HSBC'22 Nationals Case, 1st Round

IES852
October 2021
Carbfix: Storing CO2 Forever
Jordan Mitchell
Throstur Olaf Sigurjonsson
Ahmad Rahnema Alavi
Introduction
In March 2021, as many people around the world were still grappling with COVID-19, many
pointed to the next big crisis facing humanity: climate change. The team at Iceland’s Carbfix – a
carbon storage upstart born out of the culmination of more than 15 years of work by universities
and parent company Reykjavik Energy – was confident it had a solution: storing carbon dioxide
(CO2) safely as minerals in basalt rock and thus eliminating it from the earth’s atmosphere.
The Carbfix solution had certainly piqued the interest of scientists, journalists, politicians and
activists, having attracted worldwide press by the BBC, NBC, Newsweek, The Economist and
National Geographic and receiving visits from a wide range of notable figures including David
Attenborough, German Chancellor Angela Merkel and Indian Prime Minister Narendra Modi.
Kristinn Ingi Lárusson, Head of Business Development for Carbfix, had joined the company in July
2020 with the mandate to commercialize the novel CO2 storage system. Although Carbfix dated
back to 2007 as a research project, it had only been established as a separate legal entity in
January 2020. With his four colleagues, several of whom had been with the research project
since the early stages, Kristinn was focusing on three main options for meeting the dual
objectives of reducing the earth’s CO2 while developing sustainable revenue streams: licensing
the technology to other countries for onsite deployments near CO2 emitters; accelerating the
direct air CO2 capture and storage system; and developing a storage hub in Iceland where CO2
could be imported and stored.
So far, the financing for the new upstart had come from a mix of its parent company and EU
project funding and grants. The team also needed to consider the European Union Emission
Trading Scheme (EU ETS) mechanism, a “cap and trade” system that permitted carbon units to
This case was prepared by Jordan Mitchell, case writer, and Throstur Olaf Sigurjonsson, professor at the University of Iceland,
under the supervision of Professor Ahmad Rahnema Alavi. October 2021.
IESE cases are designed to promote class discussion rather than to illustrate effective or ineffective management of a given
situation.
This case was written with the support of the Fuel Freedom Chair for Energy and Social Development, IESE.
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F-974-E Carbfix: Storing CO2 Forever
be sold in order to meet CO2 reduction targets. The price had recently surged from a low of
€15.43 ($18.35) in March 2020 during the early days of the Covid-19 pandemic to past €40
($47.50) by mid-March 2021.1
What was the best path forward to deliver on its goals of reducing carbon while building a viable
commercial entity?
The Carbfix Idea
The Carbfix idea dated back to 2005 when Iceland’s then-President Olafur Grimsson contacted
Sigurdur “Siggi” Reynir Gislason, a geochemistry professor at the University of Iceland to advance
Carbon Capture & Storage (CCS) as an avenue to meet Iceland’s commitment to reduce CO2
emissions under the Kyoto protocol.2
The initiative evolved to Carbfix, a joint research program
established in 2007 between Sigurdur at the University of Iceland; Dr. Einar Gunnlaugsson from
Reykjavik Energy; Dr. Wally Broecker from the Earth Institute at Columbia University (U.S.); and
Dr. Eric Oelkers from the CNRS, National Scientific Research group (Toulouse, France).3
The
original goal of the project was to study the feasibility of permanently storing CO2 in basalt rock,
essentially burying CO2 gas and eliminating it on a permanent basis. Upon kicking off the project,
the team along with over 15 PhD and MSc students, as well as several geoscientists, engineers
and tradespeople from Reykjavik Energy, carried out experiments between the lab and Reykjavik
Energy’s in-progress Hellisheidi plant. The funding for the early stages of the project largely came
from Reykjavik Energy.
Reykjavik Energy (“Orkuveita Reykjavíkur” in Icelandic) dated back to 1909 and had grown to
become one of the country’s main electricity generators and distributors, and water utilities. It
operated two geothermal plants, one hydropower station, supplied hot and cold-water services
across 22 municipalities and ran the open fiber network in the country’s most densely populated
areas. The company was led by CEO Bjarni Bjarnason and was owned by three municipalities:
Reykjavik (93.5%), Akranes (5.5%) and Borgarbyggd (1%). The organization’s vision was to
“enhance the quality of life, guided by the principles of social responsibility,” promoting three main
values – foresight, efficiency and integrity – across all of its subsidiaries.4
See Exhibit 1 for more
information about Reykjavik Energy.
Carbfix Technology to Permanently Store CO2
The Carbfix storage technology was based on feeding CO2 gas into the bottom of a small tower.
Cold water was fed at the top creating a type of “soda stream” effect. The dissolved CO2 was
then pumped down a reservoir well – covered by a boring dome – to a minimum of 500 meters
and a maximum of 2,000 meters depending on the site. The CO2 reacted with basaltic rock,
creating carbonates and filling the porous parts of the basalt thus transforming within two years
to the solid crystalline mineral, calcite. The process essentially locked away the CO2 forever.
1 EUA Futures, Ice Futures Europe, https://www.theice.com/products/197/EUA-
Futures/data?marketId=5693906&span=3. Accessed March 10, 2021
2 Sigurdur R. Gislason, “Acceptance of the 2018 C.C. Patterson Award to Sigurdur R. Gislason,” Geochimica et
Cosmochimica Acta, 246, 2019, pp. 591-593, https://notendur.hi.is/sigrg/. Accessed January 23, 2021.
3 Idem.
4 Reykjavik Energy website, https://www.or.is/en/about-or/operations/values/. Accessed January 23, 2021.
2 IESE Business School-University of Navarra

