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