Business models
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The Business Models dimension examines business opportunities to support CDR options in a safe, sustainable and equitable way. A business model is a representation of an organisation’s strategic choices for creating value, capturing that value, sharing value with customers, and financing its activities. This may change over time, as project and different actor and sectoral needs evolve1. Business models differ2 for example in terms of their novelty, their ability to capture value in different policy ecologies, states of technology development and in the extent to which they consider different3 kinds of value e.g., economic, social, environmental.
A strong business model can enable successful deployment of CDR by matching the needs of different stakeholders and developing new collaborations in the CDR value chain. However, a suboptimal business model could also lock in certain ways of providing CDR-related goods and services that might hinder collective goals.
Developing ways to differentiate4 business models for CDR helps to evaluate the potential for different companies or proposals to contribute to meeting net zero climate goals. We focus on the three main components of a business model in the CO2RE evaluation framework: (1) Value Proposition; (2) Revenue model; and (3) Value network.
Value proposition
The value proposition is a way of framing how a product or service can solve the problem(s) it is designed to address. It shows a product or service provides a value, or unique benefit to fulfill a certain need.
Exploring the problem (s) being addressed and the key beneficiaries can enable the development of innovative business models. Value propositions differ in terms of their clarity and the breadth of co-benefits considered. Effective business models create value for stakeholders involved in each stage of the CDR project life cycle.
Revenue model
The revenue model refers to the organisation’s approach to capture the value created by their product or service. For CDR, it is critical to consider immediate and future revenue generation due to the emerging nature of the industry, both in terms of private and public revenues.
Value network
The value network provides a pathway for delivering value through a range of activities provided by the focal firm and others with complementary resources.
Evaluation approach for business models
At the firm-level, we propose three questions, which assess the clarity of the revenue model, the connection between the revenue model and co-benefits, and the identification of revenue risks related to the proposal. These questions are:
- How clear is the revenue model for the project?
- Are any of the co-benefits identified under environmental indicators being translated into revenue streams now? If yes, please specify.
- To what extent have risks to revenue been considered?
- Not at all.
- Somewhat (e.g. for some revenue sources).
- In detail (e.g. for multiple revenue sources).
A key area for further development in the coming years is considering the business model at the network level, as projects and technologies become more advanced. Additional indicators could include questions that capture the extent to which proposals are actively including collaborations or activities that will later support technologies to scale.
Using the above questions and the following table, it is possible to make an assessment of a CDR’s business model, with 1 meaning there is very low confidence in the business model and 5 meaning the business model is very strong. The table characterise how clear the value proposition of a proposal is, and whether the revenue model, non-revenue benefits and revenue-risks are fully understood.
