Speaker 1: Welcome to Zero. I am Ukha Trati this week kickstarting
Speaker 1: carbon removal.
Speaker 2: Actually, when I started at zero, one of the first
Speaker 2: things that I remember having no idea about was carbon removal,
Speaker 2: because in my mind it seemed to be this very futuristic,
Speaker 2: far fetched, kind of fever dream of a technology and
Speaker 2: maybe even a way to avoid thinking about very hard,
Speaker 2: real questions about how to actually reduce emissions in the
Speaker 2: first place.
Speaker 1: I mightily I can see why you think it's sci fi,
Speaker 1: because it's like undoing climate change, and you know that
Speaker 1: seems like a big thing. Honestly, I don't think carbon
Speaker 1: removal is that sci fi. At the end of the day,
Speaker 1: it's carbon dioxide, a gas that we have studied for
Speaker 1: hundreds of years, that the industry has captured for decades.
Speaker 1: I became a climate journalist writing about a technology called
Speaker 1: carbon capture that does exactly that. It takes CO two
Speaker 1: from smokestacks and compresses it and puts it deep underground.
Speaker 2: But if it's so simple, why are we not already harnessing.
Speaker 1: This Because it's really expensive, And it's expensive because you
Speaker 1: have to think about carbon removal differently from carbon capture
Speaker 1: in a smokestack. There's about ten percent of all gases
Speaker 1: is carbon dioxide. So say one red minem in ten
Speaker 1: blue minems, but in the atmosphere it's at four hundred
Speaker 1: parts per million, which is roughly four red minems in
Speaker 1: ten thousand blue minms. Separating just those four out of
Speaker 1: that mixture of ten thousand blue is a very energy
Speaker 1: intensive and thus expensive process.
Speaker 2: Is that also why some of the solutions when people
Speaker 2: talk about carbon removal seem so creative.
Speaker 1: Yeah, now that this has been worked on for a
Speaker 1: few years, they're all kinds of crazy ideas from things
Speaker 1: that are sophisticated, like big fans that push air over
Speaker 1: very expensive chemicals to capture carbon dioxide, to people who
Speaker 1: are taking agricultural waste and shrink wrapping it in plastic
Speaker 1: and then burying it underground.
Speaker 2: Great, who's going to pay for it?
Speaker 1: That's what today's episode is about. I speak with Nan Ransohoff,
Speaker 1: who is the head of climate at Stripe.
Speaker 2: Wait, but Stripe is a payments company.
Speaker 1: Yes, you know, they have these machines that people take
Speaker 1: payments with. So at the end of book events I've done,
Speaker 1: there've been booksellers with this white box that takes a payment.
Speaker 2: The little box that goes beep.
Speaker 1: I mean all payments go beep.
Speaker 2: Okay, but how do the makers of a box that
Speaker 2: goes beep get involved in carbon removal? Yeah?
Speaker 1: That's what is weird about the carbon removal industry. It
Speaker 1: did not get started with government support, which is the
Speaker 1: story of all other climate technologies. Patrick Collison, one of
Speaker 1: the founders of Stripe, read a report from the Intergovernmental
Speaker 1: Panel on Climate Change and thought, well, scientists are saying
Speaker 1: we need carbon removal, and there is no company doing
Speaker 1: carbon removal, So how about refund it?
Speaker 2: And that's what Nan is working on now at Stripe,
Speaker 2: and we will get into that conversation.
Speaker 1: But before we do that, don't we want to tell
Speaker 1: listeners about a new thing?
Speaker 2: Do we have to tell them? Can we just do it?
Speaker 1: I don't like surprises, so okay, let me tell them.
Speaker 1: From this episode on, you'll hear a new sound at
Speaker 1: the end of the episode, and it's going to be
Speaker 1: something energy related.
Speaker 2: I've been thinking of it, kind of like the novelty
Speaker 2: card in a brand of snacks. My kids like Yo
Speaker 2: Yo bears a little souvenir car that has a factoid
Speaker 2: that they enjoy with their snack. So listen to the
Speaker 2: end of each episode to hear a new sound that
Speaker 2: is in some way connected to energy.
