In Conversation with George Sorenson
Since 2009, world leaders, government officials, corporations, and citizens alike have gathered in New York City for Climate Week every September to showcase what leading companies and NGOs are doing to address climate change. Climate Week 2022, which took place this year between September 19-25, brought together international leaders from business, government, and civil society to showcase the innovative ways in which both the challenges and opportunities that climate change presents are being addressed. This year, a first-of-its-kind discussion took place during Climate Week on September 21 about the role that carbon capture and sequestration (CC&S) can play today to help meet the world’s mid-century climate goals.
The most recent report from the Intergovernmental Panel on Climate Change (IPCC) underscores the significance of carbon capture and storage (CCS) in meeting climate goals, stating the industry sector is, “vital for decarbonizing hard-to- abate industrial emissions…and in the near-term CCS is the only feasible solution.”
After this discussion, we spoke with George Sorenson, an early investor in clean energy. His company, FE Clean Energy Group, put together some of the first funds in the clean energy market that brought together strategic and financial investors to maximize investment success.
In this interview, we discuss with George specifically how carbon credits (a generic term for any tradable certificate or permit representing a claim that someone did not emit or paid to abate a certain amount of carbon dioxide) generated from CCS technologies can reduce greenhouse gas emissions, and the market opportunity he sees for Carbon GeoCapture, a company for which he serves as a director.
Q: How did you first become interested in carbon capture and storage technologies and the credits CCS can generate to reduce greenhouse gas emissions?
A. I have been involved in the clean energy space for more than 30 years. I founded FE Clean Energy Group, as well as its predecessor company, which focused on the purchase of utilities in emerging markets in Latin America. The primary focus of the funds under my purview was investment in renewable energy projects in emerging markets in South America, Central and Eastern Europe, and Asia. Many of the investors in the funds I managed made co-investments in projects in which the funds invested or provided technical services to those projects. These were some of the first funds in the clean energy market to combine strategic and financial investors to maximize investment success.
Q: How has the interest in carbon credits evolved over the past 20 years?
A: Going back to the Kyoto Protocol – the first U.N. agreement to commit industrialized countries to limit and reduce greenhouse gas emissions – there was very limited interest in generating carbon credits. The challenge with these early carbon trading schemes was one of true emissions reduction and the number of credits received for such reductions.
This caused a focus on the shutdown of emissions of chloro and hydrofluorocarbons produced primarily as a gas for refrigeration. Under the protocols, emitters that were already shutting down were not eligible to sell their credits obtained from the shutdown. However, “shutdown” is a nebulous concept and in China, even though the Chinese Government was shutting down heavy emitters, definitions were fudged so that the resulting large amount of carbon credits created from a shutdown in the plant were recast as a non-planned shutdown. Hence the carbon credits could be sold into the markets.
Q: What’s changed?
A: There are four drivers going on in the market today:
- There is a growing consensus that climate change is real and that carbon emissions must be reduced. Doing nothing is seen as the worst alternative. Whereas pension funds had little interest at the turn of the century, they are increasingly investing in low carbon emission projects, sometimes at the behest of their trustees.
- A regulatory framework is emerging not only in Europe, but also in the U.S. In my opinion, this will be accelerated by the climate provisions contained in the recently passed Inflation Reduction Act.
- Due to factors, including advances in clean energy technologies that reduce the price of energy generated from clean sources, and the current higher prices for fossil fuels due to sanctions on Russia, adoption of renewable energy is accelerating faster than before.
- Heavy emitters see the writing on the wall – they are feeling pressure from their customers to significantly reduce their emissions.
We’re reaching the point where carbon reduction will be a long-term, viable business, capable of generating sufficient and consistent returns. Companies that need to reduce their emissions – whether due to government or customer pressure – are going to seek the most efficient and cost-effective means to do so. And in the marketplace, there is a sense of a “thousand flowers blooming”; private sector innovations are sprouting up to meet this increasing demand.
Q: What is the market opportunity in this sector?
A: There are some businesses such as cement, steel production, some types of chemical production, and certain transportation sectors that cannot easily lower their carbon emissions below a certain threshold. These industries represent a significant portion of the economic “pie” in many countries, and it will not be economically possible to eliminate these emissions all at once. Hence, a carbon market must be established to allow these emitters the opportunity to offset their emissions. This is a huge market and will continue to grow over the medium-term.
It is unrealistic to think that carbon emissions will vanish over the next 20-50 years. The need for a viable carbon offset system will remain, and those companies which can produce low-cost carbon offsets will reap substantial rewards. The carbon market, which has been talked about for 20 years, is only now starting a major expansion phase that will dwarf anything we have so far seen. Carbon GeoCapture is a company well-positioned to capitalize on this opportunity.
Q: What type of market opportunity do you see with Carbon GeoCapture (CGC)?
A: It’s a global opportunity. Coal beds underly significant portions of the world’s land mass. The underlying science of CO2 sequestration in coal has been investigated extensively, and 95 percent of the technology has been performed repeatedly and successfully by many people over the past 30 years, all around the world. The remaining five percent is what makes the economics work, as CGC is demonstrating through its pilot scale projects in Wyoming and around the U.S.
These demonstration projects involve mimicking “Mother Nature’s” process of absorbing dilute levels of CO2 into coal, the economics of which show that carbon sequestration in coal seams is attractive. The technology and process CGC will be using is based on more than 20 years of R&D and field work. I see CGC as having operational risk rather than technology risk, and operational risks can be controlled by a good management team, which I believe CGC has.