Catalyst with Shayle Kann - Growing the Carbon Dioxide Removal (CDR) market

Episode Date: May 5, 2022

Carbon Dioxide Removal (CDR) is having a moment. The most recent report from the Intergovernmental Panel on Climate Change found that the world cannot meet the targets of the Paris Agreement without removing hundreds of gigatons of carbon from the atmosphere. Big companies like Alphabet, Stripe and others have formed the Frontier Fund, a nearly $1 billion joint-effort to jump-start the market to purchase CDR offsets. Elon Musk is even sponsoring a $100 million X-Prize focused on it. We’re not talking about point-source carbon capture and storage, often called CCS. And we’re not just talking about Direct Air Capture or planting trees, the most well-known forms of CDR. Carbon Dioxide Removal also includes technologies involving kelp, bamboo, cement, mangroves, biochar, and others.  In this episode, Shayle explores CDR with Ryan Orbuch, a partner at Lowercarbon Capital who leads the firm’s carbon-removal work. Ryan helped to start Stripe’s carbon removal procurement program and has been involved in Stripe's nearly $1 billion Frontier Fund.  Shayle and Ryan cover key questions around CDR, like: What are the important characteristics of a carbon-removal technology? What roles do permanence and additionality play? Will investments in removal come at the expense of reducing emissions? Will CDR become a commodity market? Shayle also shares his experience with the first wave of carbon offsets, and the challenges that undermined those efforts. Ryan talks about separating out the cost of measurement and verification from the costs of removal, as well as why we should be thinking about radiative forcing more holistically, and not just carbon removal alone. Catalyst is brought to you by Arcadia. Arcadia allows innovators, businesses and communities to break the fossil fuel monopoly through its technology platform, Arc. Join Arcadia’s mission and find out how you or your business can help turn a fully decarbonized grid into a reality at arcadia.com/catalyst. Catalyst is supported by Advanced Energy Economy. AEE is on the front lines of transforming policy that accelerates the move to 100 percent clean energy and electrified transportation in America. To learn how your business can play a key role in transforming policy and expanding markets, visit aee.net/join.

from the studios of PostScript Media and Canary Media. I'm Shale Khan, and this is Catalyst. It's just that there's so much inertia in the system that we'll need to do carbon removal in addition to dramatic emissions reduction. And if we would have started implementing emissions reduction as we should have in the 70s, we wouldn't be in the situation. Like, it's kind of a crazy situation to be in.

This week, the one I know many of you have been waiting for, a deep dive into the weeds of carbon dioxide removal. When utilities need flexible capacity, can count on, they turn to Energy Hub. Energy Hub works with more than 170 utilities, coordinating over 2.5 million devices to manage 3.4 gigawatts of flexibility, built for the moments when utilities can't afford uncertainty. Energy Hub builds and operates virtual power plants that utilities actually stake their grid planning on, coordinating EVs, batteries, thermostats, and more through a single platform built for utility scale. Predictive, verifiable, and designed

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I'm Shel Khan. I'm a partner at the venture capital firm energy impact partners. Welcome. So here's my recent experience. There's this small but rapidly growing group of people who are obsessed, completely obsessed with carbon removal or CDR for carbon dioxide removal. But most everyone who isn't already one of these people who haven't been CDR-pilled, so to speak, often thinks that carbon removal is one of three things. Either it is point source capture on flu stacks, it's not, or it's tree planting, it is, kind of, or it's direct air capture, it is, kind of. But in reality, it is so much more already, not to mention what it's going to be in the next couple of years. As an example, you may know that Elon Musk is

sponsoring this big $100 million X prize focused on carbon removal. So over a thousand teams submitted applications to this prize. Nearly 300 of them passed through the first filter of qualification. Already 60 of them have been selected as the top group, and 15 have been awarded these million-dollar milestone prizes. But if you look at the list, the variety of different approaches to carbon removal are pretty staggering. They use land or oceans or air. They come from biology or electrochemistry or mechanical engineering, basically every technical discipline. They come from dozens of countries, teams, startups, universities, and so on. Needless to say, carbon removal is currently expanding its horizons at a pretty rapid clip. And then meanwhile, apart from the

different tech approaches, there are just so many open questions about how to think about and how to value different types of carbon removal, what characteristics we need to pay attention to, and what the market actually might look like if indeed this does emerge into a real sizable market. Like, How do we think about permanence or durability? How do we think about and how much do we care about measurement and verification? What are the other external impacts of these different technologies on ecosystems, on land use, on energy use? When at the high level, does CDR make sense?