Speaker 1: That's right, a little energy factorid butt in sound.
Speaker 2: But first, here's Nan Ransohoff.
Speaker 1: Welcome to the show.
Speaker 3: Nan, thanks for having me.
Speaker 1: Now let's start with a little bit of history, because
Speaker 1: if you pick almost any climate technology, from solar to batteries,
Speaker 1: you'll find that governments have been crucial to creating a
Speaker 1: market for those technologies. It's not just about supporting the
Speaker 1: science that leads to the invention, but also creating the
Speaker 1: market through subsidies, through mandates for deployment at the very
Speaker 1: early st age, which eventually leads to wider adoption. Market
Speaker 1: players coming in, governments going out. You've been working on
Speaker 1: a climate technology, carbon removal, which in ways direct or
Speaker 1: indirect draws carbon duc set down from the atmosphere, but
Speaker 1: it got its commercial footing despite the involvement of governments.
Speaker 1: So the work you've done for Stripe is what kick
Speaker 1: started it, right.
Speaker 3: The work we've done for Stripe helped kickstart the market.
Speaker 3: We're not the only players in this space, but that
Speaker 3: certainly was the intention.
Speaker 1: And what were the major steps that you took at
Speaker 1: Stripe that now we can call this thing a carbon
Speaker 1: removal market.
Speaker 3: You're highlighting really the fundamental challenge that has faced carbon
Speaker 3: removal until rather recently when the twenty eighteen ie PCC
Speaker 3: report came out. One of the big takeaways is that
Speaker 3: we are, in addition to a huge amount of emissions reduction,
Speaker 3: are also going to need a lot of carbon removal.
Speaker 3: And the challenge with carbon removal has historically been, you know,
Speaker 3: because humans don't derive value from it like we do
Speaker 3: with something like energy, there have been no natural customers
Speaker 3: for it, and as a result of that, you have
Speaker 3: this chicken and egg problem where entrepreneurs don't want to
Speaker 3: start a company in the carbon removal space. Investors don't
Speaker 3: want to invest in carbon removal if there's uncertainty about
Speaker 3: whether there is really going to be revenue for those
Speaker 3: companies and demand for those products. So our work at
Speaker 3: Strape began in twenty nineteen with what was ultimately a
Speaker 3: pretty modest carbon removal commitment. It was one million dollars
Speaker 3: to buy permanent carbon removal at any available price. And
Speaker 3: the idea here was really to say, okay, we're not
Speaker 3: going to look for the cheapest technologies. We're going to
Speaker 3: look for technologies that have the potential to be low
Speaker 3: cost and high volume in the future. I'll also mention
Speaker 3: that you know, the world had and has some of
Speaker 3: the technologies needed to do carbon removal at this five
Speaker 3: gigaton per year scale. The challenge is one those solutions
Speaker 3: are often not permanent, and two, they take up a
Speaker 3: lot of arable land, which the world needs to do
Speaker 3: other things. So there's this big gap in solutions that
Speaker 3: exist today that haven't. The idea with this million dollars
Speaker 3: was how do we provide initial demand signal that there's
Speaker 3: going to be at least a million dollars in customers.
Speaker 3: When we made that announcement, two things happened. The first
Speaker 3: was the carbon removal community almost had a weirdly positive reaction,
Speaker 3: which to us just said that this field has been
Speaker 3: starved for customers such that anybody cared about the initial
Speaker 3: million dollars. And the second thing that happened was we
Speaker 3: got a lot of outreach from Stripe users who said, hey,
Speaker 3: we've wanted to do something in climate for a while,
Speaker 3: but we haven't because it's hard to figure out what
Speaker 3: to do. Could we send you some money and you
Speaker 3: figure out what to do with it. That led to
Speaker 3: phase two, right, which.
Speaker 1: That Stripe in this case, because it's a payments company,
Speaker 1: has people who are using the Stripe product to take
Speaker 1: customers money, obviously for themselves, but then Stripe gets a cut.
