Speaker 1: Pushkin. Sometime around twenty eighteen, it became clear that transitioning
Speaker 1: away from fossil fuels was not going to be enough
Speaker 1: to manage climate change. On top of moving away from
Speaker 1: fossil fuels, on top of ceasing to emit carbon dioxide
Speaker 1: into the air, the world would also need to figure
Speaker 1: out how to take some of the carbon dioxide we'd
Speaker 1: already put into the atmosphere out of the atmosphere. And
Speaker 1: it was also clear that just planting more trees wasn't
Speaker 1: going to do it. It was too much carbon dioxide
Speaker 1: and not enough land to plant trees on. A few
Speaker 1: years after those things became clear, a company called Stripe,
Speaker 1: that helps online businesses do things like process payments, decided
Speaker 1: to dedicate a relatively small amount of money, a million dollars,
Speaker 1: to pay to have carbon dioxide removed from the atmosphere.
Speaker 2: Twenty twenty, we made our first purchases from four carbon
Speaker 2: removal companies.
Speaker 1: This is Nan rants Off, the head of climate at.
Speaker 2: Stripe, and at the time, you know, two sort of
Speaker 2: interesting things happened. The first is that the field had
Speaker 2: this sort of almost weirdly positive reaction to a pretty.
Speaker 3: Small amount of money a million dollars is ultimately not
Speaker 3: that much.
Speaker 1: It's in a way quite a bad sign if people
Speaker 1: get excited, yes for a whole field about a million.
Speaker 2: No, that's exactly right, and it's concerning, like why are
Speaker 2: people getting so excited about this million dollars? So that
Speaker 2: was an interesting signal, which to us just said, well,
Speaker 2: this field has been starved for a market, and that
Speaker 2: such that a million dollars could you know, make anybody
Speaker 2: pay attention.
Speaker 1: The second thing that happened, Nan said, was Stripe started
Speaker 1: hearing from the companies that used Stripe services, and a
Speaker 1: lot of those companies also wanted to start paying for
Speaker 1: carbon removal. So Stripe set up away for those companies
Speaker 1: to purchase carbon removal and tens of millions of dollars
Speaker 1: flowed in.
Speaker 2: Good step, but it's still quite small. So then, you know,
Speaker 2: we've been doing this for about a year and a
Speaker 2: half and our team gotten room. We said, well, you know,
Speaker 2: on the one hand, this is ten x progress. You know,
Speaker 2: we are making progress, but this number is still so
Speaker 2: short of what the field needs. And we came up
Speaker 2: with a bunch of ideas and we killed a bunch
Speaker 2: of ideas and one of the ideas that we couldn't
Speaker 2: kill was this concept of an advanced market commitment. That
Speaker 2: is ultimately what has since become Frontier, which is we've
Speaker 2: launched a now over one billion dollar advanced market commitment
Speaker 2: to buy permanent carbon removal between twenty twenty two and
Speaker 2: twenty thirty and there are still many more steps on
Speaker 2: the journey, but that's one of the big ones that
Speaker 2: we've been working on recently.
Speaker 1: I'm Jacob Goldstein and this is What's Your Problem, the
Speaker 1: show where I talk to people who are trying to
Speaker 1: make technological progress. In addition to being a head of
Speaker 1: Climate at Stripe, Nan Ransohoff is also head of Climate
Speaker 1: at Frontier. That's the organization she mentioned a minute ago.
Speaker 1: Frontier is a wholly owned subsidiary of Stripe, and it
Speaker 1: is the vehicle through which Stripe and a bunch of
Speaker 1: other companies have pledged to pay one billion dollars to
Speaker 1: have carbon permanently removed from the atmosphere. I wanted to
Speaker 1: talk to Nan for a couple reasons. One, her job
Speaker 1: gives her a great overview of what is going on
Speaker 1: in carbon removal as a field, and two, the specific
Speaker 1: mechanism that Frontier is using that advanced market commitment that
Speaker 1: Nan mentioned. Is this really powerful, relatively recent economic innovation.
Speaker 1: So what's an advanced market commitment?
Speaker 2: An advanced market commitment is basically a way to guarantee
Speaker 2: future demand for a product that you want to exist
Speaker 2: but that doesn't exist yet. And advanced market commitments are
Speaker 2: a basically a kind of way of collecting revenue and
Speaker 2: demonstrating that there is a market for a product. And
Speaker 2: we borrow this concept actually from the vaccine space. So
Speaker 2: the first AMC was started in the mid two thousands
Speaker 2: for the world wanted a new macco vaccine for low
Speaker 2: and middle income countries and because the end customers are
Speaker 2: from less wealthy countries, if pharma companies are not incented
Speaker 2: to actually develop that vaccine because the end demand is
Speaker 2: uncertain or small.
Speaker 1: Right, it's not going to be a profitable enterprise probably, Right.
Speaker 1: They're going to spend hundreds of millions of dollars a
Speaker 1: billion dollars to develop a vaccine and the price at
Speaker 1: which they could sell it is not enough to recoup
Speaker 1: their investment. And we should say I feel like the
Speaker 1: new macacco vaccine is underrated in part just because of
Speaker 1: the name. Like I think that you know, this is
Speaker 1: a terrible infection that killed huge numbers of children, and
Speaker 1: it was clearly vaccine preventable. And there was this frankly
Speaker 1: economic problem was the vaccine didn't exist, and how could
Speaker 1: people with money in the rich world create the incentive
Speaker 1: structure for it to be worth it for a private
Speaker 1: company to develop the vaccine?
Speaker 2: Very well said yes, And that is a generalizable concept
Speaker 2: of AMC's is that they're trying to there's a public
Speaker 2: good or something that is of real value, societal value
Speaker 2: that should happen, but there's an incentive problem that is
Speaker 2: preventing that from happening. And AMCs are one of a
Speaker 2: broader set of what economists would call market shaping tools
Speaker 2: that we can utilize to help fix those incentive problems
Speaker 2: and make it more likely that these public goods these
Speaker 2: societal goods actually exist and scale up to the numbers
Speaker 2: that we want them to.
Speaker 1: Well, And AMCs are a little bit like clever, subtle,
Speaker 1: non obvious, right, Like the more obvious thing is like, well,
Speaker 1: the government could just spend money to develop a vaccine,
Speaker 1: or even could just subsidize one vaccine maker to do
Speaker 1: the research it, but like why is an AMC better
Speaker 1: in some settings than those options.