And how do we think about it in the broader portfolio of solutions that we need to mitigate the worst effects of climate change? So few people have thought about this particular issue, carbon dioxide removal, as much as Ryan Orbach. Ryan was part of founding Stripes Climate Initiative, which, as many of you know, was among the first buyers of permanent carbon removal and has really galvanized this market, along with a couple of others. He's also been involved in Stripe's new nearly billion-dollar fund dedicated to purchasing removals through 2030, and most recently, he joined my friends at lower carbon capital, where he's

leading their new fund dedicated entirely to carbon removal. So, great conversation with Ryan, first of many, I suspect. And with no further. ado, Ryan Orbach. Ryan, welcome to Catalyst. Thank you for having, Michelle. It's great to be here. So we're going to talk about carbon removal or CDR, carbon dioxide removal, which is going to be the shorthand that I at least will use. What do you use? What do you say you do all day? Yeah, CDR, carbon removal. Okay. So let's talk about CDR.

I think the first thing that would be useful is I'm curious how you think about, there's this like multitude of different approaches that seems to be ever expanding for how you can remove carbon from the atmosphere, but they presumably can be categorized into a few different buckets. I'm curious how you think about it at the highest level. What are the big categories of CDR that matter? Yeah, there's a couple ways to look at it. I think historically, academics and others have tried to categorize like natural versus engineered solutions, nature-based versus non-nature-based, which is like directionally right, but not actually that helpful because like most of the interesting things are somewhere in between. One thing that I found a little more

useful is to kind of just think about like what's the actual trapping mechanism for the CO2. Like where does the carbon actually end up? And there you can sort of think like, okay, well, it's leaving the air and another goes into biomass, whether it's algae or plants or trees or whatever or like a cow or a person or whatever, or it goes into some kind of mineral carbonate kind of thing, right, like a limestone or bicarbonate in the ocean or whatever. Or it is just directly extracted as a CO2 gas, and it's kind of not trapped, but it's a pure CO2 gas, and you've got to put it underground or store it or mineralize it somehow. So within that, I would kind of think of it as, like, organic and inorganic, either like it's stored in biology or it's stored in mineral, essentially,

and everything kind of falls from that. That's interesting. I thought you were going to say, you know, the high-level categories are like you capture it via the air, the ocean, or the, or plants, or I guess, or land, soil. I don't know how to categorize, but just a different way to think about it. you end up having a bunch of weird overlap, right? Like, at the end of the day, the carbon is, like, being kept out of the air by something, right? It was already in the air. You're taking it out through any number of pathways.

Like, the reason the natural and engineered gets weird is, like, you have, you know, biomass carbon capture and storage, like a biomass power plant with carbon capture or something. And people say it's like a hybrid solution, but it's not really. It's like the CO2 is coming in through the plant and then ends up being stored as gas underground. And just, like, looking at where the CO2 ends up being stored,

it helps you think, at least has helped me think a little more clearly about it, because then you start seeing constraints in each area, right? So, like, if you want to store the CO2 in biomass, right, you, like, photosynthesis is amazing. It takes CO2 out of the air with, you know, very high efficiency compared to other approaches, and it's free and it's sun-powered, and it's self-replicating and all this great stuff. But it also comes with a bunch of other nutrients, right? It's not like the plants are just, like, creating a block of carbon. like there is nitrogen and phosphorus and iron and other stuff in there.