Speaker 1: So there was an automatic way in which if these
Speaker 1: customers wanted to contribute to carbon removal to Stripes goal,
Speaker 1: they could just do it through the Stripe system itself.
Speaker 3: Exactly. Stripe has you know, works with millions of businesses
Speaker 3: all over the world. Many of these are SaaS, businesses
Speaker 3: with decent margins, and many of them want to do
Speaker 3: something for climate but haven't. And because Stripe has you know,
Speaker 3: such broad distribution, if we can offer this product to
Speaker 3: Stripe businesses and give them the option to direct a
Speaker 3: fraction of their revenue to carbon removal, we can potentially
Speaker 3: actually pull much more demand for carbon removal, aggregate that
Speaker 3: and then use it to buy even more carbon removal
Speaker 3: down the costcript and right.
Speaker 1: So that's so Phase one is when Stripe put some
Speaker 1: million dollars and buys whatever is available in the market
Speaker 1: exactly regardless of price. Phase two.
Speaker 3: Phase two is Stripe Climate and it's that software product
Speaker 3: that now tens of thousands of Stripe businesses have opted into,
Speaker 3: and I was surprised initially. You know, most of them
Speaker 3: are giving one percent of their revenue to carbon removal,
Speaker 3: which is pretty meaningful commitment. And then we Stripe have
Speaker 3: had historically aggregated those funds and then use that to
Speaker 3: pool with our own corporate funds to buy more carbon removal.
Speaker 3: So that got us from a million to call it
Speaker 3: tens of millions of dollars. By the end of twenty
Speaker 3: twenty one, the entire field of carbon removal had roughly
Speaker 3: spent about thirty million dollars cumulative buying permanent carbon removal,
Speaker 3: which is sort of crazy that that was the total number.
Speaker 3: So in that sense, you know, a million and tens
Speaker 3: of millions starts to feel big, even though it's actually
Speaker 3: quite small.
Speaker 1: And so by that time Stripe is making majority of
Speaker 1: the investments through businesses, but through your own corporate.
Speaker 3: Giving exactly, we're a significant portion of the purchases. Shopify
Speaker 3: was also really early in this as well, but it
Speaker 3: was a small number of companies that were really thinking
Speaker 3: about how do we help create the demand the market
Speaker 3: for carbon removal technologies?
Speaker 1: And then that still was not enough, because then you
Speaker 1: went on to step three and now Stripe manages a
Speaker 1: billion dollar fund that has commitments from many other big
Speaker 1: companies like Alphabet, Meta McKinsey. Is the idea that once
Speaker 1: you've done it at the tens of millions, you realized
Speaker 1: all you just needed to do was multiply that manifold,
Speaker 1: and carbon removal as a market would take off.
Speaker 3: We really thought about it from almost a top down
Speaker 3: perspective of what does it look like to get carbon
Speaker 3: removal on its best possible trajectory. And you can think
Speaker 3: about this both in terms of supply. How many tons
Speaker 3: do scientists say that we are going to need, and
Speaker 3: then what is the implied demand that that is going
Speaker 3: to require. So if you just contextualize this, and of
Speaker 3: course these numbers are estimates, but roughly by twenty fifty,
Speaker 3: if the world needs about five billion tons per year
Speaker 3: of carbon removal as part of the broader net zero strategy,
Speaker 3: and say that we get carbon removal to one hundred
Speaker 3: dollars a ton, that's five hundred billion dollars per year
Speaker 3: in demand. If you then pull that back and look
Speaker 3: at what has to be true in twenty thirty at
Speaker 3: fifty to one hundred million tons within the year of
Speaker 3: twenty thirty. At call it two hundred dollars a ton.