Speaker 2: Yeah, it's a really good question. So when we think
Speaker 2: about the types of financial interventions here, we can think
Speaker 2: about them like push. People often talk about push mechanisms
Speaker 2: are like grant funding. You typically pay for folks to
Speaker 2: upfront for an input.
Speaker 1: An input in this case is research vaccine development.
Speaker 3: Yep, you're giving someone a grand.
Speaker 1: Here's a billion dollars go make the vaccine.
Speaker 2: Or you're giving somebody a grant to figure out if
Speaker 2: it's even possible, and you're giving them upfront before you
Speaker 2: get the end outcome. Pull funding are mechanisms that you're
Speaker 2: paying for something when it's delivered, you're paying.
Speaker 3: For the output.
Speaker 2: And a prize an is sort of an example of that.
Speaker 2: It's like a one time if somebody can develop this,
Speaker 2: we'll give you a prize.
Speaker 1: And there are famous examples of this. I think Longitude
Speaker 1: the British and was it the eighteenth century they needed
Speaker 1: to they needed a clock that worked on a ship
Speaker 1: that's basically right. Or the DARPA Prize for self driving
Speaker 1: cars right, which sort of kicked off the self driving
Speaker 1: car revolution.
Speaker 2: Prizes can be very effective mechanisms, and AMCs are not
Speaker 2: always a good fit for a problem. They tend to
Speaker 2: be a good fit for the problem when a couple
Speaker 2: of things are true. If you think about the thing
Speaker 2: you want to exist, and why the organizations are the
Speaker 2: people that could have invented and scaled those things aren't
Speaker 2: doing it. The problem in their mind is there's no
Speaker 2: end revenue for it. That's criteria one. Criteria two is
Speaker 2: that you can actually define the thing that you want
Speaker 2: to exist. So you can we, in this case, define
Speaker 2: the target product profile of the new macagual vaccine that
Speaker 2: we want, or in our case, can we outline the
Speaker 2: criteria for the kinds of carbon removal that we want
Speaker 2: to exist. And then a third criteria is essentially like,
Speaker 2: once the thing is actually invented, will market forces take
Speaker 2: over to actually make it scale on its own. So basically,
Speaker 2: if once a thing invented that is true, you should
Speaker 2: do a prize because you don't need a long term market.
Speaker 3: You're just trying to get the initial invention interesting.
Speaker 2: But in the case of you know, the new macaco vaccine,
Speaker 2: for example, you want the pharma companies to invent the solution,
Speaker 2: but you ultimately care about is that the people who
Speaker 2: needed are getting the vaccine. So in that case, the
Speaker 2: incentive design there is you're taking all of the R
Speaker 2: and D and development costs associated with that, but you
Speaker 2: are giving it back to the pharma companies by amortizing
Speaker 2: it over all of the doses.
Speaker 1: So, just to be clear, the advanced market commitment for
Speaker 1: the vaccine was not will give you the money when
Speaker 1: you invent the vaccine. It's will pay an extra couple
Speaker 1: bucks per vaccine delivered in the field in this part
Speaker 1: of the world exactly.
Speaker 2: And there are genuinely different ways. AMCs are a pretty
Speaker 2: broad term that you know, can encompass a lot of
Speaker 2: different sure mechanism designs. But you described that well, it's
Speaker 2: like you want to you're paying for the outcome of
Speaker 2: somebody actually getting the vaccine.
Speaker 1: The marginal use cast. Yeah, okay, By the way, are
Speaker 1: there more criteria or do we have the criteria now
Speaker 1: in place?
Speaker 2: Those are sort of rough criteria that and they're not perfect,
Speaker 2: but there's sort of rough criteria that will help you know.
Speaker 2: Are we even in pull funding territory and within pull
Speaker 2: funding should be considered an AMC versus a prize versus
Speaker 2: something else. Those are sort of loose guiding criteria.
Speaker 1: So now we have our framework, apply it to carbon removal.
Speaker 1: As you were thinking about it in twenty twenty one,
Speaker 1: twenty twenty two, why did it seem like a good
Speaker 1: fit for that problem at that time?
Speaker 2: Yeah, I mean, I think a fundamental problem with carbon removal.
Speaker 2: So carbon removal is, for all intents and purposes, it
Speaker 2: is a public good. Unlike with energy. You know, humans
Speaker 2: derive value from energy. That is, we get value from that.
Speaker 2: When you are secking CO two out of the atmosphere
Speaker 2: and storing it somewhere permanently. You know, there are small
Speaker 2: markets where people can benefit from them. You're using the
Speaker 2: CO twos, you know, an end product, But at the
Speaker 2: scale we're talking this is mostly a public good. And
Speaker 2: as a result, it is a very reasonable question for
Speaker 2: entrepreneurs and investors to basically ask, if I start company
Speaker 2: in this space, who's going to buy the end product
Speaker 2: that I am selling? It is fundamentally a open question
Speaker 2: about the market. And I would say it's even more
Speaker 2: of an open question if I'm building a really early
Speaker 2: stage technology that is expensive at the beginning, because there
Speaker 2: are now there's some voluntary market that exists, but that's
Speaker 2: a twenty dollars a ton, and if you're building, you know,
Speaker 2: a new technology at the beginning, your price is going
Speaker 2: to be high. And so that fundamentally that first criteria
Speaker 2: is extremely applicable to carbon removal because it is created
Speaker 2: as chicken and egg problem that we're trying to solve.
Speaker 1: You use the term public good, which people use in
Speaker 1: a kind of vernacular sense, but there's a technical economic
Speaker 1: sense in which you are using it and which applies here,
Speaker 1: right MLL. It's non rivalrous and non excludable, right, which
Speaker 1: means basically, even if only one person pays for it,
Speaker 1: everybody benefits, and you can't even exclude somebody from benefiting
Speaker 1: if you want to, that's right, right. A lighthouse is
Speaker 1: the classes, that's right. Right. It doesn't make sense for
Speaker 1: any one shipping company to pay for a lighthouse because
Speaker 1: all those other cheap assholes who didn't pay for the
Speaker 1: lighthouse are also not going to crash into the boxes, right.
