You're listening to a CNA podcast. They say diamonds are a girl's best friend, but they've gotten a reputation for being the environment's enemy to combat. Not just the reputation of the harm that mining diamonds does to people in the earth. Lab grown diamonds have become popular over the years. The best part, unless under the most trained eye, no one can tell the difference.
But are they really as environmentally friendly as they claim to be my guest today is Ryan Sherman, the co-founder and chief alchemist at Ether Diamonds in the US to find out if lab grown diamonds can help combat climate change. Welcome, Ryan, thanks for having me. First of all, I will wonder what got you into
the world of lab grown diamonds. Well, early in my career, I had spent some time working in the jewelry industry, developing products for an international jewelry brand based in New York City, David while I was there and familiarized myself with the diamond supply chain.
And it was at that point when I started to feel conflicted about how it was, you know, the industry at large was sourcing their gemstones fast forward in about 2018, it was, we conceived the idea of making diamonds from captured Co2 and it was gratifying in that this new approach could address issues that I struggled with as a professional working in the industry. And this was an exciting opportunity to step back into an industry that I rather liked and
appreciated and drive real change. So Ryan give us a brief history of lab grown or manmade diamonds. And when did lab grown diamonds really take off and why commercially lab grown diamonds have really had their moment in just the last half a decade. That said the first lab grown diamonds were first produced in the 19 fifties and it was actually General Electric who had a team of engineers who successfully cracked the code for replicating the process by which we see diamonds formed deep
inside the earth through high pressure and high temperature. Today, chemical vapor deposition is the leading technological solution for producing diamonds. Just tell us what does it take to get the carbon out of the air and walk us through what it takes to turn the lightest thing on earth air into one of the earth's hardest, which is diamonds. The first step in the process is to capture the co two through direct air capture from there, we convert it
into a usable material. In our case, methane, we call this atmospheric methane. So we combine co two with green hydrogen to create CH four which is methane gas that methane gas is then injected into the diamond reactor. It is hit with a microwave, much like what you find in your kitchen just much more powerful and the
hydrogen excites into a plasma state. So the C four that's in the chamber separates the carbon that was in the CH four starts to fall to the bottom of the chamber, almost like snowfall and it lands on top of small pieces of diamond called seeds. And from there, it attaches to the diamond crystal and continues to follow that pattern. And after about a month's time, that piece of crystal has now grown to almost a large piece of rough diamond.
They call it that can be core out to the size of a seven millimeters to a side, eight millimeters to a side. And from there it goes through the traditional cutting and polishing process and we're left with beautiful gem diamonds. And that entire four step process takes roughly about four months. How much energy are we talking about? So, the diamond growing process in a chemical vapor deposition reactor requires roughly 10 kilowatts of energy. Um perhaps a little bit more,
we source renewable energy. So although we acknowledge it's a significant amount of power, we are sourcing our power responsibly and we do this through solar. And this gives us the opportunity to use those clean electrons to turn something that is warming the planet into something that warms the heart. We also have a third party certified carbon negative footprint. So that means for every diamond we produce, there's less carbon in nature than there
was before. That's a good thing. And frankly, we have strong protocols across the board as a company with respect to ESG and it's paramount that everything that we do is as responsible as possible. You know, our mission as an organization is to decarbonise industries that would otherwise be contributing to global warming and climate change, but doing it in a way that benefits not only the planet but people as well. So how much co two from air is being extracted for,
let's say a carat diamond. So the end to end process is fairly efficient. There are not a lot of losses. Ultimately, a diamond is 100% carbon. So you can simply map that carbon to what is coming out of the atmosphere almost on a 1 to 1 basis. If we were growing, say a five carat gemstone that comes from a larger piece of rough material, you can generally multiply that by about five to get your rough material amount. Once it's turned into solid carbon, it's never going back into the atmosphere.