Speaker 3: That is a twenty billion dollar need for demand in
Speaker 3: twenty thirty. So you know, a billion dollars is a
Speaker 3: good step in the right direction. It is, on the
Speaker 3: one hand, a big number compared to the thirty million
Speaker 3: dollars that had been spent to day, but on the
Speaker 3: other hand, it's still sort of falls very short of
Speaker 3: what the world actually needs. So we had tens of
Speaker 3: millions of dollars in the context of stripe climate, and
Speaker 3: as we've discussed, this market really still needs to grow
Speaker 3: extremely quickly much beyond that. So we came up with
Speaker 3: a bunch of ideas. We killed a bunch of idea
Speaker 3: and one of the ideas that we couldn't kill was
Speaker 3: this concept of an advanced market commitment, and in twenty
Speaker 3: twenty two, this is what we launched with Frontier. AMCs
Speaker 3: are a way to signal to potential suppliers and entrepreneurs
Speaker 3: and investors that there is going to be a market
Speaker 3: for the product that they are developing. We borrow this
Speaker 3: concept from vaccine development in the mid two thousands and
Speaker 3: ultimately launched with nine hundred and twenty five million dollars
Speaker 3: from Stripe. Stripe Climate users shopify Alphabet, McKinsey, et cetera
Speaker 3: in order to send that signal. And so, you know,
Speaker 3: for the past few years, our work has really been
Speaker 3: focused on both how do we spend those dollars as
Speaker 3: catalytically as possible, as well as how do we continue
Speaker 3: to grow the market for carbon removal and continue to
Speaker 3: build frontier.
Speaker 1: And it's worth looking at the technology because the og
Speaker 1: technology for carbon removal is really trees. But trees have
Speaker 1: a problem because you know, you can put trees, but
Speaker 1: putting the wrong trees in the wrong place can be
Speaker 1: actually bad for the climate. And trees are not permanent.
Speaker 1: You know, some trees, yes, they can live up to
Speaker 1: a thousand years, but most trees really don't. And now,
Speaker 1: with increased wildfires all around the world, there's a big
Speaker 1: risk of forests going up in flames, and then the
Speaker 1: carbon removal so to speak, has gone up in flames.
Speaker 1: So the reason you've been looking at technology approaches is
Speaker 1: that there are advantages to turning mostly clean energy into
Speaker 1: a carbon removal solution. So if you take the broad
Speaker 1: Church of different carbon removal technologies, how would you class them?
Speaker 3: So, I think that I think it's worth mentioning that
Speaker 3: trees are an important part of the climate portfolio. There's
Speaker 3: many benefits to nature based solutions beyond just carbon removal.
Speaker 3: The challenge is, as you said, they're not permanent, they
Speaker 3: can burn down, and also that they know we can
Speaker 3: only plant so many of them. Volumes that we have
Speaker 3: to get to with carbon removal are just so so huge.
Speaker 3: So we're looking for solutions that can fill out the
Speaker 3: entirety of the portfolio. We don't love the classification of
Speaker 3: nature based versus not nature based, because in many cases
Speaker 3: we're looking at quote unquote technologies that are harnessing the
Speaker 3: best of what nature already does for free, but trying
Speaker 3: to mitigate some of its downsides. I'll give you a
Speaker 3: couple examples here. Charm Industrial takes waste biomass. So, as
Speaker 3: you said, trees already do the work of the capture
Speaker 3: through photosynthesis, and what CHARM does is piralize that waste biomass.
Speaker 3: It heats it up, turns it into biooil, which is
Speaker 3: carbon rich, and then it can inject that back underground
Speaker 3: for permanent storage. It is not taking up arable land,
Speaker 3: and it is also making it permanent, and we call
Speaker 3: that in the category of biomass carbon removal and storage.