Carbfix: Storing CO2 Forever F-974-E
Basalt is one of the most common rocks in the world and comes from volcanic activity. It is
considered to be highly reactive and porous, making it ideal for storing CO2. See Exhibit 2 for a
diagram of the Carbfix storage system.
The mixing of CO2 and basalt was a naturally occurring process in the world – however, instead
of taking hundreds to thousands of years for this to occur, Carbfix’s scientists proved the process
could work within two years. When performed correctly, the process was deemed as being
stable and safe and permanently eliminated CO2 from the earth’s atmosphere. The only possible
downside was that in certain circumstances where CO2 was pumped into a well at large volumes,
there was an increased risk of higher seismicity and induced low-magnitude earthquakes.
Carbfix’s Evolution
Carbfix had been through several stages since its “preparation phase” from 2007 to 2011, when
scientists used lab experimentation, design, field studies, modeling and monitoring to ensure
the technology and equipment worked for the intended purpose of permanently storing CO2.
The team also used the preparation phase to attain the required licensing from local and national
bodies. Ten permits were issued for field studies.5
Pilot Phase: Carbfix1. The team entered the first pilot phase from 2011 to 2014, giving birth to
the “Carbfix1” site at Reykjavik Energy’s subsidiary ON Power at the Hellisheidi plant. During the
first three months of 2012, the project injected 175 tons of pure CO2 at 500 meters of depth and
later in the year, injected another 73 tons of a mix of CO2 and hydrogen sulfide (H2S).6
The
rationale for including H2S in the tests was to see if the CO2 storage method could also be applied
to H2S. Public pressure had been mounting since many residents close to the geothermal power
plants had complained of the foul smell and health impacts of excessive H2S. Furthermore,
scientists had found increased H2S in nearby lakes.7
As such, the name “Sulfix” emerged and was
included under the broader Carbfix1 initiative.
The team monitored the injections closely and by 2014, were able to conclude that 95% of the
injected CO2 and H2S had mineralized (and thus become permanently stored) in less than two
years.8
The findings were published in the academic-reviewed journal Science, with the playful
heading “Inject, baby, inject!”9
The biggest surprise to the team was that the mineralization
happened within two years, since the team of scientists using computer modeling had originally
thought it would take over a decade to solidify.10
Edda Sif reflected on moving from the “lab” to
the “field”:
Once we started injecting, it was very exciting since we had all put our hearts, blood and tears
into the project. We were temporarily delayed at several points in time because some of our
5 “Our Story,” Carbfix, https://www.Carbfix.com/our-story. Accessed January 23, 2021.
6 Idem.
7 S. Olafsdottir, S.M. Gardarsson, H. O. Andradottir, “Natural Near Field Sinks of Hydrogen Sulfide from Two Geothermal
Power Plants in Iceland,” Atmospheric Environment, Vol. 96, October 2014, 236-244,
https://www.sciencedirect.com/science/article/abs/pii/S135223101400569X. Accessed January 30, 2021.
8 “Our Story,” Carbfix, https://www.Carbfix.com/our-story. Accessed January 23, 2021.
9 Juerg M. Matter et al., “Rapid Carbon Mineralization for Permanent Disposal of Anthropogenic Carbon Dioxide
Emissions,” Science, June 10, 2016, Vol. 352, Issue 6291, pp. 1312-1314,
https://science.sciencemag.org/content/352/6291/1312. Accessed January 30, 2021.
10 Eli Kintisch, “Underground Injections Turn Carbon Dioxide to Stone,” June 10, 2016, Science,
https://www.sciencemag.org/news/2016/06/underground-injections-turn-carbon-dioxide-stone. Accessed January 30, 2021.
IESE Business School-University of Navarra 3