Speaker 1: And it's a classic case of market failure for that reason, right,
Speaker 1: because the person paying for it only captures a tiny
Speaker 1: and in the case of carbon removal, truly tiny, tiny
Speaker 1: part of the benefit, and so no one's going to
Speaker 1: pay for it, except in like weird edge cases, well
Speaker 1: said like stripes one million.
Speaker 3: Dollars precisely, precisely.
Speaker 1: Yes, okay, so that's good. That's one.
Speaker 3: What else that's very important one?
Speaker 2: The second one is can we define the shape of
Speaker 2: the thing that we want to exist? And in our case,
Speaker 2: when we're thinking about carbon removal, we have a set
Speaker 2: of criteria that we are that sort of try to
Speaker 2: characterize the gap in solutions that exist that would essentially
Speaker 2: get the world to the ten gigatons plus career needed
Speaker 2: by twenty fifty. Okay, So the kinds of things that
Speaker 2: we care about on this list are things like does
Speaker 2: this technology have the potential to be under one hundred
Speaker 2: dollar in the future, And that is a you know,
Speaker 2: we can come back to the specifics, but does it
Speaker 2: have the potential to be cheap? Does it have the
Speaker 2: potential to be very huge? We're looking at solutions that
Speaker 2: have the potential to be more than half a gig
Speaker 2: aten per year in carbon removal.
Speaker 3: We also care a lot about permanence.
Speaker 2: So when you emit a ton of CO two into
Speaker 2: the atmosphere, that is permanently up there, and so we
Speaker 2: want to take it out permanently as well. And then
Speaker 2: you know, there's a whole host of other criteria that
Speaker 2: we care about. But when we sat down to do
Speaker 2: our initial million dollar spend for stripes that first blog post,
Speaker 2: we spend a lot of time thinking about, you know,
Speaker 2: how do we characterize the kinds of solutions that we
Speaker 2: want to exist? And an important part of that characterization
Speaker 2: is can we be specific enough that people understand what
Speaker 2: it is that we want, but can we be broad
Speaker 2: enough to invite a whole host of creative solutions to
Speaker 2: the starting line, Because this entire field is basically, you know,
Speaker 2: six years old. This started, you know, carbon removal. The
Speaker 2: starting gun for carbon removal was a twenty eighteen ACCC
Speaker 2: report and that was not very long ago. And so
Speaker 2: maybe it's direct air capture. Maybe it's enhance rock weathering,
Speaker 2: maybe it's ocean alkalinity enhancement. Maybe you know, there's all
Speaker 2: these different solutions. Let it's too early to pick a horse.
Speaker 2: Let's get a bunch of the best ideas to the
Speaker 2: starting line, see how they do, and then some of
Speaker 2: them won't work, but the ones that do, let's really
Speaker 2: double down. So that's a long wooded way of saying
Speaker 2: we were trying to define that this target criteria in
Speaker 2: a way that sort of balanced the specificity needed to
Speaker 2: guarantee this for suppliers, but also was broad enough to
Speaker 2: invite the innovation that we think is necessary.
Speaker 1: Yeah. I mean, well that's the market force part, right,
Speaker 1: That's why it's a poll. If it's too specific, then
Speaker 1: it's like, well, just give a grant to one company.
Speaker 1: But that's what you're trying to avoid, right, You're trying
Speaker 1: to avoid picking a winner, precisely. Is there one more criterion?
Speaker 2: And there's one more criteria, which is essentially, once the
Speaker 2: thing is invented, if you have the recipe for the thing,
Speaker 2: our market force is going to scale it up on
Speaker 2: its own. And in the case of carbon removal, somebody
Speaker 2: could come up with the best possible solution and the
Speaker 2: long term market for this isn't quite there yet.
Speaker 1: It's the public good problem again, exactly. So yes, So
Speaker 1: it's yes, yes, and yes to your three criteria for
Speaker 1: advanced market commitment.
Speaker 2: Yes, And I will say that, like, there's a few
Speaker 2: differences in this in the frontier AMC and the initial
Speaker 2: AMC for New maccacle. I think one of the things
Speaker 2: that is challenging in carbon removal is that lack of
Speaker 2: long term market. So like frontiers a billion dollars, it's
Speaker 2: going to run out eventually, so we're sort of building
Speaker 2: the plane while we're flying it. We have to make
Speaker 2: sure that once these initial funds are out, that long
Speaker 2: term market does exist.
Speaker 3: So we can talk about what that looks like.
Speaker 2: But I think that you know, in the case of
Speaker 2: the new Maccacle vaccine for low middle income countries, there
Speaker 2: was a point at which it made sense financial sense
Speaker 2: once for pharma companies to continue to st reading the
Speaker 2: vaccine on their own. In our case, you know, that
Speaker 2: is only true if we can also put a sort
Speaker 2: of semi state market in place.
Speaker 1: If that makes sense, Yeah, I mean is it? Because
Speaker 1: for the for the vaccine, most of the cost is
Speaker 1: upfront exactly, and in fact there is marginal benefit for
Speaker 1: people who can pay a very small amount or for
Speaker 1: countries that can pay a very small amount, so there
Speaker 1: is once the vaccine companies have recouped the R and
Speaker 1: D cost, the marginal cost actually works in a market
Speaker 1: based way, which will never be true for a carbon
Speaker 1: capture because it's a public good, that's right. So I
Speaker 1: was thinking, we get to this later. But whatever fundamentally,
Speaker 1: there is a policy problem that somebody has to solve
Speaker 1: before too long, because this isn't going to work forever,
Speaker 1: you wrote, without government action. Frontier is building a bridge
Speaker 1: to nowhere.
Speaker 2: Yes, these private sector of voluntary commitments are a great
Speaker 2: way to help this field get to first base, but
Speaker 2: they are not going to get us all way there.
Speaker 2: So you know, if we if we zoom all the
Speaker 2: way out and think about to quick demand mouth, how
Speaker 2: big does this market need to be in for how long?
Speaker 2: So carbon removal roughly needs to scale to and this
Speaker 2: is rough numbers ten billion tons per year by twenty fifty.
Speaker 2: And if we say that, you know, for example, we
Speaker 2: think we can do it at one hundred.