Speaker 3: People abbreviate that and call it bikers. There's another pathway
Speaker 3: called enhanced rock weathering. And most of the world's carbon
Speaker 3: is actually stored in the lithosphere in rocks, just takes
Speaker 3: a really long time to get there. So this category
Speaker 3: of approaches called enhanced rock weathering essentially takes rocks, and
Speaker 3: rocks typically they will absorb carbon proportional to their surface
Speaker 3: area and water and temperature exposure. So you're taking rocks,
Speaker 3: you're grinding them up, or the world's grinding them up somehow,
Speaker 3: and they absorb CO two ultimately and of and you know,
Speaker 3: as bicarbonate in the ocean. But it's essentially accelerating the
Speaker 3: process that rocks already do naturally on their own. And
Speaker 3: then you know, of course, you have direct air capture,
Speaker 3: which is the most photogenic amongst many of these solutions
Speaker 3: that look like these giant boxes that suck CO two in,
Speaker 3: find the particles of CO two, compress them, and then
Speaker 3: inject them underground for permanent storage. Increasingly, there are also
Speaker 3: a number of solutions within ocean so ocean alkalinity enhancement,
Speaker 3: direct ocean capture. And I think the sort of interesting
Speaker 3: thing about all of this from a supply standpoint is
Speaker 3: that most of these approaches have gotten started in the
Speaker 3: last few years. I think we're still quite early in
Speaker 3: shaking the tree for really promising ideas and trying to
Speaker 3: do what we can to get them to the starting line,
Speaker 3: and then do what we can to help the most
Speaker 3: promising ones scale up.
Speaker 1: Well, you can tell your carbon removal NORD when you
Speaker 1: say direct air capture plants are photogetic, because anybody driving
Speaker 1: past a direct air capture plant is going to think,
Speaker 1: what are these boxes of fans doing?
Speaker 3: That is a fair a fair critique.
Speaker 1: So in doing this there are now by one count
Speaker 1: eight hundred carbon removal startups. The way I've been looking
Speaker 1: at those technologies has been a little bit simpler than
Speaker 1: the broad classification and smart classification that you made, and
Speaker 1: to me, it's been basically the dumber the idea, the
Speaker 1: better it is. Because the dumber the idea, the cheaper
Speaker 1: it is to capture carbon and get rid of it.
Speaker 1: I think I don't know if it's the dumbest idea.
Speaker 1: But one of the dumb ideas that exists right now
Speaker 1: is a company called Graphite, And all it does is
Speaker 1: it shrink crafts bio waste and then buries it underground
Speaker 1: and hopefully that works. But it is a real company,
Speaker 1: funded by real people in the millions of dollars. Now,
Speaker 1: that's all fun. It's good to have ideas out there.
Speaker 1: We do need carbon removal as a solution to try
Speaker 1: and tackle the climate problem. But have you been too
Speaker 1: successful in seeding that many startups? You know?
Speaker 3: I think that this is not in some sense dissimilar
Speaker 3: to the startup ecosystem. More broadly, when a market appears,
Speaker 3: when there is a market for a new technology or
Speaker 3: a new product, there are usually many more companies that
Speaker 3: get started then end up scaling or successful. So I
Speaker 3: think a bit of what we're seeing here, you know,
Speaker 3: can be pretty easily contextualized in the context of sort
Speaker 3: of startup ecosystem dynamics. More broad Do I think eight
Speaker 3: hundred companies are likely to scale? No? Do I think
Speaker 3: eight hundred companies and anyone specific space or more product
Speaker 3: area is likely to scale.
Speaker 1: No.
Speaker 3: I think there's an element of healthy ecosystems that is
Speaker 3: sort of represented here in my opinion.
Speaker 1: After the break, we take a closer look at one
Speaker 1: of the carbon removal startups called Running Tide that went bust.
Speaker 1: By the way, if you've been enjoying this episode, please
Speaker 1: take a moment to rate and review the show on
Speaker 1: Apple Podcasts or Spotify. It helps other listeners find it.
Speaker 1: So let's talk through one failure, the failure of Running Tide,
Speaker 1: which raised about fifty million dollars and just recently went bankrupt.
Speaker 1: Tell us about Running Tide and how do you analyze
Speaker 1: its failure in the context of of the carbon removal
Speaker 1: stotup ecosystem.
Speaker 3: Yeah, I mean Running Tide was doing kelp sicking, so
Speaker 3: they were growing. Initially, they were growing kelp in the
Speaker 3: open ocean, and then once that kelp was mature, it
Speaker 3: would sink to the bottom of the ocean. It sort
Speaker 3: of gets stored quote unquote on the perverbial desert floor
Speaker 3: of the ocean.