And if you're taking that out of the cycle, you're taking the nutrients out in ratio with the carbon, right? In contrast, and that's like something you have to think about if you want to take a lot of biomass out of the carbon cycle and like could end up being a real issue for biomass-based approaches. Yeah, I mean, I think every one of these, and we'll get into this, but every one of these approaches carries its trade-offs. The biomass-based approaches, depending on which version you're talking about,

like you have to take into consideration things like land use. Right? the engineered approach is, or I guess maybe, wait, I'm going to use your definitions now. So there's a stored in biomass versus stored in minerals versus capture it as a gas, as a CO2 stream, and then put it somewhere, possibly underground, possibly also in minerals. But those are your three, right? Yeah, I think we could try that. This is not perfect.

I think there's tons of academic work done on different categorizations. I'm not sure it's actually that helpful because there will be lots of pathways that are not easily fit in those categorizations. So organic and organic can be like a little bit of a framework. Yeah, okay. Anyway, what I was saying is, like, they all have their trade-offs. The biomass one, you've got stuff like land use. Like you said, you've got, what other stuff are you taking out of the cycle as a part of this? You've got all sorts of other, like, ecosystem questions. If you're going to capture it as a pure CO2 stream, depending on where you're going to capture it from, there's like upstream emissions, questions. There's all sorts of other stuff. And then if you're, then there's the like energy consumption part of anything that's engineered and all these other kinds. of like ancillary side questions.

But at the high level, it feels to me, and you're way deeper in this than I am, that like there's a Cambrian explosion of new ideas for CDR that has been showing up just in the past couple of years, partially spurred on by like the fact that there's a ready and waiting market and lots of supportive. There's folks like Stripe and what you're doing, a lower carbon now, but there's also the carbon removal XPRIZE. And there's like multiple incubators that are now running specific carbon removal programs. And it's just a very warm embrace if you create a new CDR idea right now in the market.

And so as a result, what used to be like a fairly straightforward set of approaches, which I would think was sort of dominated initially by like plant a tree or build a direct air capture machine, which are kind of two ends of the spectrum. Now there's this like massive wave of new approaches that make it harder. and harder to categorize because they're all unique and sort of cross these boundaries. Definitely. I mean, I'm so glad that people are starting to try to figure out how to do this. I mean, that was kind of the whole point of the stripe work and now of the work at lower carbon. But, you know, for many years, it wasn't clear that we would need large amounts of CDR. And it wasn't clear that there was any market whatsoever for people trying to build scalable methods. So, like, you would expect that, you know, the things that were talked about in the literature in the 90s and early 2000s are only a tiny,

subset of the actual good ideas. And I think we'll see over the next few years that many really promising pathways get actually discovered and actually implemented that are not in these national assessment reports and stuff. And I think one of the really exciting things about new founders coming into this space is hopefully through that kind of entrepreneurial activity, we'll figure out what the potential pathways are in alignment with the scientific community helping validate some of these approaches. I do want to talk for just one minute about the role of CDR at the high level and how you think about it in a broader decarbonization strategy because I think folks who haven't already been like carbon removal pilled. There's often this sort of, I don't know, knee-jerk

negative reaction to it because people think it could come at the expense of attention or dollars that will be paid to mitigation. But to your point, sort of that there's like it's increasingly clear from just that climate modeling that one way or another, like there's no way we get to 1.5 degrees C or anything approaching it without a bunch of CDR. There was a good, but on the other hand, it can't come at the expense of mitigation, perhaps even mitigation first. I'm interested to hear how you think about that, but I was going to reference a tweet from Zikausfather just yesterday, actually, which I thought was really good, which he did a little bit of like high-level math and said, even if we get permanent carbon removal down to $50 a ton, which is ambitious, right? like a lot of folks are talking about 100 bucks a ton, for every 0.1 degrees Celsius,

over 1.5 degrees that we land, meaning to the extent that we don't get there with mitigation in the meantime, every 0.1 degrees would cost another $11 trillion to remove from the atmosphere. So like, it just drives home the point that CDR clearly has to have a role. I think that has become,

that has become obvious, but how do you think about where to place it in the broader objective, which is mitigating climate change? I think that tweet and that context is just like drives home the point that it's really frustrating that we've been to some degree quite slow in reducing emissions, right? Like, carbon removal is never intended to be a substitute for emissions reduction, and like to that point is going to be dramatically more expensive than the vast majority of reductions. right? Like, that's just how this works. Like, not burning something is going to be cheaper than collecting the dilute remnants of the burned thing and doing something with it. Like, it should be

