangroves. You can also engineer systems, you can use biomass, convert it to energy, capture all that CO2 and store it like they're doing in Denmark now. Or you can just enginee a device to hoover CO2 out of the air, like they're doing now in Iceland with the Climeworks facilities. All of these are literally taking CO2 out of the air and putting it into some stock. Ideally, you want that stock to be durable. You want it to be out of the air and oceans for a long time. In terrestrial systems, you're typically talking about 30 to 100 years. For these engineered pathways and geological storage, you're really talking about more than 1000 years - very, very durable storage. And the reason you do this is because we've already blown our carbon budget, and we need to balance. That's thing one. Thing two, there's always irreducible fractions. Always. Our company has done some work with Microsoft, they've been very transparent about their numbers, their total annual emissions are 16 million tons. They can reduce 10. Their irreducible fraction is six. They have no idea how to get rid of those last six. So, that irreducible fraction - let's say they innovate like crazy and cut that in half - they still have 3 million tons of irreducible emissions. That's about 15%. It's a number we keep coming back to. So, if you scale that globally, it is billions of tons of removal. And the science is very clear on this. The IPCC has done an excellent job of spelling out what has been written up, and many other places. You can get maybe a billion tons with nature-based solutions. Maybe. That takes a lot of land. It takes a lot of energy. It takes a lot of focus and people and time and money but you can certainly get it. You can maybe get another billion or two in a sustainable way. With things like BECCs, these biomass energy and carbon capture or a system that I call BiCRS these days, biomass, carbon removal and storage. The rest of it looks like either mineralization or direct air capture. That's what's left. And those end up being billions of tons of the budget. The Energy Transition Commission, the ETC and the EU, recently laid out a report on this. They got 4 billion tons of CCS and 4 billion tons of CO2 removal using DAC, because that's the budget. That's what you need. And we keep coming back to these findings because we don't have other options.

ML  Acronym claxon! We've used CDR and we've used DAC without explaining what those are.

JF  Glad to do so. CDR is carbon dioxide removal. The Brits have decided they're going to call this GGR, greenhouse gas removals, which I hate. Don't use that term, talk about CDR instead. Direct air capture is DAC. Direct air capture with storage is DAC+S. Enhance weathering, carbon mineralization are other pathways to do this. BECCS is bioenergy with CCS, or BiCRS, biomass carbon removal with storage.

ML  Okay, so does direct air capture include enhanced weathering or not? Let's deal with enhanced weathering, because that is taking a type of stone which can which, normally, in geological time, would absorb CO2, but speeding that up many, many times. How do you do that?

JF  So right now, the earth without our help, removes 300 million tons of CO2 a year just by weathering rocks. The key question is, can we speed that up? And the answer is yes. A lot of that work is done by a very small class of minerals that are really rich in iron, magnesium and calcium. They’re called mafic minerals. You find those in basalts, you find them in what are called ophiolites, chunks of the ocean floor that are up on the continents. Oman is famous for this. Oman is about 70% ultramafic rock body, which is cool, but diamond mines, nickel mines, they have a lot of these minerals. These minerals can react quite quickly. By quite quickly, I mean hours, some of them will react in hours, some of them will react in weeks. There's ways to speed that up. The number one way to speed it up is grinding. You just get reactive surface area and you expose more of the mineral to more air. And in fact, mine tailings in a lot of these mines spontaneously react with the air, which is cool. So, if we can manage this pile of rocks that’s lying around a little better, we can get some CO2 removal. That stuff could be very cheap, as cheap as like $11 a ton. But most of the mineralization is going to be more like $150 a ton, where you're quarrying these minerals for the purpose of reaction.

ML  I just love the names of these minerals. I want to hear you talk about this. There's brucite, there's olivine, and we're going to mine them, we're going to grind them up, then we're going to spread them on fields or use them in building, that sort of thing, right?