equipment was damaged, but we were able to get the project back on track. We were all so
incredibly happy that we could mineralize CO2 so quickly. Then, we focused on scaling up.11
Industrialization Phase: Carbfix2. The second main phase kicked off in 2014 when the
organization decided that it would apply the learning at its own Hellisheidi geothermal plant.
Sandra Ósk Snæbjörnsdóttir, head of storage at Carbfix, commented:
Hydrogen sulfide continued as a big problem and if it wasn’t addressed in some way then
Reykjavik Energy would have had challenges with the public. Luckily, the scientists working
on Carbfix and Sulfix said “we have a solution!” and that really gave a push to industrialize.12
Dubbed “Carbfix2,” Reykjavik Energy built a full-scale carbon capture plant connected to two of
Hellisheidi’s six geothermal high-pressure turbines. See Exhibit 3 for pictures of the site. At the
end of 2014, Carbfix2 was able to inject 2,400 tons of CO2 and 1,300 tons of H2S, accounting for
10% and 22% of the plant’s emissions respectively.13
The team made several adjustments
throughout the early stages, including a change in the water flow. By the end of 2017, injections
had grown to 10,200 tons of CO2 and 4,900 tons of H2S, representing 34% and 68% of the plant’s
emissions respectively.14
The team had estimated the complete cost of capture and storage to
be $24.80/ton15
, which was lower than the average European Union Emission Trading Scheme
(EU ETS) Futures price on the ICE Exchange (approximately €40/ton or $47.50/ton in March
202116
).
Continued Innovation. The team continued to look for novel ways to apply its storage technology
and in 2017, began collaborating with the Swiss clean-tech company, Climeworks, a specialist in
capturing CO2 directly from ambient air. Climeworks installed a small direct air capture (DAC)
facility at the Hellisheidi plant as part of Carbfix2 to capture about 50 tons/year.17
The pilot for
direct air capture combined with Carbfix’s storage method was seen as being a crucial innovation
since the direct air capture facilities did not need to be installed at the site of a carbon emitter,
but rather anywhere basalt rock existed.
In October 2018, Carbfix received €3.2 million ($3.7 million) from a total grant of €16 million
($18.5 million) for the GECO (“Geothermal Emission COntrol”) project intended to apply the
Carbfix technology to four sites in Europe with distinct features: an Icelandic basalt reservoir; an
Italian gneiss reservoir; a Turkish volcano-clastic reservoir; and a German sedimentary reservoir.18
The funding for the GECO project was for five years and as of 2021 was half way spent.
11 Edda Sif Aradóttir. Interview by case writers. January 15, 2021.
12 Sandra Ósk Snæbjörnsdóttir. Interview by case writers. January 15, 2021.
13 Bergur Sigfússon et al., “Reducing Emissions Of Carbon Dioxide And Hydrogen Sulphide at Hellisheidi Power Plant in
2014-2017 and the Role of Carbfix in the 15th International Symposium on District Heating and Cooling Hellisheidi Power
Plant in 2014-2017 and the Role of Carbfix in Achieving the 2040 Iceland Climate Goals,” Energy Procedia, 2018, pp. 135-145.
14 Idem.
15“Our Story,” Carbfix, https://www.Carbfix.com/our-story. Accessed January 23, 2021.
16 EUA Futures, ICE Exchange, https://www.theice.com/products/197/EUA-Futures/data?marketId=5693906&span=1.
Accessed January 31, 2021.
17 Maurice Smith, “Climeworks Captures CO2 from Air, Turns It to Rock in World First,” JWN Energy, October 20, 2017,
https://www.jwnenergy.com/article/2017/10/20/climeworks-captures-co2-air-turns-it-rock-world-fi/. Accessed January 31, 2021.
18 Alexander Richter, “Carbfix Project in Iceland Wins EUR 16m EU Geothermal Emissions Control Funding,” Think
Geoenergy, October 1, 2018, https://www.thinkgeoenergy.com/Carbfix-project-in-iceland-wins-eur-16m-eu-geothermal-
emissions-control-funding/. Accessed January 31, 2021.

The other research and development activity that had begun in the early stages of Carbfix was
related to using seawater for carbonation, given that much of the world’s basalt rocks were
under the seabed. Within the lab, the Carbfix team had successfully dissolved CO2 in seawater
and were scheduled to start a field demonstration site within 2021. Bergur Sigfússon, Carbfix’s
Head of CO2 Capture and Injection, talked about the importance of seawater:
In everything we do, we have to be able to complete the formal research and be able to state
with scientific accuracy what we’re doing will work. We have the scientific grounding our
solution will work with seawater, but we’re at the stage where we need to test it. By way of
comparison, with seawater, we’re roughly at the stage where we were with the Carbfix
injection site in 2011.19
Kári Helgason, Carbfix’s head of research and innovation, talked about seawater and innovation
more broadly:
An innovation like using seawater instead of fresh water would be a major breakthrough. The
company is innovation-driven and we pioneer everything from first principles. We need to
continually push ourselves to go outside our comfort zone and inject CO2 into different rock
formations. We need to innovate all the time.20
As of early 2021, the company had two patents pending for abating CO2 and H2S in a geological
reservoir21
and had at least two more in process.
Carbfix as a Subsidiary. In January 2020, Carbfix became its own legal entity as a wholly owned
subsidiary of Reykjavik Energy with the goals of furthering the reach of the technology to reduce
CO2 while ensuring that Carbfix activities would not interfere with the core activities of the
parent company. In a press release from late 2019, Reykjavik Energy representatives wrote:
Carbfix has received global attention in recent months and years, especially with respect to
applicability to reducing emissions from various power and industrial processes. However,
investing in climate projects comes with a potential risk. Therefore, one of the goals of
establishing the new subsidiary around Carbfix is to limit the financial risk of Reykjavik Energy
in relation to new Carbfix projects while still continuing Carbfix development and scale-up in
Iceland and abroad.22
Since the outset of the project, scientists involved with Carbfix had published over 80 academic
papers and won prestigious awards such as the Keeling Award (2020), Ruggero Bertani European
Geothermal Innovation Award (2020) and Energy Globe Award (2019) among other Icelandic
and European accolades. The company had been featured in numerous publications such as the
BBC, NBC, Newsweek and The Economist, and featured in documentaries such as David
Attenborough’s “Climate Change-The Facts,” the Leonardo DiCaprio-narrated film, “Ice on Fire,”
and Zac Efron’s “Down to Earth” series, among many other smaller documentaries and news
programs.
19 Bergur Sigfússon. Interview by case writers. January 15, 2021.
20 Kári Helgason. Interview by case writers. December 23, 2020.
21 “A Method of Abating Carbon Dioxide and Hydrogen Sulphide,”
https://patents.google.com/patent/WO2020234464A1/en?q=Carbfix&assignee=iceland&oq=Carbfix+iceland. Accessed
January 31, 2021.
22 “Carbfix as a Subsidiary,” Carbfix Website, November 27, 2019, https://www.Carbfix.com/Carbfix-as-a-subsidiary.
Accessed January 31, 2021.