pretty straightforward. I think that it's a different system, right? Like, decarbonizing all industries in the entire economy has a tremendous amount of inertia. And progress, like, massive progress has been made in, you know, cost curves of renewable energy, and you know this much better than I do. But I think we at some point have to be honest with ourselves about, you know, one 1.5 is out of reach at this point, and the rate at which we reduce needs to be accelerated as much as possible, but it doesn't seem to be a plausible way to reduce quickly enough to avoid significant overshoot and significant damages, and therefore we need as much CDR as we can to try to balance that a little bit. And in the long term, like, if we can't zero out

emissions by mid-century or a little after, there's no way any of this is going to work, right? Obviously, this is only in that context. But in practice, it's just that there's so much inertia in the system that we'll need to do carbon removal in addition to dramatic emissions reduction. And if we would have started implementing emissions reduction as we should have in the 70s, we wouldn't be in the situation. Like, it's kind of a crazy situation to be in. Right. Yeah. I mean, you know, in the ideal world, we would have to spend zero dollars on carbon removal.

But now that we know we have to spend X dollars on carbon removal, like every bit that we don't mitigate is another set of dollars. We have to spend on carbon removal if we're going to balance this out. And so it ends up being extremely expensive if we don't get our act together on mitigation now. Totally. We have to get our act together on mitigation now because many of those technologies are required for carbon removal too, right? Like, you know, unless we can come up with some really incredible biological systems and, you know, synthetic biology to make biomass that doesn't decompose or something like that, like, there's going to be a lot of energy use. And like no one's lifecycle pencils without renewable energy use, right? So, like, this whole thing is going to put demand there.

Yeah, we'll come back to that because I think that's going to be one of the bigger, like, bottlenecks on this market's growth and the kind of midterm. But actually, that's a good segue into. So, okay, I think we can dispense with, like, do we need CDR? The answer is, yes, we need CDR, I think. Let's talk about, because there's so many different approaches now, and because the market is such a wild west at the moment, and you see, you know, there are voluntary buyers buying carbon removals. for everywhere from, I don't know, the low end is $5 a ton probably at the moment. You could tell me whether there's anything even cheaper than that, up to literally thousands of dollars a ton.

And each one, each removal purchase has its own set of characteristics and, like, it's totally different from each other. So I want to talk through the kind of the factors that differentiate these different kinds of removals and which ones, you know, how we should be thinking about them relative to the value of a removal credit and the value of a solution, like what should buyers be thinking about? What should companies be thinking about? So I'll run through a few of the kind category is with you and then you can tell me what I'm missing. But the obvious one is permanence. So this one comes up a lot, but I think actually a bunch of folks haven't fully conceptualized,

like, why does it matter? And how do we think about permanence on a scale? It's not binary, permanent or non-permanent. So explain the importance of permanence from your perspective. Yeah, so on-permanence, it's definitely not binary. Some folks have moved to using the word durability, which is probably better and more at the spirit of the thing. But I guess there's like different arguments people have here, right? Like obviously, you know, our whole argument, you know, the whole argument here is that 100 years from now will be decarbonized and we'll be better at all these things. They'll be cheaper. So like, why isn't taking carbon out of the air for 50 or 100 years good enough? Right. So it's not that that doesn't matter. It obviously does help.

But I think the intuition here is really that, like, an emission is permanent, basically. Like, an emission of CO2 stays in the atmosphere for hundreds of thousands of years, not forever, but hundreds of thousands of years. And if you want to somehow net that out with a proportional removal, like, it's not proportional to the emission unless it's similarly permanent. And I think that, like, that's the intuition for why durability matters for net zero is that, like, basically emissions are permanent. And that also means, to your point earlier, like, avoided emissions are basically permanent. removals. And like, that's why decarbonization is so important and needs to continue to be the priority because it's almost always going to be cheaper. So what I've been struggling with in part, so I see how, look, I like the intuition that like an emission is permanent, so a removal of

set emission should also be permanent. But then there's also this just like practical reality that we can, at least currently, we can remove emissions with significantly less durability way, way, way cheaper. This is why we have 5, 10, $15, $20 credits coming out of largely, you know, the sort of biomass based to purchase of one kind or another planting trees, etc.