Speaker 3: Dollars a time.
Speaker 2: Okay, that is a trillion dollars per year okay, in
Speaker 2: demand that is needed. And of course if we end
Speaker 2: up needing less carbon removal, that numbers goes down, and
Speaker 2: if we can do it for cheaper, that numbers go down.
Speaker 1: But just back of the envelope, it's a trillion dollars
Speaker 1: a year, which is a big number. Right.
Speaker 3: Global GDP is about one hundred trillion.
Speaker 1: Dollars, So one percent of global GDP is a tremendous,
Speaker 1: a tremendously large number that it is dauntingly large.
Speaker 3: In fact, it's dauntingly large.
Speaker 1: Can you get another order of magnitude out of the price?
Speaker 1: It's the first question I have for you.
Speaker 2: So I think that that is why it really matters
Speaker 2: that we are so hunting for a solution that can
Speaker 2: be much cheaper, because you know, being able to get
Speaker 2: down to seventy or fifty or thirty dollars a ton
Speaker 2: does make a really big difference. Yeah, I would call
Speaker 2: out though that like, is half a percent or a
Speaker 2: percent of global GDP a lot? I mean, of course
Speaker 2: the answer is in one sense yes, But of course
Speaker 2: as a current moment a tough.
Speaker 3: Time to be getting countries to coordinate on global public goods.
Speaker 2: But it's not totally out of the realm of possibility,
Speaker 2: especially if and as the world gets richer that percentage
Speaker 2: goes down.
Speaker 1: Well, So, okay, fine, we're saying all these numbers. It's
Speaker 1: a lot of money, but what does it mean in
Speaker 1: terms of policy? Right, it's fundamentally a public good. Public
Speaker 1: goods we know the most basic economic way are not
Speaker 1: provided by the market, So like, what do governments have
Speaker 1: to do to sort of take the baton from Frontier.
Speaker 2: I think that probably in practice, the collection of policies
Speaker 2: that get to these hundreds of billions of dollars per
Speaker 2: year ends up looking like a patchwork quilt of demand policies.
Speaker 2: I think it is unlikely that there is sort of
Speaker 2: one thing that ultimately gets us there.
Speaker 3: We can talk about what the shape of.
Speaker 2: Those things could look like, but at a high level
Speaker 2: you can kind of imagine a couple of different worlds.
Speaker 2: One world is that governments treat carbon removal like sanitation,
Speaker 2: and they say, you know, going to We're going to
Speaker 2: do this clean up on behalf of our citizens, and
Speaker 2: we're going to coordinate with other countries to do that.
Speaker 2: We could put that in the kind of category of
Speaker 2: like direct government procurement. Governments are the ones that are
Speaker 2: doing it themselves. There's another worldview, which is that governments
Speaker 2: are essentially trying to quantify the negative externality of a
Speaker 2: ton of emissions and then push that onto the players
Speaker 2: that are emitting, private companies.
Speaker 1: Some kind of carbon tax. Basically that is funding carbon removal.
Speaker 3: Yes about the other thing, Yes, the dream, the dream.
Speaker 1: Let's dream about a carbon tax for one moment, because
Speaker 1: it makes so much.
Speaker 2: Sense, and they are different, and there are different sort
Speaker 2: of ways of implementing that that I think are sort
Speaker 2: of further or closer to a traditional carbon taxing. So
Speaker 2: that's a long winded way of saying there are a
Speaker 2: whole host of bets I think that the world needs
Speaker 2: to make, and some of them will pan out and
Speaker 2: some of them won't. But it is very important to
Speaker 2: start planning those seeds now so that the market is
Speaker 2: where it needs to be when it needs to be there.
Speaker 1: We'll be back in just a bit. Let's go back
Speaker 1: to the recent past. So you have this idea for
Speaker 1: big advanced market commitment for carbon capture and removal.
Speaker 2: What do you do you know at the time AMC's there,
Speaker 2: there only really been sort of one or one and
Speaker 2: a half AMC's and they were all in the context
Speaker 2: of health. So is this Initially mccaggo vaccine AMC GAVY
Speaker 2: and then Operation Warp Speed incorporated some components of this
Speaker 2: as well, for to.
Speaker 1: Develop the coronavirus fix to great success, to great success, underrated,
Speaker 1: so underrated operation like nobody wants to own it politically,
Speaker 1: which is so sad. Like it was great, it worked,
Speaker 1: it was amazing.
Speaker 3: It was amazing.
Speaker 1: So what is Frontier at launch in twenty twenty two.
Speaker 2: What we wanted to do with Frontier, the spirit of
Speaker 2: what we wanted to do was say, there is a
Speaker 2: big market for carbon removal and what does that mean?
Speaker 3: A big market? A billion dollars.
Speaker 2: Was an imperfect number that we came up with that
Speaker 2: was that both met the criteria of it. We thought
Speaker 2: it would be big enough to get people's attention and
Speaker 2: send a strong signal to entrepreneurs and investors that there
Speaker 2: is a market, but it was still something we felt
Speaker 2: was in the realm of possibility, Like we can't go
Speaker 2: raise one hundred trill you know, a trillion dollars that
Speaker 2: is that is not something we were able to do.
Speaker 2: So a billion dollars was the number that we settled on.
Speaker 2: I will sort of want to asterix and call out
Speaker 2: the fact that like it is a sort of imperfect
Speaker 2: number because it does not solve the whole problem.
Speaker 1: Kind of the minimum viol both number in contact.
Speaker 2: That's exactly right, Yeah, and that's different than the new
Speaker 2: Macauga vaccine. Like you know, initially when they put together
Speaker 2: the billion and a half dollars from countries and the
Speaker 2: Gates Foundation that they thought it was enough to get
Speaker 2: the vaccine to the point that they wanted to get to,
Speaker 2: So I will sort of call out the flaw in that,
Speaker 2: but we said, okay, a billion dollars Stripe can put
Speaker 2: in some of that. We have now tens of thousands
Speaker 2: of Strike Climate users that are giving money for carbon removal.
Speaker 3: So in the context of Stripe.