JF  So, the easiest step is to go after these ultramafic minerals. My favorite is brucite, thank you for mentioning it. The chemical equation is magnesium oxide. So, if you add CO2, it makes magnesium carbonate? Done. We don't know how much brucite there is in the world, we don't know where it is, we don't know in what purity, nobody's ever looked for it! But we’ve found bits of it, and it tends to occur in things like nickel rock bodies, so where you have a nickel mine, you probably have some brucite. In some places, we’ve found really high concentrations that you can just grind it up with the existing equipment. Excellent. Olivine is a very iron and magnesium-rich mineral. That stuff also reacts fairly quickly, that's on the range of weeks or years that it starts reacting. So here again, you have to grind it up. You can put acid on it, you can heat it up, there's other things you can do and that will do the same. The last thing I'll say though, for minerals there’s a completely different pathway of doing this which is just the rush contractor version, just brute force. And that's what's called basalt to the to the Brits or basalt to everyone else. You can take the basalt which is a volcanic rock - rich in iron, magnesium - grind it up and put that basalt dust on cornfields and crops. There what you're paying for is the energy up front. It's not as fast, but you're making up for it by reactive surface area. That looks like a very promising way to do this.

ML  Basalt will get us on to Iceland, because that, I believe, is the key to the project that now we're going to get on to. Climeworks has a project in Iceland, working with Carbfix, pumping the CO2 down underground into basaltic rock where it's being mineralized, and it's being kept there. So, I think that's our segue onto direct air capture. Now, you said that it costs $500. There was a news story about two years ago, about Climeworks. It said that this Swiss company is capturing CO2 on a commercial basis, and storing it forever. I love that - commercial basis - this is $600 at the time, per ton of CO2. It was commercial to the extent that you can get subsidies for things, then that makes them commercial. This stuff is wildly expensive, and it's going to remain wildly expensive for some time.

JF  So to clarify, the commercial work that is being done with Climeworks and Carbfix is not subsidized. It is strictly commercial, but it is voluntary and small. So, a very small number of people are prepared to pay an enormous amount of money. I'm one of those people, by the way. I pay about $1,100 a ton to remove CO2 from the air and ocean.

ML  So, this is you and Leonardo DiCaprio saying “oh, no, I took a flight, I have to go and make a cube of mineralized CO2 and I don't care how much it costs?”

JF  But it's important to know that it's not subsidized. And it's really not. It is also the case that that price has really cheap green electricity and green heat. So, that's a very low price for what this costs, because if it costs more for electricity, or heat, the price goes up. So even so, I view this very analogously to things like solar panels, wind turbines, gas turbines, all of these things, which began at extremely high prices. And the first commercial solar module that was sold was sold at $300 a watt, which is very expensive, and was bought strictly by a voluntary market.

ML  To be fair, you're too much of an engineer and too much of a scientist really to believe that, because that's a material science. This is about moving large quantities of air. And when I say large, there's a fantastic calculation by David Cebon who calculated how much air you need to move around. The unit he uses is the Rolls Royce Trent jet engine, which is a large-scale mover of air or of gases. His figure was that for each gigaton of removal, you need to move so much air - if you just take the 400 and you know, 20, 30, 40 parts per million – that each gigaton would require 44,000 of the largest jet engines in the world just to move the air around. You haven't gotten any solvents, nothing else. And then you're going to say that this is going to become really, really, really cheap. That's for one gigaton, 44,000 jet engines worth of fans.

JF  Yeah, I would quibble with that calculus on many, many levels. And in point of fact, I would start with the first very first calculation that was made on direct air capture by Klaus Lackner, who's a professor at Arizona State University. He looked at it in terms of the cross-section of a single windmill. He said, “how much wind moves through a wind turbine, and how much CO2 would you need to pull out of it?” He looked at that and looked at the thermodynamic limits of energy costs and said, “if you just look at the wind moving through a windmill, and the air volume that's moved through it, the lowest cost you can get is $25 a ton.” And he said, “we're nowhere close to that, but that's a good target. Let's go for it.” Since then, the National Academies have actually refined that number. The cheapest that you can get with his orbit based system is $18 a ton. Let me be super clear. I don't believe for a minute that we'll get $18 a ton. We're not going to get that number. We're just not. But it is certainly the case that we can get below $100 a ton, we can probably get below $60 a ton. That's conventional engineering, conventional systems. You will need a lot of cheap heat and electricity to do.

ML  Does that include moving the air, capturing the CO2, and then sequestering it and monitoring and storing? Or is that just a capture? What does that include?