Speaker 1: And kelp forests are fascinating. I mean, if you've never
Speaker 1: seen the calp forest, which I've not actually been inside one,
Speaker 1: but I've seen footage of it, they are just basically
Speaker 1: underwater forests.
Speaker 3: It's amazing though the difference with Running Tide was that
Speaker 3: they weren't growing the kelp from the floor up. They
Speaker 3: were growing it from the top down. So they were
Speaker 3: having almost like picture, you know, booize with kelp hanging
Speaker 3: from the bottom, and then once the kelp matured, because
Speaker 3: it is negatively buoyant, it would sink to the bottom
Speaker 3: and get stored sort of on the quote unquote desert
Speaker 3: floor below the thermal client, which is really really far down.
Speaker 3: And so we Stripe bought six hundred tons from Running
Speaker 3: Tide back in twenty twenty one. This was before Frontier launched,
Speaker 3: and this was part of We now have two tracks
Speaker 3: for companies. A pre purchase track for really early stage
Speaker 3: companies that are just getting started. These are five hundred
Speaker 3: thousand dollars commitments where we are buying tons, often at
Speaker 3: very high prices, and whether or not the company delivers,
Speaker 3: we don't take the money back. That's okay, sort of
Speaker 3: the cost of doing business for early stage companies. We
Speaker 3: now also have a off take track, which is for
Speaker 3: tens of millions of dollars, and these are contracts that
Speaker 3: essentially are a legally binding agreement to pay for a
Speaker 3: certain number of tons at a certain price, and they
Speaker 3: are pay on delivery, so we as a buyer are
Speaker 3: not on the hook to pay unless the company actually delivers.
Speaker 3: Running Tide fell into the first category in the context
Speaker 3: of stripe, so it was a one hundred and fifty
Speaker 3: thousand dollars for six hundred tons, and then also an
Speaker 3: R and D grant was part of that five hundred
Speaker 3: thousand tons because Running Tide was really early. So I
Speaker 3: guess from our perspective this again is you know, billing
Speaker 3: companies is hard. Building curb and removal companies is really hard.
Speaker 3: And we expect more of this to happen in the
Speaker 3: coming months and years as well. And I think that
Speaker 3: that's just a sign of what an early EGOSYSM looks like.
Speaker 1: Yeah, and this happens in industry after industry. There were
Speaker 1: by one count eleven hundred auto companies in the US
Speaker 1: in the early twentieth century, and of course now you
Speaker 1: have three giant ones.
Speaker 3: That's a great example.
Speaker 1: There were at one point four hundred and fifty electric
Speaker 1: vehicle companies in China. There are now a few dozen,
Speaker 1: and so the fact that they're eight hundred carbon removal
Speaker 1: companies and many of them are not going to survive.
Speaker 1: Isn't a surprise, but it is a different kind of market.
Speaker 1: In the case of electric cars or even gasoline cars,
Speaker 1: or solar or batteries, it's a commodity that people eventually
Speaker 1: wanted because it made their life better in some form,
Speaker 1: and that's not the case with carbon removal. Carbon removal
Speaker 1: isn't something that people want. It is something that society needs.
Speaker 3: It's a public good.
Speaker 1: It is a public good, and that means the only
Speaker 1: way to really have a huge, scaled up market for
Speaker 1: it is if governments mandate the purchase of carbon removal
Speaker 1: in some form, either through government purchase directly or through
Speaker 1: corporates being required to buy these tons.
Speaker 3: You're absolutely right, and I think it's really important to
Speaker 3: sort of pull the demand thread that you're getting at here.
Speaker 3: This has always been the challenge in carbon removal has
Speaker 3: been the lack of demand and the lack of natural
Speaker 3: customers and the DOO. We launched a procurement program. Canada
Speaker 3: and Denmark have launched procurement programs. Government involvement and policy
Speaker 3: intervention and compliance markets of some sort are going to
Speaker 3: be critical there. It is very unlikely that the voluntary
Speaker 3: markets by themselves are going to get anywhere close to
Speaker 3: the numbers required. We often talk about the need for
Speaker 3: a portfolio approach on the supply side, but we also
Speaker 3: need a portfolio approach on the demand side as well.