The subsidiary had five full-time employees and regularly consulted with 12 additional Reykjavik
Energy employees for engineering, project management, finance, communications, marketing,
legal and strategic management support.
Carbon Capture & Storage (CCS) Industry
The Carbon Capture & Storage (CCS) industry encompassed three major activities: capturing,
transporting and storing CO2. The economic size of the industry was $5 billion in 2019; growth
prospects were projected at more than 10% CAGR over the next 5 years.23
Traditionally, the CCS industry had been associated with oil and gas as a mitigant to reduce
carbon emissions. The Global CCS Institute – comprising oil and gas, industrial organizations,
major governments and cleantech companies (including Carbfix) – regularly published reports
on the importance of growing the industry stating: “One of the big factors driving CCS growth is
recognition that achieving net-zero greenhouse gas emissions is increasingly urgent.”24
The
institute made a distinction between two types of facilities based on capacity: large-scale
facilities (over 400,000 tons of CO2 per year) and pilot and demonstration facilities.25
The Global
CCS Institute talked about the importance of scale: like most industries, CCS benefits from
economies of scale. Larger scale compression, dehydration, pipeline and storage drive significant
reductions in costs per ton of CO2.26
In traditional CCS deployments, there were three main capture methods: post-combustion (CO2
separatedaftertheemissions),pre-combustion(gasifyingfueltoseparateCO2)andoxy-fuel(burning
fuel in pure oxygen).27
For transporting, the gas was typically compressed into fluid and then moved
via pipelines, ships, trains or trucks.28
For storage, the liquid was then injected into rock formations,
which were usually former oil and gas reservoirs, saline formations and coal beds.29
Some scientists believed one of drawbacks of traditional large-scale CCS was that CO2 leakage
from the site was difficult to measure, especially over long periods of time without adequate
monitoring.30
And, while the Intergovernmental Panel on Climate Change (IPCC) argued that CCS
would be a necessary part of the solution to lower global temperatures, IPCC scientists talked
about limitations:
There is uncertainty in the future deployment of CCS, given the limited pace of current
deployment, the evolution of CCS technology that would be associated with deployment, and
the current lack of incentives for large-scale implementation of CCS. Given the importance of
CCS in most mitigation pathways and its current slow pace of improvement, the large-scale
23 Carbon Capture and Storage, https://www.polarismarketresearch.com/industry-analysis/carbon-capture-and-storage-
market. Accessed October 18, 2020.
24 “Global Status of CCS 2020,” Global CCS Institute, p. 11, https://www.globalccsinstitute.com/resources/global-status-
report/. Accessed January 23, 2021.
25 Idem.
26 “Global Status of CCS 2020,” Global CCS Institute, p. 21, https://www.globalccsinstitute.com/resources/global-status-
report/. Accessed January 23, 2021.
27 Vincent Gonzales, Alan Krupnick, and Lauren Dunlap, “Carbon Capture and Storage 101,” Resources for the Future,
May 6, 2020, https://www.rff.org/publications/explainers/carbon-capture-and-storage-101/. Accessed February 6, 2021.
28 Idem.
29 Idem.
30 Adriano Vinca, Johannes Emmerling, Massimo Tavoni, “Bearing the Cost of Stored Carbon Leakage,” Frontiers in Energy
Research, May 15, 2018, https://www.frontiersin.org/articles/10.3389/fenrg.2018.00040/full. Accessed February 6, 2021.

deployment of CCS as an option depends on the further development of the technology in
the near term.31
An important aspect in the industry was the regulatory and carbon trading environments available
in each jurisdiction. In Europe, the market for emissions trading was the European Union Emissions
Trading System (EU ETS), covering all EU countries as well as Norway, Liechtenstein and Iceland.32
Operating under the “cap and trade” principle, CO2 emitters were given a cap as to their total
emissions, which was decreased over time to ensure a decline in overall emissions. If an emitter
were under the cap, they could sell their carbon credits and if they were over the cap, they had to
buy carbon credits.33
The government of Iceland was in the process of passing a law which would
extend the granting of ETS carbon credits to old oil reservoirs. The EU ETS Futures price had
experienced a low of €15.43 (ISK 2,200) per unit and a high of €33.29 (ISK 5,050) on the ICE Futures
market.34
See Exhibit 4 for historical EU ETS Futures prices in Iceland.
Main Players in the CCS Industry
The traditional CCS players were oil and gas majors (Shell, Chevron, Exxon Mobil, BP, Total,
ADNOC and China National Petroleum Corporation) and other companies involved in the oil and
gas industry (Fluor, Carbon Engineering, Dakota Gasification, Aker, Linde among others). The
International Association of Oil & Gas Producers (IOGP) had logged over 90 large-scale CCS
projects around the world that were operating or planned: Europe (24 projects), Americas (25),
Asia-Pacific (14), Middle East and Africa (5).35
Most CCS projects had multiple industry
collaborators. See Exhibit 5 for a map of the projects.
While Carbfix did not necessarily view many of the projects as “competition,” the team
referenced projects in the North Atlantic such as: Northern Lights (Norway), Acorn (UK) and
Porthos (Netherlands).
Northern Lights. The Northern Lights project was part of the Norwegian government’s larger
initiative to develop a large-scale CCS system by 2024 and involved the collaboration between
Equinor (Norwegian government-owned oil and gas company), Shell and Total.36
The project
involved capturing CO2 from two plants (waste and cement), transporting the CO2 in liquid by
ship and permanently storing it in the North Sea.37
Phase 1 of the project was aimed at
commencing in 2022 and eventually storing up to 1.5 million tons of CO2.38
The overall cost of
31 “Global Warming of 1.5 ºC,” Intergovernmental Panel on Climate Change (IPCC), 2018,
https://www.ipcc.ch/sr15/chapter/chapter-2/. Accessed January 30, 2021.
32 EU ETS, European Union, https://ec.europa.eu/clima/policies/ets_en. Accessed March 7, 2021.
33 EU ETS, European Union, https://ec.europa.eu/clima/policies/ets_en. Accessed March 7, 2021.
34 ICE Futures Europe, EUA Futures, https://www.theice.com/products/197/EUA-
Futures/data?marketId=5693906&span=3. Accessed March 7, 2021.
35 “Global CCUS Projects,” International Association of Oil & Gas Producers (IOGP), May 2020,
https://www.iogp.org/bookstore/product/map-of-global-ccs-projects/. Accessed February 6, 2021.
36 Northern Lights Website, About the Project, https://northernlightsccs.com/en/about. Accessed February 6, 2021.
37 Idem.
38 Idem.

