SECTOR FOCUS – Q4 2024: BIOCARBON’S DECARBONATION POTENTIAL

The production of biocarbon, also known as vegetable charcoal, is recognized as a strong decarbonation tool by the IPCC (Intergovernmental Panel on Climate Change), that can also improve food, water or soil quality. It is also called biochar, typically for its agricultural soil use case.

Biocarbon is produced by heating organic matter in oxygen-limited environments. Its  value chain can be highly sustainable because  i) biocarbon production can use low value biomass as feedstock such as agricultural waste or wood obtained from the thinning of trees[1] ii) when used as soil amendment,  biocarbon sequesters CO2 for hundreds (to thousands) of years, avoiding its release from organic biomass in decomposition iii) when used as an input in an industrial process like ferro-alloy or cement production, it avoids CO2 emissions[2] iv) the pyroligneous juice, a co-product from biocarbon production, can be used as a heat source for the industrial process or as an input to produce biofuel[3]. Biocarbon can also be an efficient food or water quality enhancement tool[4].

The potential of biocarbon for decarbonation could be swiftly realized, as it is based on well-established technologies (thermolysis or pyrolysis) that industrials such as Haffner Energy, Soler Group or Groupe Bordet have been using for decades. Such historical energy industrials are diversifying toward biocarbon production.

Biocarbon’s environmental potential in various industries is feeding its demand.

First and foremost, large corporates are interested in the scientific properties of its output, such as Vicat Group for cement manufacturing[5] and ArcelorMittal for steelmaking processes[6].

Second, the carbon credit market might represent a significant upside, since its demand is expected to grow at least at a 30% CAGR in volume between 2023 and 2030[7] and at a 39% CAGR in value over the same period[8]. For example, the carbon market is a core target of a biochar facility aimed at sequestering 17k tons of CO2 per year that should open in the UK in 2025[9].

In the end, the biocarbon market is expected to grow at 13% CAGR between 2024 and 2032 to reach $2.1Bn[10]. This dynamic not only attracts historical players with technical expertise (see above), but also new pure players like NetZero or Novocarbo. Their absence of legacy, the openness of the core biocarbon production technology, the interest of deep pocket investors[11] and the willingness of large institutions to sign off-takes are creating opportunities for them. For instance, the startup Airex Energie is scaling-up thanks to an alliance with a waste management specialist (Suez) and the wood industry (Groupe Rémabec) to secure the feedstock, aimed at serving Microsoft’s demand for carbon removal credits[12]. Indeed, long-term access to sustainable biomass is a key challenge[13].

In conclusion, there are interesting SMEs to watch in the biocarbon industry, building on a mature technological environment and a highly sustainable value chain to structure. All the more that the IPCC (Intergovernmental Panel on Climate Change) highlights that the sector needs more investment to build large-scale facilities and thus decrease production costs[8].

[1] Sources: Biocarbon International Initiative, Soler Group

[2] Source: IPCC (Intergovernmental Panel on Climate Change) Climate Change 2023 Report

[3] Sources: Biocarbon International Initiative, Haffner Energy

[4] Sources: Biocarbon-based water treatment systems as a potential low-cost and sustainable technology for clean water provision (W. Gwenzi, N. Chaukura, C. Noubactep, F. N. D. Mukome), Advances and prospects for biocarbon utilization in food processing and packaging applications (T. Bhattacharya, A. Khan, T. Ghosh, J. T. Kim, J.W. Rhim)

[5] Source: Vicat

[6] Source: ArcelorMittal

[7] Source: Bloomberg

[8] Source: Grand View Research

[9] Source: PM Today

[10] Source: Fortune Business Insight

[11] Examples of General Partners that have invested in the biocarbon industry: SWEN, Cycle Capital, STOA, Congruent Ventures, Climentum Capital

[12] Source: Suez

[13] Source: IPCC (Intergovernmental Panel on Climate Change) Climate Change 2023 Report

[14] Source: IPCC (Intergovernmental Panel on Climate Change) Climate Change 2023 Report

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