Humanity has released a lot of carbon dioxide, which makes up the bulk of the total greenhouse gases responsible for global warming, into the atmosphere. And we release about 43 billion tons every year.
There are multiple emission sources, but the most significant ones are power, transport, and industry (including oil and gas).
The best way to control it and improve the environment is to stop releasing this much carbon dioxide.
But the world is also working towards solutions like carbon capture, which means that you should start looking into the best carbon capture stocks before they become too mainstream.
Carbon Capture – Understanding The Asset Class
The world is releasing an enormous amount of carbon into the air every year, and it’s not going to change any time soon.
Electric vehicles still make up about 1% of the world’s total vehicles, and enormous amounts of fuel are required to keep the other 99% moving (among other things).
The world also needs enough power, especially now when the power consumption required for mining Bitcoin is higher than the total consumption of some countries.
Renewable and EVs will take decades to catch up, and the world is still divided on the use of nuclear power.
So while we are working on reducing emissions, it’s a good idea to take care of the other end as well: Carbon capture. There are two basic principles behind carbon capture:
- Capturing carbon on its way out (one way to reduce emissions)
- Capturing carbon from the atmosphere to reduce its amount
For both types of technologies, captured carbon is usually stored underground, which gives the whole process the acronym CCS – Carbon Capture and Sequestration (essentially storage).
Some companies go a step ahead and use the captured carbon for some products.
This, while it’s not exactly removing the carbon from the atmosphere, keeps the total amount of carbon the same (instead of a similar product adding to it), and it’s sometimes more financially viable.
It’s called Carbon Capture Utilization and Storage.
Trees and algae already do the second part for us (natural carbon capture), but it’s not nearly enough because of the level of emissions, so we have to step up.
There are several different carbon capture technologies already in place, and the governments are encouraging taking measures like carbon capture in addition to organically reducing their emissions.
Carbon credits might also become an important motivator.
But from a business perspective, there are still several limitations that make the future of carbon capture uncertain.
In fact, many people don’t believe that these technologies can be scaled in time to become financially viable and are adamant that investing in them is premature and highly risky. Some challenges include:
- Limited financial incentive: The governments haven’t started to incentivize carbon capture the same way they did the renewables.
- Failed case studies: Many of the world’s most ambitious and well-funded carbon captured projects failed their targets. Chevron’s project in Western Australia became the poster boy for missing carbon capture targets, and most of the eleven similar projects in the US (that got about US$1.1 billion in funding) failed.
- Costly process: The process of carbon capturing and storing it underground is quite costly right now, and the cost may differ greatly from terrain to terrain. And since there is no end product at the end, the only time it would become more financially viable for businesses to pursue is when the alternative to not doing that (like government penalties) is costlier.
- Unplanned hazards: The process of storing carbon dioxide underground comes with its own set of potential problems, including its negative impact on water reservoirs and supplies and underground pressure build-up. These challenges are more likely to surface when carbon capture is pursued more aggressively and may change the trajectory of this business entirely.
Understanding these challenges is imperative before you tie your capital, even to the best carbon capture stocks there are.
Who Are The Leading Companies In Carbon Capture?
Europe’s Climeworks and Aker Clean Carbon, Canada’s Carbon Engineering, and US-based Global Thermostat are some of the leading companies in the carbon capture space.
What Is The Most Efficient Carbon Capture?
Trees (especially Empress Trees) and algae are the most effective carbon capture “devices” there are.
But from an artificial angle, many direct carbon capture technologies (which suck carbon dioxide directly from the atmosphere) are becoming increasingly efficient, like the Orca in Iceland, which can capture 4,000 tons of carbon dioxide in a year. That’s equivalent to Empress Trees spread out over 40 acres.
Best Carbon Capture Stocks in Canada
It’s important to note that, since it’s a relatively new asset class, there are only a handful of publicly-traded Canadian companies in this space.
But the pool gets a bit bigger if you add US-based companies to the mix as well as international companies that trade in OTC markets.
1. Pond Technologies Holdings Stock
Tech: Trapping carbon dioxide with algae-filled vats
Pond Technologies employs one of nature’s most efficient carbon-capturing agents: Algae.
The company grows Algae in vessels they call bioreactors, and they divert gas directly from the smokestack of industries to these vessels to grow the algae.
The company partners up with businesses and takes care of the whole installation and maintenance elements of these bioreactors. Their partner companies get carbon capture credit.
And the best part is that the company makes algae a revenue stream for a business, which they handle.
It’s an old company and has been around for almost five decades. The stock, which is currently nano-cap, wasn’t always as run down as it is now.
But its current status as a nano-cap penny stock also offers excellent growth opportunities.
2. Delta Cleantech Stock
Tech: Carbon dioxide capture (proprietary technology)
As a self-proclaimed leader in the carbon capture market, the company currently has a few proprietary technologies and solutions to its name.
Its carbon dioxide capture technology is designed to reduce cost, and it also offers captured carbon use solutions. One of its subsidiaries is engaged exclusively in the carbon credits business.
The company has established an impressive global presence despite its small market cap.
The stock, which is relatively new (Aug 2021), has mostly gone downhill after a small post-inception growth period.
But the company can thrive if the Canadian government starts imposing severe carbon credit taxes and penalties.
3. Advantage Energy Stock
Tech: Oil and gas company
While it’s not purely a carbon capture company, it’s on this list because it has made promising strides in this arena, especially within the Canadian energy sector.
The company has a subsidiary (called Entropy) dedicated to carbon capture. It has also developed a proprietary technology with a patent pending.
It managed to sequester 16,482 tonnes of carbon dioxide from one of its gas plants in 2020 alone.
The stock is also a fraction of what it used to be in its glory days. However, it has offered two growth spurts since 2013 and grew its market value by over 200% and 500%, respectively.
There are several other carbon capture companies in Canada, but many of them are not publicly listed.
4. Aker Carbon Capture Stock
Tech: AdvancedCarbon Capture Technology
This Norway-based company has been implementing its carbon capture technologies on a commercial scale since 2009 and has over 50,000 proven operating hours under its belt.
It has tested its tech on seven different flue gases and in at least six different industries. Most of its projects have been in Europe and a few in North America.
The most substantial of their installation has a carbon capture capacity of about 2 million tonnes a year.
The stock has been trading on the open market since March 2021 and saw a decent growth phase (about 144%) before sliding down.
However, this stock looks relatively more promising compared to other carbon capture stocks on this list.
How To Buy Carbon Capture Stocks In Canada
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The best carbon capture stock list is relatively small right now, but as the world moves towards a greener future, this may change, and we may see many of these companies joining different stock exchanges.
The most natural entry point for many future carbon capture companies (especially in Canada) would be as subsidiaries of energy companies which may leverage the market position of the parent company.
If you want to pursue responsible investing at a relatively broader scale, you may consider investing in some ESG ETFs.