the project including all phases was estimated at 25.1 billion kroner ($3 billion)39
and the initial
investment was 6.9 billion kroner ($810 million).40
Acorn. The Acorn project was led by Pale Blue Dot Energy with funding from the governments of
the UK and Scotland, as well as oil and gas companies Chrysaor, Shell and Total.41
The project was
based at the St. Fergus gas terminal in Scotland and it intended to utilize the existing gas pipelines
to transport CO2 to a storage facility 2.5 kilometers undersea about 100 kilometers from St.
Fergus.42
Phase 1 of the project was planned for 2023 to store 300,000 tons per year of existing
CO2. Further expansion included transporting CO2 from several sites to grow to 2 million tons per
year.43
The cost of the first phase was estimated at £276 million ($380 million).44
Porthos. The Porthos project was a collaboration between Dutch government-owned companies
Port of Rotterdam Authority, Gasunie and EBN.45
The three companies planned on supplying
their CO2 and shipping them from the Port of Rotterdam 20 kilometers offshore where the CO2
would be injected 3 kilometers under the sea into an empty gas sandstone reservoir.46
The site
was planned for 2024 to store 2.5 million tons of CO2 per year.47
The cost of the overall project
was estimated to be between €400 and €500 million ($480 to $600 million), with €102 million
($123 million) so far coming from the European Commission.48
In addition to major CCS projects, there were many innovations emerging in each one of the
aspects of capturing, transportation and storage of CO2. Several ideas began in university labs and,
for smaller projects, many were reliant on university, governmental agencies or corporate
sponsors. As such, the business models of smaller projects and enterprises were still in flux.
39 CCS Norway, https://ccsnorway.com/costs/. Accessed February 6, 2021.
40 “Historic investment decision for transport and storage of CO2,” Equinor, May 15, 2020,
https://www.equinor.com/en/news/2020-05-northern-lights.html. Accessed February 6, 2021.
41 Acorn Website, https://theacornproject.uk/about/. Accessed February 6, 2021.
42 Idem.
43 Idem.
44 Angeli Mehta, “Can UK Acorn Carbon Capture Project Grow Into Solution To Industry Emissions?, Reuters Events,
February 25, 2019, https://www.reutersevents.com/sustainability/can-uk-acorn-carbon-capture-project-grow-solution-
industry-emissions. Accessed February 6, 2021.
45 Porthos, https://www.porthosco2.nl/en/project/. Accessed February 6, 2021.
46 Idem.
47 Idem.
48 “102 Million Euros in Funding On The Horizon for Porthos Carbon Storage Project,” Port of Rotterdam, October 2,
2020, https://www.portofrotterdam.com/en/news-and-press-releases/102-million-euros-in-funding-on-the-horizon-for-
porthos-project. Accessed February 6, 2021.

Options to Commercialize Carbfix
The Carbfix team was considering three main options in their path to commercialization:
1. Licensing the technology to other countries for onsite deployments near CO2 emitters
2. Accelerating the direct air CO2 capture and storage system
3. Developing a storage hub in Iceland where CO2 could be imported and stored
All of the options needed to consider the market price of EU ETS carbon credits in relation to the
cost (refer back to Exhibit 4).
Option 1: Licensing and Consulting to Onsite Storage
The first option involved pursuing partners in basalt-rich areas close to CO2 emitters for onsite
storage. The Carbfix team estimated that 4 trillion tons of CO2 could be stored in Europe and
7.5 trillion tons in the U.S.49
There were likely at least 1 million sites in the world for small
deployments. See Exhibit 6 for a global map of the storage opportunities.
Average site capacity could range from 10,000 to millions of tons of CO2 per year with the
average well size likely being around 30,000 tons each. Suitable sites required being
approximately 10 kilometers from the emission source with the ability to create a well into the
basalt rock and a water supply. The main pieces of equipment in the standard set-up were pipes,
a scrubbing tower, pumps and compressors. All pieces of equipment could be procured around
the world as the equipment was used in common infrastructure projects and could be adapted;
for example, an alternative third-party capture process could be installed instead of the
scrubbing tower.
The capital cost of setting up an onsite CO2 storage facility was approximately $25 to $35 per ton
of CO2 or $1.25 million to $1.75 million with the annual operating costs estimated at 20% to 30%
of the site’s revenues for water, electricity, annual maintenance on the equipment and salaries for
monitoring. Electricity requirements were approximately 15 kilowatt/hour (kWh) per ton.50
With
a purer source of CO2 reduced, the capital and operating expenses could be reduced by up to 25%.
Most sites had a useful life of 40 years, with equipment replacement every 10 years. The Carbfix
team had talked about different pricing models, including one-time consultation fees per project
and then ongoing licensing fees for the system and monitoring software on a per ton basis.
In order to find suitable partners, the Carbfix team narrowed down the focus by basalt
availability and countries where CO2 incentives existed such as Sweden, Norway, the U.S. and
Canada. There were several favorable areas in the U.S. that had emitter, basalt and tax
incentives. Since Carbfix had received a lot of international press, many companies had
contacted Carbfix, but the company was starting to do more proactive prospecting based on the
above factors. After initial contact, Carbfix engaged in a feasibility study for the site where they
would evaluate the partner, CO2 emissions, geology, engineering and public support and map
out a rough plan for the site. If the parties were interested in continuing, Carbfix typically
recommended a pilot program whereby the partner would look after the procurement of the
equipment and hiring of a project team. The time commitment from the Carbfix team onsite
49“Where Does It Work?,” Carbfix, https://www.Carbfix.com/Carbfix-atlas. Accessed February 6, 2021.
50 All costs associated with Carbfix options are for illustrative purposes only.

