Big Tech invests $925 million in carbon phase-out

0

The world’s biggest tech companies are taking carbon removal seriously, the still-nascent technology in which humanity can extract heat-trapping carbon dioxide from the atmosphere. Yesterday, an alliance of major Silicon Valley companies including Google, Meta, Shopify and payments company Stripe announced that it would buy $925 million worth of carbon disposal over the next eight years. In a world awash with overrated corporate climate pledges, this is actually a big deal.

Purchases, which will be made by a new company owned by Stripe called Frontier, will eclipse all previous such efforts. In 2020, Stripe announced that it would spend $1 million to purchase carbon offset credits – at the time, the biggest purchase ever. Since then, Stripe and its customers have spent about $15 million on carbon elimination, Nan Ransohoff, a Stripe employee who will lead Frontier, told me. This figure alone is more than what other companies have spent on such technologies. Now Frontier is committed to increasing it by a factor of 60.

Carbon removal alone will not solve climate change. To avoid the most catastrophic effects of global warming, we must reduce carbon pollution as soon as possible. That means phasing out fossil fuels, embracing clean energy, and switching to public transit and electric vehicles. But even in situations where humanity is aggressively reducing its carbon pollution, some carbon removal is now “essential” to zeroing emissions: it was one of the the main discoveries of the new report of the Intergovernmental Panel on Climate Change last week. Even the most conservative IPCC estimates indicate that humanity will need to capture more than a billion tonnes of carbon dioxide per year to keep the planet’s average temperature from rising more than 1.5 degrees Celsius above from its pre-industrial level, an already unlikely proposition. The median estimate is a even more expensive 31 billion tons per year.

But the technology to do all of this at scale remains nebulous. Scientists and engineers are still exploring different ways to extract carbon from the atmosphere and store it permanently, such as building factories that clean carbon from the air or growing vast underwater farms of kelp, which can then be harvested and buried deep in the ocean.

Either way, these efforts will need to accelerate by orders of magnitude for humanity to meet its climate goals. There is no global total of the number of tonnes of carbon dioxide that have been permanently removed from the atmosphere so far, but Ransohoff estimated it to be in the thousands.

To go from thousands to billions, virtually everyone, including the members of the Frontier team, agrees that the federal government should eventually pay to eliminate most of this carbon. The market for carbon removal will likely need to grow to $1 trillion a year, Ransohoff told me, a figure that puts it well beyond the reach of any company.

But today the government isn’t making those purchases yet, so the companies behind Frontier have pledged to start buying carbon instead. “We’re trying to buy time to put the right policy mechanisms in place to get this market to where it needs to go,” Ransohoff said. At nearly “$1 billion, that’s about 30 times the carbon removal market that existed in 2021. But it’s still 1,000 times less than the market we need by 2050.”

I covered Stripe’s 2020 carbon disposal purchases for the first time. The company has now committed to purchasing carbon disposal from 14 different startups. Among them is CarbonBuilt, which attempts to sequester carbon by capture it in concrete; the Future Forest Company, which seeks to accelerate the natural process of rock weathering; and Project Vesta, which wants line the beaches with a carbon-capturing mineral called olivine. Stripe was just a customer of these start-ups, providing them with money today to capture carbon in the future. As I wrote last year, Stripe – and now Frontier – aims to be a “buyer of first resort,” sending a demand-side signal to entrepreneurs and investors that there is a large market for permanent disposal. carbon.

If $15 million was a dog whistle, $900 million is a megaphone. With this new investment, Frontier will take the same approach. “We do not invest in any of these companies. It’s money, tons,” Ransohoff said. This idea – that by committing to buying a product early, you can help bring it to market faster – was first pioneered in the field of medicine. In 2010, a group of donors committed $1.5 billion buy doses of a vaccine for Streptococcus pneumoniaebefore it was invented. This “advanced market engagement,” as it is called, spurred the rapid invention and deployment of a pneumococcal vaccine, which has been credited with saving 700,000 lives worldwide in 2020.

Much of Frontier’s work will take the form of this type of engagement. Each year, Frontier supporters will spend a certain number of dollars on carbon removal. Frontier will then pool its dollars and pay different companies to remove carbon through the method that company is exploring.

If those startups don’t deliver the tons promised, then Frontier has no recourse to get its money back, Ransohoff said. But he hopes his large payouts will accelerate the development of the industry, helping to discover what techniques and methods will actually allow carbon removal to scale as much as needed.

And now Frontier will have another tool in its box: an “offtake agreement,” a contract in which Frontier agrees to buy a certain amount of carbon from a company as soon as it becomes available. Banks and investors tend to be uncertain about lending to carbon removal companies that want to build a facility to test their ideas, Ransohoff said. But with a Frontier Levy Agreement, a carbon removal startup can prove to a bank that it will have a customer once the facility is up and running.

One of the most important aspects of Frontier’s purchases is that the company intentionally takes not effective carbon removal purchasing approach. Frontier, like its predecessor, Stripe’s climate division, has set a maximum amount it will spend to remove one ton of carbon. On average, Stripe paid “a few hundred dollars a ton” to remove carbon dioxide, Ransohoff said, but its purchases ranged from $75 to $2,052 a ton.

The goal, of course, is to remove carbon at the lowest possible price per tonne, but simply paying for efficiency isn’t necessarily the fastest way to get there. The history of US technology policy helps demonstrate why. In the 1950s and 1960s, the United States promised to buy the fastest semiconductor from any company capable of producing it at virtually any price. This program helped the new computer chip industry flourish: small businesses were able to explore new experimental techniques for making very expensive but fast computer chips. Because the government would buy fast chips at all costs, a company could break even just by selling a few tokens to the government once in a while.

In the 1970s, the government adopted a similar program to help market solar panels. But as I wrote, this program was far less successful, in part because it sought to buy the most efficient panels – which meant, in fact, the cheapest. Instead of supporting a vibrant ecosystem, this program encouraged companies to compete with each other to disappear.

The end result of these two policies is that America remains a major player in semiconductors but hardly makes solar panels anymore, even though the two underlying technologies were invented here. Of course, carbon removal is a far cry from the economic importance of either industry. But if he ever does, Frontier could be a crucial part of his story.

Share.

Comments are closed.