And ultimately, that five carat piece of material comes from say a total of 25 carats of rough material. And uh that's about 5 g of CO2. So in each stone, there's not a whole lot of carbon, the net impact when you compare this to say the need for mining a diamond from the ground or growing a lab grown diamond using fossil methane, which is the traditional feedstock. The avoidance of the negative externalities associated with those products is
where the impact comes from. So Ryan, how sustainable are lab grown diamonds compared to, you know, naturally created or mined diamonds? So when we mine a diamond from the ground, we have to dig very large holes in the ground. Some of these can be as wide as half a mile visible from space and those mining sites are never
really remediated. It's not like they're back filling the mine and, and all of the tailings that are dredged up from deep inside the earth, they're left on the surface where rain falls on them and ultimately heavy metals and other contaminants that are in those tailings do leach into the groundwater. There obviously is a well documented history of human rights abuses associated with the production of mine diamonds on the converse. You have lab grown diamonds which avoid
some of those challenges, especially from an environmental perspective. We don't have to dig the big hole in the ground. We don't have to deal with, you know, mine tailings leaching really bad materials into water that either the local flora and fauna rely on or you know, perhaps even human beings. The kind of sin of omission that occurs in lab grown diamonds is people often don't think about where the
carbon comes from. So although we're growing diamonds above ground, the carbon used to make them still comes from inside the ground. So largely the industry has just swapped one harmful extractive process for another harmful extractive process. So Ryan, let's address a common question that many people are asking are lab grown diamonds, real diamonds. So at the end of the day, a lab grown diamond is 100% crystal and carbon. It's at an atomic
level identical to what comes out of the ground. This is not a cubic Circon, this is not a moisten, this is in fact a diamond in every conceivable way. Even in the United States, the Federal trade Commission has changed the rules for what needs to be said as we talk about manmade diamonds. These do not even need
to be called synthetic anymore. Whereas the word synthetic was a requirement that rule changed just a couple of years ago and we see a general acceptance here in the US market and there was a recent report that upwards of about a third of engagement rings sold in 2022 utilized lab grown diamonds, centers stones. When we started this company in 2018, that number was
less than 1%. So the rate at which consumers are adopting lab grown diamonds is increasing year over year, what has changed so largely education, you know, consumers in the beginning didn't quite know what they were dealing with. There was a large education hurdle that kind of needed to be crossed. And consumers largely understand now that these are man made and they come from a laboratory. But they are, in fact, diamonds quality
lab grown diamonds are indistinguishable by eye. Even the world's best gemologist can't tell that a high color, high clarity lab grown diamond is not a natural stone. It requires expensive equipment in order to perform the test. You know, early on many retailers anticipated that people would simply spend less money and get the same stone that they would have gotten otherwise.
And in fact, the opposite is happening. We're seeing consumers continuing to spend the same amount of money, but to go to lab grown and get a bigger diamond. So they're getting a bigger diamond from a better, you know, frankly, more human friendly and more environmentally friendly supply chain without some of those, you know, human rights concerns and environmental concerns. And at the end of the day, it's indistinguishable.
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there's going to be fewer and fewer diamonds available because we've already exhausted what half of the world's diamond supply. So will natural diamonds continue to hold monetary value better than lab grown diamonds? What are your thoughts? So the price differential between a lab grown diamond, a mine diamond varies greatly depending on who you buy it from. Generally speaking, you're going to see a lab grown diamond sell for maybe about 30% the cost of
its mind counterpart. So for the same color, same carrot weight, same clarity, you're getting a lot better value for what you're spending. Peak diamond output happened in 2017. Every year from here on out, fewer and fewer stones will be pulled from the ground. And I think that's a net positive for humanity and for planet earth. But with that reduction in supply, the laws of supply and demand dictate that maybe that
actually helps support pricing. With that said, the rate of acceleration of lab grown diamonds is starting to eat into the market share of mine diamonds in a way that I don't think a lot of people anticipated. And this is not driven purely by the fact that it's a better value by getting a larger stone for the budget, but also driven
by environmental concerns. These are things that we've learned, speaking to consumers and ultimately, we feel that that is going to accelerate beyond the rate of decline of mine diamonds. I think younger consumers by and large understand that they don't need to support these archaic extraction practices anymore. That's
very interesting. How about, you know, when we say diamonds for the longest time, the aspect on scarcity also the rarity made people to desire or cray for the, what would you say to those that, you know, the sense of romanticism shall I say is sort of removed in the lab or devoid in the lab? I think that's a fair criticism of lab run diamonds. Frankly, it's
a criticism I've made myself on numerous occasions. I don't think that it maps to what we do and I think that's where we have some competitive advantage in the market. You know, there's no geographic limitation to where we can pull our carbon from. There's nothing stopping me from extracting co two from the air in Paris and introducing Parisian diamonds.