development was estimated to be between 250 and 500 hours spread over six months to two
years. As of early 2021, there were approximately 20 potentially serious partners and another
20 to 30 that had expressed some level of interest.
Edda Sif weighed the pros and cons of the onsite option:
The pros are that it’s the lowest cost, provided the site does not have to transport CO2 for
long distances and is in a favorable area with basalt. Most are fairly straightforward projects
with equipment that is readily available. The major con is that everyone wants to reduce their
emissions but no one wants to pay for it. The dialogue with the site owner or operator takes
time because they’ll need to invest. Furthermore, you usually have to do a lot of permitting
and you need public support, which changes region to region. In order to make a big impact
on CO2 reduction with this option, you need to have hundreds of sites up and running.
There’s no shortage of opportunity for suitable sites. However, each one does take time to
have that dialogue and we’re a small team and can’t do them all at once. We know the
conditions in Iceland but don’t always know the specific territory. So, it might take each site
a couple of years to get to the most efficient operation.51
Option 2: Accelerating Direct Air Capture and Storage System
The second option involved building out more sites with direct air capture technology such as
Climework’s system and Carbfix’s storage capability. The combined system could be
theoretically placed at any site where there was suitable basalt rock since the direct air capture
system essentially pulled CO2 directly from the air. The system worked whereby the air was first
drawn into a collector with a fan and the CO2 was captured on a filter inside the collector. The
temperature was increased to between 80 and 100°C, effectively releasing the CO2 and
collecting the concentrated CO2.52
The size of each site was notably smaller than the onsite
storage option; direct air capture sites were estimated to be between 3,000 and 5,000 tons of
CO2 per year. See Exhibit 7 for a diagram of the Direct Air system.
The capital costs of the direct air capture method far exceeded the onsite method as they were
estimated at $600 per ton or $1.8 to $3.0 million for a typical site, particularly because the
capture equipment – CO2 collectors requiring heat – was more expensive than traditional
capture sites. Operating costs were estimated at about 30% to 40% of the site’s revenues for
water, electricity, annual maintenance on the equipment and salaries for monitoring. Electricity
requirements were about 400 kWh per ton. Higher operating cost were due to the high amount
of energy required to run the CO2 collectors. Since the system was intended to use renewable
energy only, the cost varied greatly around the world. Sites had a useful life of 40 years, with the
need to replace equipment every 10 years.
52 Climeworks, CO2 Removal, https://climeworks.com/co2-removal. Accessed February 6, 2021.

The potential partners for the direct air capture option included industries such as aviation and
automotive, where there were no concentrated CO2 emissions at a particular site. As of early
2021, most of the prospects that were willing to pay the high cost per ton for the direct air
capture and storage method were research and test sites. As such, around the world, there were
very few operational sites using direct air capture since the technology was seen to be in its early
stages of development. Sandra weighed the pros and cons of direct air capture:
CO2 is very diluted in the atmosphere and it requires a lot of energy to capture the CO2. And
because it’s very energy intensive, it’s very expensive. The positive side is that you can put it
anywhere and line up and couple it with other CCS activities and wastewater. Almost all of
the climate scenarios require Direct Air Capture to remove CO2 from the atmosphere. Trees
can do this, but it takes a long time and a lot of space. More technological advances will be
needed and it will take time to scale up this option.53
Kári added:
People love direct air capture since it’s almost like magic! You’re able to pull CO2 right from
the air and because of that, it’s seen as the silver bullet to address climate change. The
problem is, right now, it’s way too expensive and takes too much energy. Renewable energy
will become a bottleneck as too many companies are banking on direct air capture. There is
a real risk of losing focus on the real problem, which is to reduce emissions in their value
chain. However, we’re still pursuing direct air capture because it is a necessary part of the
solution, and if there is willingness to pay for it, then we have the ability to make that option
available.54
Option 3: Developing a Storage Hub in Iceland
The third option involved importing CO2 to Iceland from countries located in the North Atlantic
such as Norway, Sweden, Denmark and the UK and storing the CO2 in Iceland. The team believed
it would make sense to start building a demonstration site in the first phase for 100,000 to
300,000 tons of CO2 and predicted that this could be accomplished by 2025. Based on learning
from the demonstration site, the team believed they could expand it by 2028 to get to a site
capable of storing 1 million tons of CO2 per year and as much as 3 million by 2030. Over the next
10 years, there was the possibility of rolling out several hubs, each between 1 and 5 million tons
of CO2 spread throughout the country. This also offered the possibility of an offshore hub,
depending on the development of using seawater within the system. See Exhibit 8 for a map of
the opportunities.
There were several suitable areas within Iceland the team had identified to build the hub since
the entire country sat atop porous basalt rock. The equipment needed to build the hub was
fundamentally the same as the onsite option – the difference was the quantity of wells. A hub
operating with 1 million ton capacity would have 20 to 40 wells. Since the hub concept brought
a number of economies of scale, the capital costs for the storage site ranged from $10 to $15
per ton so that a 1 million-ton site would cost approximately $10 to $15 million to build. Annual
operating costs were at about 5% to 15% of the site’s revenues for water, electricity,
maintenance and monitoring resources. In order to build out the hub concept, the company
53 Sandra Ósk Snæbjörnsdóttir. Interview by case writers. January 15, 2021.

