Nature or technology? How companies decide on investments in carbon capture

The current energy crisis is bringing renewed attention to climate protection. Switzerland and the European Union are seeking ways to reduce their dependence on fossil fuels. If less oil and gas is burned, less carbon dioxide ends up in the atmosphere. Using energy sparingly and switching to renewable energy sources are clearly sensible measures for combating climate change. But what should be done about the large quantities of greenhouse gases that have already been emitted in the past?

To address this challenge, a market for “Carbon Dioxide Removal” (CDR) has been developing for some time. This market comprises various segments: alongside nature-based projects such as afforestation or the restoration of wetlands, technological solutions are also being offered. In Switzerland, for example, the company Climeworks is developing systems that filter CO_₂ directly from the air. This carbon dioxide can then be stored in suitable rock formations in a second step – this is why it is also referred to as CCS, Carbon Capture and Storage.

Which of these solutions do those responsible for deciding on climate strategies within companies prefer? Researchers at the Institute of Responsible Innovation, Sustainability and Energy (RISE-HSG) at the University of St.Gallen investigated this question in collaboration with a visiting professor from Grenoble.

Clear preference for nature-based solutions

For the study, the research team analysed the preferences of 378 climate managers from European companies who, in a choice experiment, had to decide between investments in various CO_₂ removal projects. In total, the participants made 4,158 individual decisions.

The analysis shows:

• Climate managers prefer nature-based projects such as afforestation or peatland restoration over technological processes such as direct air capture or bioenergy with CO_₂ storage.
• Respondents also described nature-based solutions as safer and better suited to their own climate strategies. They associate these solutions with higher social acceptance.
• Climate protection projects in their own country are preferred over projects in other parts of the world. 
• In addition to the type of project and the costs, local environmental and social impacts and the reputation of the CO_₂ service provider also play an important role in the decisions made by climate managers.

“As things stand, climate decision-makers in companies are showing greater interest in nature-based solutions for CO_₂ capture and storage,” says study author Sabrina Mili. “When competing with nature-based solutions, providers clearly still have some persuading to do.”

Managers’ decision-making style influences choice

The preference for nature or technology depends, among other things, on how climate decision-makers process information to reach their decisions. Managers with a holistic decision-making style show a stronger preference for nature-based solutions than those who focus more on individual key factors such as price or reputation.

Price alone, however, hardly explained the decisions. Even managers with a strong focus on costs did not systematically choose the cheapest projects but also took safety and reputational aspects into account.

Implications for companies, markets and policy

The findings shed new light on the development of the emerging market for CO_₂ removal. In many climate scenarios, technological solutions play a prominent role. However, the study suggests that market demand could develop differently than anticipated in some expert debates. Should corporate decision-makers continue to favour nature-based solutions, this could influence the structure of the industry.

The study also provides indications that companies consider reputation, local impact and additional environmental and social benefits when selecting projects. Credible certification systems or funding programmes for local climate projects could therefore gain in importance.

At the same time, the researchers warn against drawing overly simplistic conclusions. Nature-based and technological methods differ in their risk profiles – for example, in terms of the permanence of storage, scalability and cost trends.

“To achieve climate targets, a combination of different solutions will likely be needed,” says co-author Robert Mai. “Investment decisions in the climate sector are strongly influenced by perception, trust in providers and reputation-related factors – such aspects complement cost considerations.”

The study “Back to Nature or Technology to the Rescue? Climate Managers’ Preferences for Investment in Carbon Dioxide Removal” (Link?) is available to download online. The team of authors includes Sabrina Mili, Prof. Dr. Moritz Loock and Prof. Dr. Rolf Wüstenhagen from the Institute of Responsible Innovation, Sustainability and Energy (RISE-HSG) and Prof. Dr. Robert Mai from the Department of Marketing at Grenoble École de Management.