Speaker 2: We were actually able to underwrite a huge amount of
Speaker 2: that initial billion dollars ourselves, but we weren't able to
Speaker 2: get to that full billion. So we said, okay, how
Speaker 2: can we find other like minded organizations that would be
Speaker 2: interested in sort of this kind of wonky experiment that
Speaker 2: we want to try and run. And so we ended
Speaker 2: up in the spring of twenty twenty two launching with
Speaker 2: Google and Shopify and McKenzie and since then have added
Speaker 2: other folks like you know, JP Morgan and h and
Speaker 2: M and Autodesk work Day and the numbers have grown.
Speaker 3: But at the time it was.
Speaker 2: Sort of, how do we get as close to that
Speaker 2: billion dollars as number as we can, as fast as
Speaker 2: we can, because these suppliers need as much time as
Speaker 2: they as they could possibly get to build.
Speaker 1: And so what everybody who puts money into that pot
Speaker 1: is promising is we will buy this amount of money,
Speaker 1: this number of millions or hundreds of millions of dollars
Speaker 1: worth of carbon removal if it needs some set of
Speaker 1: specifications some time between now and twenty thirty. That is
Speaker 1: what everybody is promising, like contractually promising to do yes.
Speaker 3: That is the spirit of what it is.
Speaker 2: And in practice, most of those dollars get spent and
Speaker 2: contracted through something called an off take agreement, and an
Speaker 2: off take agreement is a legally binding contract between a
Speaker 2: buyer and a supplier that the buyer is going to
Speaker 2: buy a certain number of in our case tons at
Speaker 2: a certain price if the supplier can deliver. So when
Speaker 2: companies initially signed up to Frontier, they basically said, you know,
Speaker 2: we're going to put in two hundred million dollars and
Speaker 2: this is how we are sort of able to budget
Speaker 2: that each year from twenty twenty two twenty thirty. And
Speaker 2: at that point it's it's an intention. It's an intention
Speaker 2: to spend, but it's not a legally binding contract. It
Speaker 2: becomes a legally binding contract in these off take agreements
Speaker 2: where buyers are prompting to buy a certain number.
Speaker 3: Of tons of certain price.
Speaker 2: And the reason that off take important contracts are really
Speaker 2: important for carbon removal companies is because if you are
Speaker 2: a carbon removal company and you want to build a
Speaker 2: big new, say dock facility.
Speaker 1: That's direct air catch direct air cash, and.
Speaker 2: You go to a bank and you're like, I want
Speaker 2: to loan to actually finance the bill. The first question
Speaker 2: they're going to ask you is who's going to buy
Speaker 2: the thing that comes off of this plant? Right?
Speaker 1: If they if they take the time to talk to
Speaker 1: you at all, yes, they're going to say, you want
Speaker 1: to build this thing that nobody's ever built before, and
Speaker 1: you don't know who's going to pay you for it,
Speaker 1: and it's a public good, so why should anybody even
Speaker 1: bother to pay for it? So basically a company gets
Speaker 1: an off take agreement and then they can take that
Speaker 1: literally to the bank and use it as collateral for.
Speaker 2: A loan exactly. And there's a lot of other things
Speaker 2: as you've called out, that have to go write in
Speaker 2: order for that loan to actually happen. But one of
Speaker 2: the things that this helps the risk is is the
Speaker 2: demand side, is there a customer to buy the end
Speaker 2: thing that we're doing.
Speaker 1: That's the genius of the advanced market commitment fundamentally, right,
Speaker 1: That's right. So how's it going. You're three years in
Speaker 1: out of eight, right, so like things are happening. You're
Speaker 1: kind of in the middle now of the project.
Speaker 2: Yes, the goal, our goal at Frontier at a very
Speaker 2: high level is to get carbon removal on its best
Speaker 2: possible trajectory. We are sort of working on behalf of
Speaker 2: the ecosystem, largely through these off take agreements. But our goal,
Speaker 2: you know is sort of is very world first and
Speaker 2: by the numbers. So we're, as you said, about three
Speaker 2: years in. We have contracted now over five hundred million
Speaker 2: dollars with several dozen carbon removal companies, and so much
Speaker 2: of our time at Frontier is spent sourcing, getting to
Speaker 2: know and diligencing and ultimately writing contracts with the best
Speaker 2: carbon removal companies out there. And we're, you know, we
Speaker 2: obsess over how to spend and how to contract each
Speaker 2: of these dollars.
Speaker 1: You've committed half of the pot so far.
Speaker 2: We've committed half of the pot across several dozen companies.
Speaker 2: And these companies cover lots of different pathways, some of
Speaker 2: which we've talked about, and in some sense it's too
Speaker 2: early to tell if things are quote unquote like definitely working.
Speaker 3: But we look at some leading.
Speaker 2: Indicators to tell us what to help us triangulate, like
Speaker 2: is this doing the thing that we wanted it to
Speaker 2: be doing. And one of those leading indicators is like,
Speaker 2: what is the number of companies for whom sort of
Speaker 2: Frontier was the first customer. And the reason that we
Speaker 2: hear about that metric is we're trying to pull this
Speaker 2: field forward, So like going early versus following on is
Speaker 2: a good indicator that we're like, yeah, we're pulling companies forward.
Speaker 1: And I mean, you want you want to be the
Speaker 1: marginal buyer, right, you want to be the buyer that
Speaker 1: they need if somebody else was going to buy it anyways,
Speaker 1: that's not as useful, right at some level exactly.
Speaker 2: And we because you know, we're not hunting for the
Speaker 2: cheapest tons, We're looking long term at you know, our
Speaker 2: we're looking for technologies that have the potential to be
Speaker 2: really low cost and high volume in the future. We
Speaker 2: are typically buying more expensive tons earlier on as the
Speaker 2: first buyer, and we are the first ever customer for
Speaker 2: seventy eight percent of companies and we're the first off
Speaker 2: taker for as of you know, as of now eighty
Speaker 2: two percent of them. So like you know, we're we're
Speaker 2: coming in early.
Speaker 1: Yes.