JF  Okay, so that would be just the capture costs. If you include the cost of drilling and storage on top of that, depending on where you are, that's $15 to $25 more. So, all-in cost, below $100. Yeah, we're going to see that. It is, first of all, in large part, a material science problem. It's about solvents, and sorbents, and membranes, and these sorts of things in a very real way. But it’s also about modularization. The best systems we've seen have become modular, and we're innovating quickly.

ML  The David Cebon calculation, however, was just saying, 420 parts per million times a gigaton and just saying “what is the amount of there you have to move?” We've talked about the scale; you've said it's two times the oil and gas industry working in reverse. That brings us to questions of costs, does it not? Aggregate costs, investment costs, running costs.

JF  Let’s talk about costs in a couple of different ways, and scale. First of all, this is exactly the argument that I have over and over again, with Vaclav Smil, because he just looks at that scale and goes ‘I don't see it happening.’ I think it's reasonable to be skeptical about this.

ML  I think that Vaclav Smil is a great man and a great economist, except that he hasn't really focused on distributed solutions and when they really scale up. He would say that agriculture can never happen, because these hunter gatherers will never be able to operate on the scale required to produce agriculture. I’ve got to be honest, I'm kind of a Smilite on direct air capture, because I look at it, and I say $100 a ton, times two gigatons, is $200 billion a year, and you've said it produces no benefit other than the service of not messing up the planet. It doesn't produce electricity, it doesn't produce product, it's $200 billion dollars a year for your two gigatons of direct air capture, which is not enough, by the way… Who is going to spend that? I don't see it.

JF  That number $200 billion a year is about the same amount of money we pay for trash disposal, which also adds no benefits.

ML  But it very clearly does. If you don't spend money on trash disposal, you get rats, and you get a foul stench, and disease instantly, right?

JF  But those are benefits you get from spending the money. You don't get a benefit from trash removal, you get the benefit from the removal of trash. And the same way, you don't get a benefit directly to the economy for keeping a stable climate. But the ecosystem services are well worth that money. That's where Stern started the Stern Report. He said the cost of fixing the climate is maybe 5% of GDP. But the cost of not fixing the climate is maybe 20% of GDP.

ML  I agree, but the problem is in the real world, you've got approximately half of the population at any one time, sometimes more, sometimes less, that simply doesn't believe it. And you've got a whole other chunk that believes it, but is so stressed about their daily budgeting, that the idea that you would spend that sort of money for a benefit that is in some future, that’s in any way theoretical… I just can't see the spending of that amount. I can see spending on renewable energy, on energy efficiency, on lots of things around mitigation and adaptation. But I'm not seeing a couple of $100 billion a year spent on direct air capture. I can see some of it, I can always see a couple of billion because we'll be tinkering around the edges and there’ll always be you and Leonardo DiCaprio, paying these indulgences so that you can keep flying. But $200 billion a year? I'm not seeing it, I’m with Smil.

JF  So, you are exactly where London was in 1918, when they didn't clean up their trash. Then they had horrible stink years, and then they spent 2% of their GDP to build a trash system and they continue to pay a substantial fraction of GDP to manage it. It's that kind of a thing. And at the heart of it, it's a narrative story. It's a challenge of telling stories and getting people to buy in. Vaccines are the same sort of thing. Vaccines deliver imaginary benefits that you don't see, but real benefits that science measures; you don't get sick. And it is an annual recurring cost that is borne by everybody in the world. I want to put a point on this in a numeric way to help clarify exactly what I'm talking about. If you were to do carbon capture on a cement plant, it would double the cost of cement. Okay, it would go from, say $100 a ton of concrete production to $200 a ton. Okay, that would increase the price of a bridge made entirely out of concrete by 1%. You double the cost of the primary material, but the end product cost goes up a tiny, tiny amount. The same thing happens if you did direct air capture to offset all of the costs for steel production, the cost of a car with that steel production would go up 4%, at $500 a ton. It's an infinitesimal cost on the cost of a car.

ML  I admire your optimism. I remain skeptical because I suppose the problem with the narrative… You're right, it's a narrative challenge, and the problem with that narrative challenge is, if there was ever a truly obvious large scale climate catastrophe, then I think the narrative changes. But as long as it is people saying “if we don't pay this, then this bad thing will happen at some point…” I'm thinking that politics is very heavily stacked against that scale.