You know, mapping this to your personal love story as a consumer plays into kind of this trend of hyper personalization that we're seeing across a number of consumer markets and from their major markets around the world. There are areas where we'll be looking to capture CO2 that we can use to produce regional diamonds. You know, we don't have to go where these diamond deposits underground exist. We're not limited to parts of Africa or Russia or Canada,
we can do this globally. And that really brings an interesting marketing and merchandizing opportunity into the fray that we think people in markets all over the world will appreciate. So, what's Ether's goal within the next 5 to 10 years? How do you plan to achieve it? So our goal goes far beyond diamonds, diamonds, we consider merely our first act. Ultimately, if you think what we're doing, we're turning air pollution into an upcycled hydrocarbon. So we envision a future where we don't need to
extract hydrocarbons from the ground. Rather, we can develop an extractive industry around pollution and turning pollution into climate solutions. And our goal would be to bring our atmospheric methane to a wide range of different industries that utilize methane gas as a chemical feedstock as an ingredient, methane can be
used to make quite a lot of things. So our goal is to proliferate the technology across a number of different industry, verticals and different sectors and different geographies and ultimately decarbonise the world's industries by getting rid of fossil fuels. There are those who are quite skeptical about this sequestration, removing carbon from the air. What would you say to them?
There are fair criticisms. Carbon capture technologies, especially direct air capture, ambient capture of CO2 is relatively expensive, comparable to other climate solutions. And for me, this was the big aha moment you can take that carbon and bury it under the ground where hopefully it stays for a very long time.
But then you're losing half the opportunity. Ultimately, if we know, products are made with methane and we know we can make methane with captured CO2 to not do that is tacitly supporting the further continued extraction of hydrocarbons from the ground. So if we have this usable material and we fail to utilize it, we're making a grave mistake. And that's
really where we come in. And because diamonds as a product have favorable unit economics, it allows us to be somewhat cost insensitive to the upfront cost of the direct air capture. In the beginning when we were sourcing CO2. From our first, we were spending over $10,000 per ton of CO2. That's
a lot. If you compare that to the cost of pulling one ton out of the air through, you know, planting trees, it pales in comparison, but that was ok for us because with one ton of CO2, we can make many, many diamonds and then you can take that 10,000 plus dollar sum of money and advertise it across all of those stones and the per carat contribution was less than $10. So even if the cost of direct air capture went to zero, it really wouldn't fundamentally change our unit economics. And that made
us especially early on relatively cost insensitive. And those are characteristics that you need to see when new technologies are being developed. You want to see cost curves come down, you want to be able to see those technologies mature and we believe that we could play a role in helping bring those cost curves down starting in diamonds and ultimately across a number of industries, Brian. Before I let you go, just looking ahead, what do you think the future will hold for lab
grown diamonds? And what do you think will matter when it comes to diamonds in the future? One of the things I'm quite excited about is we are probably a year or two away from seeing lab grown diamonds make up the majority of engagement rings sold here in the US market. This is no longer, you know, some small esoteric piece of the industry. It's going to be the majority and
that's going to happen soon. And frankly, if you look at consumer trends over indexing for sustainability for the supply chain transparency, those are things that matter to an increasing number of consumers. So we're starting to see that ball rolling in the European market, whispers of an increasing willingness to buy lab grown in parts of Asia as well. So we're very excited to continue to see the market mature for lab grown diamonds and see consumers the world over start to accept them
exciting times ahead, Ryan. Best of luck to you. Thank you so much for joining us today and shedding light on this fascinating world of lab grown diamonds. Thanks so much. Well, thanks to my guest Brian Sherman and thanks to all of you for tuning in. We hope you enjoyed this episode. Do remember to subscribe and like this podcast. So, you know, when the new episode drops, we, we will be going on a season break.
We'll be back in August. But in the meantime, you can find the CNAs climate and sustainability coverage online at CN A dot asia. The team behind this podcast is Joan Chen, Jacqueline Chan and Christina Robert and I'm Julie Yu signing off.