Speaker 2: Another leading indicator that we look at is is basically like,
Speaker 2: are are we picking companies that are actually starting to
Speaker 2: deliver the tons? Like Vaulted, for example, delivered twelve thousand
Speaker 2: tons of carbon removal last year. This is the most
Speaker 2: of any company working on carbon removal, permanent carbon removal,
Speaker 2: by a significant margin. You know, Chrum has injected and
Speaker 2: several thousand tons last year. Lithos applied three hundred thousand
Speaker 2: tons of rock this year, which is positioning them to
Speaker 2: put in some pretty significant numbers in the coming couple
Speaker 2: of years. So these numbers are still small, but they
Speaker 2: are much larger than we've seen in previous years. And
Speaker 2: I think that that is really promising. I think we
Speaker 2: feel those are good early indicators. But you know, it's
Speaker 2: going to take a decade or so, I think to
Speaker 2: know if this really had the effect that we wanted to.
Speaker 1: Let's talk a little bit about kind of the state
Speaker 1: of the industry itself, right, because you are kind of
Speaker 1: at the center of it. You have a nice perspective. Yeah,
Speaker 1: I mean, let's just step through like a few companies
Speaker 1: doing with a few different kinds of technologies, right, I
Speaker 1: feel like the one the most people have heard of
Speaker 1: is direct air capture. Right, is just fans and filters
Speaker 1: and whatever, like, should we start there? What's happening with
Speaker 1: direct air capture? Sure?
Speaker 2: So direct air capture, Yeah, you've probably seen these big
Speaker 2: fans kind of looks like a vacuum cleaner or something.
Speaker 2: You're like, you're pulling an air You're finding the co
Speaker 2: two particles from the other million air particles, You're compressing
Speaker 2: those and then injecting that usually underground somewhere, and there
Speaker 2: are a number of direct air capture companies out there.
Speaker 2: I think direct air capture is a technology that has
Speaker 2: high long term potential, but it's very capital intensive and
Speaker 2: it's very energy intensive, especially early stage. And there's a
Speaker 2: number of in our opinion, really promising approaches that have
Speaker 2: the potential to be super low cost. And that is
Speaker 2: both because of sort of cheap off the shelf capex
Speaker 2: and because of their ability to do that process for
Speaker 2: really low energy. But it's basically a game of capex
Speaker 2: and energy for DAC that's really important. It's technically infinitely scalable, right,
Speaker 2: but cost is the challenge for DAC. It's permanent, it's scalable.
Speaker 2: The question is cost, which is a function of capex
Speaker 2: and energy.
Speaker 1: Okay, what do you want to do next? Should we
Speaker 1: talk about plants next? What do you want to talk
Speaker 1: about next?
Speaker 3: Let's talk about plants. Then we're going to talk about rocks.
Speaker 1: Okay, plants go.
Speaker 2: So plants, of course, as we know, naturally sucks you
Speaker 2: two out of the air. And they do this sort
Speaker 2: of in a quote for free because they're using using
Speaker 2: solim from the.
Speaker 1: Least they use leaks, photos, sus.
Speaker 2: The challenge with plants is when in the context of
Speaker 2: carbon removal is two things. One, they take up a
Speaker 2: lot of space and so at the scale that we're
Speaker 2: talking they're sort of limits. The second thing that is
Speaker 2: challenging about plants is they're not permanent. Trees can burn down.
Speaker 1: Or just die, even right at the time scales we're
Speaker 1: talking about, even if there is not a fire, they
Speaker 1: will die and decompose. Right.
Speaker 2: Plants are very important for many reasons, but in the
Speaker 2: context of carbon removal, that the types of solutions that
Speaker 2: we are looking at because we care about the permanence
Speaker 2: piece A lot is how do you take what nature
Speaker 2: does for free and make that sort of permanent. So
Speaker 2: Charm Industrial is an example of a company that takes
Speaker 2: waste biomass, so sort of leftover corn stover for example,
Speaker 2: that farmers would you know, have from growing corn. They
Speaker 2: take that, they pyalyze it, which basically just means they
Speaker 2: heat it up without oxygen, and they turn it into
Speaker 2: at oil that they can then direct back underground.
Speaker 1: I talked to Sean Kinnetic who used to be there
Speaker 1: on this show a couple of years ago.
Speaker 3: Oh fabulous.
Speaker 1: So why is that one promising and why is that one?
Speaker 1: What are the limits?
Speaker 2: It's promising because you get the capture part for free
Speaker 2: from plants. It's challenging because there is a limited amount
Speaker 2: of quote unquote waste biomass, So like there is a
Speaker 2: sort of tap on probably how big that can be
Speaker 2: because there is only so much waste biomass. And then
Speaker 2: there's a question of like what is the best thing
Speaker 2: to do with that waste in a given scenario based
Speaker 2: on where it is.
Speaker 1: And so just to be clear, like in the case
Speaker 1: of Charm they go out to cornfields where after the
Speaker 1: corn has been harvested. There's all this just like the
Speaker 1: corn plant is just sitting there on the ground, right,
Speaker 1: and that is essentially carbon that has been captured that's
Speaker 1: about to go back into the atmosphere. But if they
Speaker 1: can piraalize it and stick it in the ground for
Speaker 1: ten thousand years, that's great. But it doesn't scale that
Speaker 1: much because there's not that many corn stocks sitting on
Speaker 1: the ground in various forms around the world.
Speaker 2: It gets you to probably actively and you know, there
Speaker 2: are different estimates for this, probably in the order of
Speaker 2: like a gig a ton plus per year by twenty fifty,
Speaker 2: so that's not nothing, okay, but it's probably not going
Speaker 2: to get you to ten gigatons a year. So it's
Speaker 2: by itself, it's not going to get you all the
Speaker 2: way there.
Speaker 1: But it's a non trivial chunk if it works, if
Speaker 1: it comes cost effective, I mean presumably for all these
Speaker 1: cost is still they're still quite expensive, and you have
Speaker 1: to get the cost exactly.
Speaker 2: And in the case of you know, some of there
Speaker 2: are different biker's approaches, but there's case to the capex,
Speaker 2: there's a case there's the cost of sometimes transporting the biomass,
Speaker 2: but it's again it's very sort of case by case specific.
Speaker 2: I would just call out that the waste biomass problem,
Speaker 2: there's a real limit to how big it can be,
Speaker 2: and so that's why we can't put.
Speaker 3: All of our chips in that basket. Yeah, now we
Speaker 3: can talk about rocks.
Speaker 2: Most of the world's carbon actually is in rocks in
Speaker 2: the lithosphere, and it just takes a really long time
Speaker 2: to get there. A reactive rocks, if it's an alkaline rock,
Speaker 2: will absorb carbon roughly proportional to a surface area.