JF  Time will tell. And there's no easy answer for what you've just laid out. At the heart, climate change solutions face this difficulty, because most of the emissions are invisible to most people. Most of the emissions are things like agriculture use, and heavy equipment manufacturing and stuff. Most people don't go to the store to buy 10,000 tons of steel, so they don't know what it means to make steel. They don't know what it means to use steel. But we have to decarbonize steel. And it is a system which is built around a traded commodity that is globally traded with very tiny margins. So very small changes in the price of steel are very hard for the market to absorb. But we still have to do it. So I look at direct air capture and say that that it is the 12th of 12 miracles. We have to do 11 other miracles to get to the point where we also do the direct air capture: we have to build the transmission lines that nobody wants to build, we have to scale up the green hydrogen, we have to do all these other things. It's just as crazy as the rest of it.

ML  You are the chief carbon-wrangler, not just in general, but for Carbon Direct. And that is a consulting business helping companies to do this stuff. But also, you are an investor. Now I'm going to ask you this kind of invidious question... If I have calculated correctly there are 9 investments, at least on your website. I'm going to ask you which one is your favorite.

JF  I have to first preface this by saying I am not speaking on behalf of my company when I say this because we love all our babies. All nine of the investments are wonderful. We encourage people to join us in investment. Go to the website at carbon-direct.com. My personal favorite, the one that I like the best is Svante, a point-source capture company. They have a very elegant solution. It looks like they're going to be able to do post-combustion capture and a bunch of systems for $30 a ton. At that price point, that's a very important company. But I have to say I'm a fan of lots of these companies. I like LEILAC, which is a low-carbon cement production company. I like our one direct air capture company which is Heirloom, which uses minerals as a sorbent and passive airflow. We think we're going to be able to deliver at half the price of many of the other direct air capture companies, because of a completely different pathway and approach, and trying to incorporate the sensibilities that you pointed up that are very real and you have to manage. Of course, I like the air company because they make the best vodka I've ever had, and they make it out of CO2.

ML  I was hoping you were going to say that company because I actually I looked at their website. They actually, so they make ethanol out of air. And ethanol is of course a major constituent of vodka. So, I was very much hoping you would raise that one, actually. But I did look at the costs. They have this fabulous website, I do encourage people to go to their website as well, because it says what we do now is hand sanitizer, it’s eau de parfum, and it's vodka. But in the future, we're going to do  bulk fuels; ethanol, at $1.91 per kilo, methanol, $1.38, and rocket fuel. I calculated those numbers, and it works out at about equivalent to $8 per gallon of petrol, or about $580 per barrel of oil. And that's their aspiration for the future. That really, to my mind actually encapsulates the scale of the economic challenge, does it not?

JF  Yes, it does. It's worth knowing, by the way, that there's an important factor… At $50 a barrel for oil production? A barrel of oil has $500 of CO2 in it. So, a barrel of oil is in fact a lot of carbon. And most people don't clock that. We think that we have a clear line of sight to being cost competitive with a bunch of fuels and a bunch of markets. That's the basis for the investment. The investment thesis for Carbon Direct is you can make money today on existing policy. Period. If we don't think you can make money today on investing existing policy, then we won't invest in it. And so, for the air company, it is about the fuels. And obviously, the prices are more expensive today, but we have clear line of sight to those price points.

ML  Well, we are out of time. And I think we've reached the point where we have to continue this discussion Julio over one of those net-carbon negative vodkas. Although, I suspect if I did a full lifetime assessment of that vodka, once you drink it, I suspect something happens that then releases the CO2 back to the atmosphere. This is a very fruitful scene for discussion when you and I meet in person.

JF  Absolutely, I'll bring the vodka but you're buying.

ML  Well, that should bring the costs into very, very sharp focus. I wish you the very best of luck reducing the costs in that case, but that's a deal.

JF  This has been such a treat. Thank you, Michael, for having me on.

ML  Thank you so much. So, that was Julio Friedman, expert in carbon capture and storage and direct carbon removal and chief carbon wrangler with Carbon Direct. And that brings to an end series six of Cleaning Up. We’ll now be taking a few weeks off, and so should you. Enjoy the summer! We'll be back on Wednesday, the 7th of September for the first episode of Series Seven of Cleaning Up. So, see you then Wednesday, 7th of September. Put it in your diary. Cleaning Up is brought to you by Capricorn Investment Group, the Liebreich Foundation and the Gilardini Foundation.