would require land of approximately 10 square kilometers for a 1 million-ton site and a method
of transporting the CO2 through a combination of pipeline and ship.
For potential customers, the team had identified industrial CO2 emitters such as producers of
cement, chemicals, metals and other power plants that might be able to effectively capture their
CO2 and ship it to the hub. While capture costs of those emitters would vary, a rough estimate
was $50 per ton. Shipping costs were about $20 to $30 per ton from countries within
2,000 kilometers (e.g., Norway was about 1,500 km. and Southern UK was about
1,800 km. away from Iceland). Bergur commented on the hub concept:
The first question that might come to mind is “why would you want to do this?” since the CO2
needs to be transported more than 1,000 kilometers. It’s mainly because our geology is very
favorable; we have access to a great renewable energy source with geothermal and we know
we can store CO2 safely and cheaply in Iceland. We see that some sites in Norway have a
storage cost of over $50 per ton so even taking our storage costs of $10 per ton, there’s still
room with the transportation to make it viable.55
The other consideration with the hub was garnering political and public support. Since the
Icelandic and local governments had been involved in Carbfix and more broadly, the renewable
energy sector, the team felt there was the political willpower to support the hub concept.
Furthermore, CCS solutions coming online in Norway, the Netherlands and the UK had pushed
the conversation with policy makers. As for the public support, the team felt that the
communication from Reykjavik Energy and Carbfix throughout the years aimed to explain the
importance and innovation with the project. Kári commented on Icelanders’ reaction to
importing CO2:
I suppose one could look at it like we’re taking other people’s garbage. Also, the idea of
shipping CO2 is sometimes linked with oil and gas. However, in Iceland, people really
understand our whole renewables focus and know that we have the ability to solve a huge
problem. Furthermore, it could become a driving force for the economy and a means to
create jobs over time.56
Kristinn commented on the evolving regulatory structure and ETS carbon credits:
For all options, we always need to consider ETS carbon credits. However, with the
Government of Iceland extending the deduction of CO2 injected into injection sites such as
ours, this would allow any company in the EU to claim credits even if they inject the CO2 in
Iceland.
The importance of carbon credits cannot be underestimated. Even if we look around the
world at other companies, we see how big of a role they play. For example, the automotive
manufacturer Tesla derives a significant portion of their profitability by selling regulatory
credits.57
55 Bergur Sigfússon. Interview by case writers. January 15, 2021.
57 Kristinn Ingi Lárusson. Interview by case writers. March 5, 2021.

Edda Sif weighed the pros and cons:
The main pro is that we can reach scale and make the infrastructure very efficient. We can
focus our efforts on fewer projects with bigger impact from a human resource perspective.
One of the biggest cons is that the cost of transport can be high, but perhaps once more hubs
are developed, the storage cost would come down further making it more attractive to
transport. We feel we have a much cheaper way to store CO2 when we look at the other
major CCS projects occurring in Northern Europe.
The biggest risk to a project like this is seismicity and because Iceland has natural
earthquakes, we have to be careful not to trigger some of them earlier than expected. Some
people might also say “we don’t want to become the waste disposal site of the earth,” but as
I look at it, we only have one atmosphere and we have to select the best options to make the
greatest impact on climate change. We are creating value from our bedrock and creating new
jobs and a new industry which is climate friendly.58
Where to Focus?
Many questions circulated in Kristinn’s mind. Where should the team focus their efforts? Should
all three options be pursued simultaneously? What would a potential investor pitch look like?
Ultimately, he needed to weigh multiple considerations in what would be a path forward, given
Carbfix’s goal of creating a sustainable business while reducing CO2. There were approximately
34 billion tons of CO2 emissions in 202059
and the global concentration of CO2 in the atmosphere
had grown to a new record high of 409 parts per million (ppm), up from 325 ppm 50 years earlier
in 1970.60
As Edda reiterated, “we have enough basalt to deal with all fossil fuel available on Earth.”61
Kristinn wondered how he could form a plan to build on the opportunity:
Since joining this industry from banking and finance, my biggest surprise is I thought CCS
overall would be much further ahead. I believe we have a great solution to a massive problem
and we have an incredible advantage of already being recognized as a brand and a warrior
against the battle of CO2. The age-old question becomes, with limited time and resources,
where’s the best place to focus for maximum impact?62
59 “Global Carbon Project: Coronavirus Causes ‘Record Fall’ in Fossil-Fuel Emissions In 2020,” CarbonBrief, December 11,
2020, https://www.carbonbrief.org/global-carbon-project-coronavirus-causes-record-fall-in-fossil-fuel-emissions-in-2020.
Accessed February 6, 2021.
60 Rebecca Lindsey, “Climate Change: Atmospheric Carbon Dioxide,” August 14, 2020, https://www.climate.gov/news-
features/understanding-climate/climate-change-atmospheric-carbon-dioxide. Accessed February 7, 2021.
61 Ari Daniel, “In Iceland, Turning CO2 Into Rock Could Be A Big Breakthrough for Carbon Capture,” PRI, May 3, 2019,
https://www.pri.org/stories/2019-05-03/iceland-turning-co2-rock-could-be-big-breakthrough-carbon-capture. Accessed
October 18, 2020.
62 Kristinn Ingi Lárusson, Interview by case writers. November 20, 2020.