Speaker 3: These are different countries. Each country has different political contexts.
Speaker 3: In the US we like to pass everything through tax credits.
Speaker 3: US tends to be more carot Europe tends to be
Speaker 3: more stick. There are you know, there's pay for practice,
Speaker 3: there are pay for tons. There are potentially policies that
Speaker 3: are technology neutral and policies that are technology specific, Like
Speaker 3: what is the relationship between agriculture and enhanced weathering? There's
Speaker 3: some sort of a happy marriage there. But the point
Speaker 3: is that probably what the world is going to look
Speaker 3: like on the demand side is a patchwork quilt of
Speaker 3: different kinds of policies in different places, And if we
Speaker 3: want those to scale to that twenty billion a year
Speaker 3: and twenty thirty, we have to start planting more of
Speaker 3: those now.
Speaker 1: It's worth recognizing that as much as carbon normal will
Speaker 1: maybe needed by twenty fifty at five billion tons per
Speaker 1: year scale, the vast majority of the work between now
Speaker 1: and twenty fifty actually reducing the emissions that we are
Speaker 1: putting out, and that's going to be through technologies that
Speaker 1: avoid the consumption of fossil fuelds in the first place,
Speaker 1: or some of it may come from technologies that capture
Speaker 1: the emissions of fossil fuels being burned before they even
Speaker 1: enter the atmosphere, so carbon capture at point source, as
Speaker 1: it's called. There has been a different market, which at
Speaker 1: one point was the only real market that we were
Speaker 1: talking about when it came to what corporations were voluntarily doing,
Speaker 1: and that's the carbon offset market. Now I'm just going
Speaker 1: to categorize that market as a market that is trying
Speaker 1: to avoid emissions in the first place, because ninety five
Speaker 1: percent of the credits that are being sold on that
Speaker 1: market are about avoiding emissions, and mostly that's done through
Speaker 1: trying to protect forests, which is a good thing needs
Speaker 1: to be done. But we at Bloomberg Green have looked
Speaker 1: at that market and have found a huge number of
Speaker 1: flaws even in the morally right, science backed idea of
Speaker 1: trying to protect forests. The ways in which the counting
Speaker 1: of protection of forests has been done and offset credits
Speaker 1: have been created and then sold to companies, there are
Speaker 1: a number of frauds that have happened. That market is
Speaker 1: still around. It has grown and then shrunk, but there
Speaker 1: are a huge number of actors who want to have
Speaker 1: the carbon offset market as it exists, become better and
Speaker 1: become bigger. How do you see that playing out with
Speaker 1: the carbon removal market, which is a lot more expensive
Speaker 1: but has much more verified carbon removal as a result
Speaker 1: of the way it's being approached, compete on the demand
Speaker 1: side for what companies purchase, because currently that demand could
Speaker 1: be met either through carbon offsets that are avoiding emissions
Speaker 1: or through carbon removal, which are a lot more expensive
Speaker 1: but count for real tons.
Speaker 3: You know, I don't exactly know how the voluntary markets
Speaker 3: are going to play out at scale. I think in
Speaker 3: practice right now they're quite different, primarily because of the
Speaker 3: price point. So the offsets that you're mentioning are usually
Speaker 3: in the tens of dollars. The weighted average cost for
Speaker 3: frontier is in the mid hundreds of dollars, And so
Speaker 3: the buyers that are considering carbon revle tend to be
Speaker 3: a sort of very small subset of the broader set
Speaker 3: of organizations that are engaged in the voluntary market overall.
Speaker 1: Yeah, and we can just say these are organizations that
Speaker 1: are typically tech companies that have huge profits, and our
Speaker 1: tech companies that understand the science and want to do
Speaker 1: the right thing. Yeah, the companies that are buying the
Speaker 1: cheap offsets, many of them have been doing it for
Speaker 1: a lot longer, but also haven't really taught through the
Speaker 1: science as much. And after they've been called out, some
Speaker 1: of them have stopped. Others still continue because carbon accounting
Speaker 1: rules allow them to.
