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Top 5 Carbon Capture Stocks To Invest In (February 2024)

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Cutting Emissions Is Not Enough

Regarding climate change, a lot of attention goes to reducing emissions. It can be done through higher efficiency or changing things, like making power from solar panels and wind turbines or using electric cars.

This approach alone might fail at having the wanted impact on climate. One reason is that emissions are still high, and consumption growth means additional capacity might barely keep emissions stable but not stop any time soon. In fact, an IEA (International Energy Agency) report states, “Global CO2 emissions rebound quickly after 2020 and then plateau, with declines in advanced economies offset by increases elsewhere.”

Source: IEA

Another reason is that all the carbon has already been released since the beginning of the industrial revolution. This is not going away and might be enough to cause significant warming already.

Putting Back The Genie In The Bottle

This is why growing attention is being paid to carbon capture technologies. By actively taking carbon from the air and removing it from the atmosphere this could be a way to fully reverse the consequence of fossil fuels burning, past, present, and future.

The tricky part is that it is a very energy-consuming process. So, of course, the energy source itself needs to be carbon neutral.

Currently, 2 types of carbon are being explored. The first one is to capture concentrated carbon when it is emitted, like in the fume of a coal power station. The second is to capture carbon from the air directly.

In both cases, the carbon captured can be used to create carbon-neutral fuel or permanently sequestrated in a stable form. You can also read more about the various carbon capture technologies in this article by Energy Tracker.


Top 5 Carbon Capture Stocks

Many companies involved in carbon capture are also massive oil & gas companies. In a way, it makes sense, as they are companies with a lot of expertise on the topic and great technical skill at manipulating hydrocarbons. However, as these companies are also often large carbon emitters, they have not been included in this list, which will have only companies focused on actually reducing emissions.

1. Bloom Energy Corporation

finviz dynamic chart for  BE

Bloom Energy's solid oxide electrolyzer technology converts natural gas, biogas, or hydrogen into electricity without combustion, resulting in low or no CO2 emission. The company was founded by Jim McElroy, the developer of the first hydrogen fuel cell in the 1960s, for NASA's Gemini program.

It can also be used for carbon capture by producing an almost pure carbon stream that can easily be captured and stored away. The company has clients in multiple industries: Walmart, The Home Depot, Yahoo, Honda, FedEx, and many more.

Source: Bloom Energy

By 2023, Bloom is exiting the small-scale demonstration stage and entering the phase of 10 MW of projects completed by Q1 2024 before taking on larger projects.

The company is growing quickly and targets a 30-35% CAGR for 2031 in revenues. It is working on turning profitable, with its products having dropped in price significantly, from $3,864 in 2017 to $2,653 in 2022, reflecting economies of scale and technological improvement.

In the long run, the company's zero-carbon energy should also benefit from increasing carbon taxes on other power sources.

As a leader in electrolyzing technology, Bloom is both a hydrogen and a carbon capture company, able to benefit from the trend of decarbonization of the energy grid and the growing demand for electricity or transportation, digital applications, and industrial processes.

2. LanzaTech Global, Inc.

finviz dynamic chart for  LNZA

LanzaTech focuses on turning carbon into useful products instead of greenhouse gas emissions. That carbon can come from industrial off-gas emissions, organic wastes, or direct electrolysis and capture technologies.

By using carbon this way, LanzaTech provides a new market for carbon capture besides carbon credits. It also makes possible the vision of a fully circular economy, where carbon emissions are immediately turned back into useful products. Another advantage is that by producing the same feedstocks as obtained from hydrocarbon, Lanzatech products do not need the final user to redesign their factories and assembly lines.

Source: LanzaTech

The company has operated commercial-scale plants since 2018, producing aviation fuel, purified ethanol, PET, polyethylene, and glycol. On average, this means that 2 tons of CO2 got removed for every ton of products made with LanzaTech's Carbon Smart.

The process relies on bacteria turning waste into useful compounds, with LanzaTech, a leader in fermentation technology, as well as an in vitro prototyping platform and the world’s first anaerobic biofoundry.

This ability to create new bacteria strains also allows LanzaTech to retrofit existing plants into a new type of chemical production, depending on new needs or market prices for these molecules.

Source: LanzaTech

The company's business model is to license its technology (one-time off revenues) and then collect royalties and licensing fees on a regular basis. This makes it a very capital-light business model, letting the final industrial clients like Danone or BASF take on the capital expenditure for the plants. Over time, the large majority of the revenues and earnings will come from recurring revenues, giving predictability to the company's cash flows.