Speaker 3: It also cares about.
Speaker 2: Other things like you know, it doesn't have access to
Speaker 2: water and temperature, et cetera. But you can kind of
Speaker 2: think about reactive rocks. Some rocks are like sponges for carbon.
Speaker 2: So the question is is how do you find or
Speaker 2: make alkaline rock which is very reactive rock that is
Speaker 2: kind of in its most squeezed sponge form, and what
Speaker 2: do you do with that to turn that into carbon
Speaker 2: ruble to sort of get it to do this sponge activity.
Speaker 2: And there are a number of different ways that we
Speaker 2: are looking at. One of them is called enhanced rock weathering,
Speaker 2: and this is taking sort of taking that reactive rock,
Speaker 2: spreading it on fields where it has access to air
Speaker 2: and it has access to sort of rain and water,
Speaker 2: and eventually that makes its way into the ocean and
Speaker 2: is stored as bicarbonate. But that is sort of one
Speaker 2: use of a rock. There's another category called it doesn't
Speaker 2: really have a good name yet. We talk about it
Speaker 2: as like surficial mineralization. But essentially, yeah, taking this rock,
Speaker 2: grinding it up to air and some water, it mineralizes,
Speaker 2: it turns into a carbonate, and then you essentially put
Speaker 2: it in these giant piles that are piles of carbon removal.
Speaker 2: And you know, it sounds it sounds a little wild,
Speaker 2: but it's quite interesting because.
Speaker 1: I like how simple it is. If it works, it
Speaker 1: sounds really simple, which seems good.
Speaker 2: Yes, And you know, we know how to do things
Speaker 2: like grind up rocks. We have an existing big mining industry.
Speaker 2: In this case, the carbon removal actually stays in place,
Speaker 2: so the monitoring and verification is quite easy.
Speaker 1: You just go and look at the big rock and
Speaker 1: you say, yeah, it's still there. Basically yeah.
Speaker 2: You know, we're very excited about rocks in general, and
Speaker 2: I think that this is this is a thing that
Speaker 2: nature already knows how to do and if we can
Speaker 2: find or make enough alkaline rock and that those are
Speaker 2: you know, very scalable and sort of infinitely scalable sponges
Speaker 2: that we can use to suck out a lot of
Speaker 2: cotube from the atmosphere and oceans.
Speaker 1: So it sounds like a direct air captured plants and rocks.
Speaker 1: You seem particularly bullish on rocks.
Speaker 2: I think that rocks are under explos relative to their potential,
Speaker 2: is why I'm quite excited about it. You know, I
Speaker 2: think that, you know, people ask us a lot like, well,
Speaker 2: what's your favorite one? And I am always hesitant to
Speaker 2: answer that question because.
Speaker 1: I wasn't planning to ask you that, But it feels
Speaker 1: like rocks are your favorite.
Speaker 2: I'm excited about rocks currently because I think they are
Speaker 2: under explored, and I think the combination of the scale potential,
Speaker 2: which is functionally unlimited, the permanence and the simplicity of
Speaker 2: rocks could be interesting.
Speaker 1: Obviously, in terms of the whole field of carbon removal,
Speaker 1: it's super early, right, But in terms of the life
Speaker 1: of frontier, it's not that early, And so I'm curious
Speaker 1: what has been different than you expected, Like what has
Speaker 1: gone better, what has gone worse?
Speaker 4: What?
Speaker 1: What have you learned?
Speaker 2: You know, I've been surprised by how at the time
Speaker 2: when we launch Frontier, I wasn't sure for the reason
Speaker 2: that we discussed that a billion dollars was going to
Speaker 2: send an appropriately loud signal. I don't think that it can.
Speaker 2: It didn't convince everyone, and that's fine, but I think
Speaker 2: it convinced enough startups and entrepreneurs and investors that this
Speaker 2: was a big enough market for them to try. And
Speaker 2: so you know, the numbers that we talked about earlier
Speaker 2: that surprised me. I think in that sense, it worked
Speaker 2: better than expected. I think that a thing that is
Speaker 2: also I don't know if we should be surprised by this,
Speaker 2: but you know, carbon removal is still really early and
Speaker 2: when companies start and not all approaches work, and that's
Speaker 2: not because they weren't good ideas. It's because you got
Speaker 2: to test your idea in the real world, and sometimes
Speaker 2: they those don't pan out as you expect. I've been
Speaker 2: also a little bit surprised by like how quick people
Speaker 2: can be to sort of catastrophize what I think in
Speaker 2: any other in any other field would just like look
Speaker 2: like early innovation like there's a bajillion AI startups. Not
Speaker 2: all of them are going to make it, but like
Speaker 2: some of them will, and that's that is there's some
Speaker 2: normal dynamics for an early ecosystem.
Speaker 1: I feel like with carbon removal, there's haters on both sides, right,
Speaker 1: because like, people who don't care about climate change of
Speaker 1: course hate it. But the surprising one is that some
Speaker 1: of the people who do care about climate change hate it. Right,
Speaker 1: there's the it's just going to distract us from the
Speaker 1: energy transition argument, right, So I do feel like you're
Speaker 1: up against a lot of haters.
Speaker 3: Yes, I think that's right.
Speaker 2: And on that point, I think that, you know, the
Speaker 2: moral hazard piece is an argument that people have been
Speaker 2: talking about in the conducts of CARMEEU for a long time.
Speaker 1: And just to be clear, moral hazard our second fund
Speaker 1: econ term of the conversation, after public goods, is basically
Speaker 1: the idea that like, oh, carbon removal will just let
Speaker 1: people keep emitting. It'll it's a signal that oh, I
Speaker 1: don't have to worry about it because they'll just suck
Speaker 1: all the carbon out of this.
Speaker 2: Yes, and you know, I think that, you know, our
Speaker 2: perspective is like if we had done. As a world
Speaker 2: a better job with emissions reduction earlier, we wouldn't have
Speaker 2: to do the carbon removal.
Speaker 1: It's a great world where we don't have to do. Really,
Speaker 1: it's a dumb thing to have to spend money on.
Speaker 1: If we'd have been smarter, we wouldn't have to spend
Speaker 1: money totally.