Speaker 2: I think that.
Speaker 3: The biggest challenge from a buyer standpoint in the voluntary
Speaker 3: markets right now is that there aren't really mechanisms that
Speaker 3: reward early buyers for paying higher prices for early stage
Speaker 3: carbon removal companies, and as a result, the total market
Speaker 3: for these early stage carbon removal technologies has just been
Speaker 3: really small.
Speaker 1: But are you heading for a fight here? Right the
Speaker 1: carbon removal market which currently exists, there's some compliance coming
Speaker 1: through by government purchaes, but it's quite a small amount.
Speaker 1: And then you have the carbon offset market, which is
Speaker 1: also voluntary at about a billion dollar scale, so you
Speaker 1: know roughly the similar size, if not same size. Are
Speaker 1: you in competition with that market? Because both markets want
Speaker 1: to grow and there is only so much demand for
Speaker 1: carbon from companies.
Speaker 3: Again, I think in practice, like because the price points
Speaker 3: are so different, it does tend to be a different
Speaker 3: set of like buyer on either side. But the main
Speaker 3: point that I think is worth highlighting is like, sure,
Speaker 3: we can compete with each other over a billion dollars
Speaker 3: here and there, but the end of the day, this
Speaker 3: has to get so much bigger that I think most
Speaker 3: of the conversation really should be focused around market growth
Speaker 3: versus market capture.
Speaker 1: Here when I first started thinking about carbon removal, and
Speaker 1: I've had a chance to talk to lots and lots
Speaker 1: of expert in this area, one conclusion that can be
Speaker 1: drawn from this is kind of stunning. Right, if there
Speaker 1: is ae hundred dollars a ton carbon removal credit available,
Speaker 1: that is actually a pretty cheap price point to try
Speaker 1: and avoid emissions or capture emissions that have been emitted, which,
Speaker 1: if it is true and available at scale, could stop
Speaker 1: us from deploying other solutions that may be much more expensive,
Speaker 1: such as green hydrogen, say, which if you count dollar
Speaker 1: for dollars based on the tons avoided, is actually quite expensive.
Speaker 1: Even solar in its initial days was you know, a
Speaker 1: thousand dollars a ton of carbon avoided. Yes, it's become
Speaker 1: cheaper since then, but there is a real advantage in
Speaker 1: carbon removal that it could set a price cap on
Speaker 1: what a solution to tackle climate change needs to cost,
Speaker 1: because carbon removal is the most expensive option and it
Speaker 1: is only at one hundred dollars a ton, but that
Speaker 1: could risk a bunch of other solutions never scaling. Have
Speaker 1: you thought about that.
Speaker 3: I think when people talk about this sort of the
Speaker 3: marginal abatement cost curve, it is assumes this world that
Speaker 3: you know, everybody is making perfectly rational decisions based on
Speaker 3: the price of a specific ton, and that's just, you know,
Speaker 3: as I've observed, it not really how the world works.
Speaker 3: And there's also other ways to intervene that are not
Speaker 3: just around price. So like governments can make requirements around
Speaker 3: how much emissions reduction has to happen before companies attempt
Speaker 3: to carbon removal. They could put in place specific rules
Speaker 3: for specific technologies and evs or with hydrogen, et cetera.
Speaker 3: So I think there are ways to solve that problem
Speaker 3: outside of just assuming that there's this perfectly liquid market
Speaker 3: for tons, and maybe we should do that. But the
Speaker 3: point is that you know, right now the big area
Speaker 3: of focus is how do we make sure that across
Speaker 3: all of these various climate solutions we can get them
Speaker 3: to be as cheap and scalable as possible, so that
Speaker 3: at least we have those choices to make when we're
Speaker 3: considering the entire toolkit for climate change.
Speaker 2: Thank you, Ann, thanks for having me.
Speaker 3: It's a fun conversation.
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