j
l
i
l
l
i
i
j
i
l
i
l
i
i
F-974-E
Carbfix:
Storing
CO
2
Forever
Exhibit
1
Information
on
Reykjavik
Energy
CEO
B
arni
Bjarnason
VEITUR
PLC
Gestur
Pétursson
ELECTRICAL
SYSTEM
Jóhannes
Þorleiksson
DISTRICT
HEATING
Hrefna
Hallgrímsdóttir
WATER
SUPPLY
&
WASTEWATER
Arndís
Ósk
Ólafsdóttir
SYSTEMS
Hans
Liljendal
Karlsson
TECHNICAL
DEVELOPMENT
NN
SMART
DIGITAL
DEVELOPMENT
Diljá
Rudolfsdóttir
FUTURE
VISION
&
OPERATION
Guðbjörg
Sæunn
Friðriksdótir
ON
POWER
PLC
Berglind
Rán
Ólafsdóttir
NATURAL
RESOURCES
Marta
Rós
Karlsdóttir
PROJECT
MANAGE-
MENT
OFFICE
Hildigunnur
Jónsdóttir
POWER
PLANT
OPERATIONS
Kristinn
Harðarson
BUSINESS
MARKETS
Kristján
Már
Atlason
CONSUMER
MARKETS
Guðrún
Einarsdóttir
REYKJAVIK
FIBRE
NETWORK
LTD
Erling
Freyr
Guðmundsson
TECHNOLOGY
Jón
Ingi
Ingimundarson
FIBRE
NETWORK
Kjartan
Ari
Jónsson
TECHNICAL
SERVICE
AND
DELIVERY
Dagný
Jóhannesdóttir
CUSTOMER
EXPERIENCE
Skúli
Skúlason
CUSTOMER
EXPERIENCE
Guðný
Halla
Hauksdóttir
CONSUMER
SERVICE
Sigurjón
Kr.
Sigurjónsson
FINANCES
Ingvar
Stefánsson
ANALYSIS
&
PLANNING
Ingvar
Stefánsson
RISK
MANAGEMENT
Ásgeir
Westergren
PROCUREMENT
Kenneth
Breiðfjörð
ACCOUNTING
Bryndís
María
Leifsdóttir
IT
Sæmundur
Friðjónsson
PROCESS
IMPROVEMENTS
Kristjana
Kjartansdóttir
RESEARCH
&
INNOVATION
Hildigunnur
H.
Thorsteinsson
RESOURCE
MANAGEMENT
Ingvi
Gunnarsson
INNOVATION
&
STRATEGIC
PLANNING
Vala
Hjörleifsdóttir
BOARD
OF
DIRECTORS
BOARD
OF
DIRECTORS
BOARD
OF
DIRECTORS
BOARD
OF
DIRECTORS
SKI-510-30
01/2021
INTERNAL
AUDITING
HR
&
CULTURE
Sólrún
Kristjánsdóttir
HUMAN
RESOURCES
Sólrún
Kristjánsdóttir
FACILITIES
Magnús
Már
Einarsson
GOVERNANCE
&
STRATEGY
STRATEGY
Guðrún
Er
a
Jónsdótt
r
COMMUNICATION
&
COMMUNITY
Bryndís
Ísfo
d
H
öðversdótt
r
HSE
Reyn
r
Guð
ónsson
ENVIRONMENT
Hólmfríður
S
gurðardóttir
LEGAL
AFFAIRS
E
ín
Smáradótt
r
PROJECT
MANAGEMENT
Aða
he
ður
S
gurðardóttir
CARBFIX
PLC
Edda
Sif
Pind
Aradóttir
The
company
is
organized
in
teams
focusing
on
carbon
capture
and
mineralization,
monitoring,
and
business
development.
BOARD
OF
DIRECTORS
P
O
W
E
R
Source:
Reykjavik
Energy
website,
January
7,
2021,
https://www.or.is/en/published-material/.
Accessed
January
17,
2021.
14
IESE
Business
School-University
of
Navarra

Exhibit 2
Diagram of Carbfix Storage Solution
Source: Document provided by the company.

Exhibit 3
Photos of Hellisheidi Geothermal Power Plant and Carbfix2
Hellisheidi Geothermal Power Plant. Photo by Arni Saeberg.
Carbfix2: Left: “Soda Stream” water tower, right top: Boring dome, Right bottom: Sandra Ósk Snæbjörnsdóttir,
Bergur Sigfússon, Edda Sif Pind Aradóttir, Kári Helgason, Kristinn Ingi Lárusson.

Exhibit 4
Carbon Emission Allowances (EUA) Futures on the ICE Exchange
March 2021 Contract
Start of Graph: Mar 10, 2019 €22.88
End of Graph: Mar 8, 2021 €40.58
Source: EUA Futures, ICE Exchange, https://www.theice.com/products/197/EUA-
Futures/data?marketId=5693906&span=1. Accessed February 7, 2021.

F-974-E
Carbfix:
Storing
CO
2
Forever
Exhibit
5
CCS
Global
Projects
–
Operating
or
Planned
Source:
“Global
CCUS
projects,”
International
Association
of
Oil
&
Gas
Producers
(IOGP),
May
2020,
https://www.iogp.org/bookstore/product/map-of-global-ccs-projects/
.
Accessed
February
6,
2021.
18
IESE
Business
School-University
of
Navarra

Exhibit 6
Global Storage Opportunities

Exhibit 7
Direct Air Capture Diagram
Exhibit 8
North Atlantic Map of Opportunities for the Hub

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