Speaker 2: And like ninety percent plus of the world's efforts should
Speaker 2: stay focused on a miss introduction, because without that there
Speaker 2: is no path to solving climate change full stop. But
Speaker 2: the math also, unfortunately for all of us, doesn't work
Speaker 2: without carbon removals, so like we have to learn to
Speaker 2: walk and chew them at the same time.
Speaker 1: So fun you were surprised by the haters. I'm sorry,
Speaker 1: what else I.
Speaker 2: Think that I am generally an impatient person, and I
Speaker 2: have to you know, my team's already reminding me that
Speaker 2: to build real things in the real world takes time.
Speaker 1: Yea, this is physical hard tech, right, It's not software.
Speaker 1: You can't just iterate every day and ship every day.
Speaker 1: It's like physical things. It's rocks, right, It's rocks in
Speaker 1: the world that take time to do the thing that
Speaker 1: they do exactly.
Speaker 2: And so we are sort of we as a team
Speaker 2: talk a lot about sort of inhabiting different mindsets. It's
Speaker 2: like we are rushed and we're we're sort of where
Speaker 2: we are running to get, you know, our fund contracted
Speaker 2: as robustly as possible, and at the same time, we're
Speaker 2: playing the long game like this is going to take decades.
Speaker 2: This this industry is going to take decades to really
Speaker 2: materialize and form. And we are still you know, we're
Speaker 2: We're closer to the starting line than any other place.
Speaker 2: We're five six years into this. So I think that
Speaker 2: trying to sort of both have that short term urgency
Speaker 2: but also really realize that, like you know, climate and
Speaker 2: carbon removal is more than one administration, It is more
Speaker 2: than one country. The timeframes that we're talking about just
Speaker 2: requires a sort of steadfastness that I should have appreciated
Speaker 2: at the beginning, but that I don't think I really
Speaker 2: internalized until probably like the last.
Speaker 3: Year or two.
Speaker 4: We'll be back in a minute with the lightning round.
Speaker 1: Let's finish with the lightning round. Great, he is romanticism
Speaker 1: making a comeback in San Francisco.
Speaker 3: You know, I'm sort of.
Speaker 2: I wrote that piece in part because I think the
Speaker 2: answer is yes, and part because I'm trying to manifest it.
Speaker 1: I love that.
Speaker 3: I do see tells.
Speaker 2: I've lived in San Francisco for a long time, and
Speaker 2: I think that there are tells that San Francisco is
Speaker 2: rediscovering it's humanism, we are rediscovering enjoyment, we are rediscovering
Speaker 2: our sort of soul in a way that I think,
Speaker 2: to me feels very exciting and a little bit different
Speaker 2: and sort of zaggy from the past ten years in SF.
Speaker 3: So I hope.
Speaker 2: So.
Speaker 1: I mean, you talk about it as this sort of
Speaker 1: you know, reaction to the Enlightenment as it was the
Speaker 1: first time, right, which is fun. Who's the byron? Is
Speaker 1: there like a Byron of San Francisco.
Speaker 2: That's a really good question. I don't know, but I
Speaker 2: will think about that. I mean, I also like the
Speaker 2: piece of it is the byron. I don't know you
Speaker 2: live there, and like I'm not, I'm not in the mix.
Speaker 2: I would love you to tell me somebody I should
Speaker 2: listen to or read or watch or whatever.
Speaker 3: I will think about that.
Speaker 1: I do think. I mean, there's another piece of it
Speaker 1: that you write about, right, which is particularly interesting right now,
Speaker 1: which is a reaction to AI reductively right and more
Speaker 1: specifically like this idea that if AI commodifies intelligence, what
Speaker 1: does that mean? Right, Like that's a super There's like
Speaker 1: all the sad Ai things, which fair enough, but there's
Speaker 1: a kind of interesting, maybe happy version of like, you know, embodied.
Speaker 1: I was talking to a guy at Anthropic the other week.
Speaker 1: I said, if you weren't working there, what would you
Speaker 1: be doing? And he said, I'd be a massage therapist.
Speaker 1: And he's say it and he's like, I'm really into
Speaker 1: embodied stuff, which is super romantic in the capital.
Speaker 3: R sense, right, Yeah, I think that.
Speaker 2: Yeah, there's there's sort of like this re emergent interest
Speaker 2: in the physical world and in tactile things and beautiful
Speaker 2: things and a beautiful built environment. I think that, And
Speaker 2: it's just sort of aesthetic aesthetics generally, I think are
Speaker 2: on the rise, and those all they're not all, you know,
Speaker 2: definitionally I guess physical or or sort of analog non digital,
Speaker 2: but I think a lot of them. I think a
Speaker 2: lot of them, A lot of them are that.
Speaker 3: That feels true to me.
Speaker 1: What was the hardest thing about building a coffee table?
Speaker 3: Well, you know, I didn't know how to how to
Speaker 3: use a drill.
Speaker 1: I awesome drills they are amazing.
Speaker 3: I use a drill.
Speaker 2: I didn't know how to use a sander, and I
Speaker 2: I'd really never built anything before. I tweeted. I tweeted,
Speaker 2: did anybody have these things? And a neighbor had had
Speaker 2: all the tools, taught me to use them, and essentially,
Speaker 2: you know, this coffee, this coffee I'm looking at it
Speaker 2: right now, this coffee table is I love how it looks,
Speaker 2: and I had a very specific thing that I wanted
Speaker 2: it to look like. But I am pretty sure that
Speaker 2: it is going to decompose by ever trying to move
Speaker 2: it. It is not built very well, but it does serve
Speaker 2: its purpose, at least at this at this moment.
Speaker 1: I mean, maybe it's purpose was building it.
Speaker 4: Right.
Speaker 3: Oh, I love that. Yeah, No, you're probably right.
Speaker 1: Man Ransoff is head of Climate at Stripe and Frontier.
Speaker 1: Please email us at problem at Pushkin dot fm. We
Speaker 1: are always looking for new guests for the show. Today's
Speaker 1: show was produced by Trina Menino and Gabriel Hunter Chang.
Speaker 1: It was edited by Alexander Garreton and engineered by Sarah Bruguier.
Speaker 1: I'm Jacob Goldstein, and we'll be back next week with
Speaker 1: another episode of What's your problem,