Source: LanzaTech

The plants are profitable, with an average of $25M/year of gross cash margin per plant for a capex cost of $125M. As a result, LanzaTech's first customer is now building its 4th plant.

Still, the company is far from profitable currently, registering a net loss of $63.3M in Q1 2023 for total revenues of $9.6M, up 23% from a year before. The company operates 5 plants, is building 4 more, of which 3 should start in 2023, and has up to 90+ other projects at various stages of development.

Overall, LanzaTech has just demonstrated the efficiency of its technology and is starting to expand and deploy its fermentation plants worldwide. This could lead to explosive growth, especially with brands worldwide getting interested in more green sourcing for their products. The need for financing might be a risk for the company, but it might also manage to get help from its industrial partners or raise more money thanks to its strong growth and pipeline of new projects.

3. FuelCell Energy, Inc.

finviz dynamic chart for  FCEL

FuelCell Energy offers 2 different technologies to the energy markets: carbonate and solid oxide fuel cells. Carbonate is more adapted to capture carbon from an external source, like a power plant. Solid oxide is similar to Bloom Energy's technology systems, generating power from gas or hydrogen without combustion, allowing for easy capture of the carbon eventually emitted.

Source: FuelCell

The company has generated over 13 million MWh for clients like Pfizer or local utilities. This method of energy production avoids more carbon emissions than any other, including “classic” renewables like wind and solar, up to 2-3x compared to rooftop solar.

Source: FuelCell

When used in a powerplant, FuelCell systems allow for an increase in the plant's output by 20% while also capturing the previously emitted carbon, as long as it has a source of industrial exhaust available.

In Q1 2023, the company registered $38.3M in revenues, up 134% from a year before. Still, the net loss was large, standing at $33.9M. With a total cash amount of $353M, the company has a comfortable cash runway but will need to improve profitability in the years to come.

As it operates at a smaller scale than competitors like Bloom Energy, FuelCell Energy is both riskier and more likely to deliver larger returns in case of turning profitable. So, it might be of more interest to investors looking for the largest possible growth potential.

4. Aker Carbon Capture ASA

This Norwegian company is solely dedicated to carbon capture. Its priority targets are industries like cement, gas-to-power, blue hydrogen (hydrogen produced from gas), and biowaste-to-energy.

It has already built 5 carbon capture plants, with a 4.1 million TPA CO2 capacity, including the famous “Urban Ski Slope” on top of a power plant in Copenhagen.

The company is also finishing plants in multiple locations:

  • Waste to Energy plant in the Netherlands, 100,000 TPA CO2 to be delivered at the end of 2023.
  • NORCEM HEIDELBERG MATERIALS in Norway, 400,000 TPA CO2 to be delivered in 2024.
  • 3 projects with UK utilities, 5 million TPA CO2.

The company has registered a solid 99% revenue growth year-to-year in Q1 2023. The negative EBITDA, somewhat stable since 2021, was mostly driven by high sales, tender activity, and R&D projects.

While other solutions are often limited to specific setups, like the presence of concentrated industrial CO2 flux, Aker's solution can work in most setups. This flexibility is illustrated by the Norcem contract, which in 2021 was the first in the world for carbon capture at a cement factory.

So, if emissions stay high and fossil fuels are still in use for many applications, technologies like Aker's will likely be the only solution to reduce the world's carbon emissions.

5. Delta CleanTech Inc.

Delta is a Canadian company active in CO2 capture, blue hydrogen, carbon credit marketing, and purification of glycol solutions. In practice, all the company's revenues in 2022 were from carbon capture.

The company aims to capitalize in the beginning of 2023 of the Canadian carbon tax at $50/ton, which will rise to $170/ton by 2030. This adds a 50% tax incentive for carbon capture projects.

This is a much smaller company, with a market capitalization below $2M at the time of writing of this article. Its disclosures are also more limited, but it commented that it is currently working on 5 projects, 2 in Canada and one each in the USA, China, and Kazakhstan.

The company is not profitable, with a net loss of CAD2.8M in 2022 for total revenues of CAD1.4M. It is nevertheless not in immediate danger, as it owns 2.3M CAD in current assets for only 0.5M CAD in total liabilities.

If the carbon capture market picks up, especially in Canada, Delta could be able to turn around and reverse its stock price fortune after a more than 90% decline since the end of 2021. So, this might be among the highest risk and reward profiles available to investors among the carbon capture stocks.

Jonathan is a former biochemist researcher who worked in genetic analysis and clinical trials. He is now a stock analyst and finance writer with a focus on innovation, market cycles and geopolitics in his publication 'The Eurasian Century".