So should we be thinking of that kind of, and those things have let's just say baseline, you know, 50 to 100 year durability. And to your point, that means that then 50 to 100 years from now, all else equal, like those emissions go back into the atmosphere and then we got to deal with them.

But if we believe that by that point, 50 to 100 years from now, we will have basically figured out all of our mitigation solutions and we will be at net zero or we'll be at zero potentially at that point. Then maybe we need to do it again and again and again and again or maybe it's not as big a problem at that point. So the intuition that I haven't been able to develop and I know the market has not been able to solve yet is like should we be thinking of this as

sort of low durability solutions are just lower value? and thus should command a lower price, but have a teeming market, or low durability solutions don't make sense. They don't actually solve the problem, and we should just be focused entirely on high durability, which is what Stripe is doing, right? I think we need an actual way to quantify

and at least try to think about the actual... Like, durability is not the only thing that matters about a solution, because many of what we could refer to as low durability, low-end credits today, whether it's something like improved forest management or otherwise, it's not that they're a low durability. They actually just don't exist. So, like, you have this weird thing where the lower the durability is. In practice, it ends up meaning it's like less and less likely to be additional. And that's not a rigorous rule, but I think the intuition is just that, like, the more

aggressively you perturb the natural cycle, the more you're sure you did something. So, like, maybe one way to think about it. And that's kind of why we prioritize high durability stuff so much is because we know at least, in some cases it's additional, but that's not enough on its own, right? So, like, one way to think about this maybe is any given credit, and this leads into, like, monitoring and verification and all this kind of stuff. And to be clear, there is a lot of value in forestry and in soils and in rewilding and all of these approaches. Some of us just not carbon value. And I think if we could break that out, that would be really, really, really helpful for everyone.

But, you know, one way to think about it maybe, just like framework we're playing with a little bit is for any sort of, you know, proposed credit, there's some notion of, like, a durability risk and some notion of an additionality or counterfactual risk. And like, you get this nice little two by two. And I'm sure this isn't perfect, but it's just an idea. And you can start to try to assess different approaches along this thing. And I think what you would find is that generally the lower durability things are also more likely to have uncertainty about whether or not they're additional, whether or not

there's leakage and otherwise. I'm sure there is a fraction of the low durability stuff that is really additional and is really high quality, but it's hard to determine that fraction. and I think the fact that it's hard to determine that fraction has led to both great work from organizations like Carbon Plan, but also sort of a growing consensus in the market that many of these, the cheap credits aren't actually that good, and starting to make people realize that there's a supply crunch on the higher quality stuff. The problem is that everyone at every part of the system is incented to say that their thing should fall into the good bucket, however you define the good bucket. And, you know, there are nominally third-party accreditation and verification bodies whose job is to do this.

But historically, they, you know, haven't performed as well as one might hope that they could. So, you know, being able to consistently evaluate these credits, I think we'll need to mean at some point, we kind of just draw, need to draw a hard line on the counterfactual and additionality. And, like, you didn't actually do anything you're just saying you promised to not cut down these trees. Like, I don't see how you can credibly evaluate anything like that. And for credits like that, arguing about, like, okay, well, how durable are the trees? To me, feels like it misses the point. Like, the question is, did you do anything?

Yeah, I mean, for what it's worth, I spent, I dipped into the world of carbon credits over a decade ago. I was doing, like, origination and trading of voluntary carbon credits in 2007, 2008. God, 15 years ago now. Was that like out of Kyoto? Or what was this? No, this was in the Northeast U.S. Like Reggie had just been passed, so there was a small, compliance market. There was a perception that there was going to be sometime a national

compliance market. We thought maybe 2008 election would change things. Obviously it didn't. But there was a burgeoning voluntary market at the time, though it was small, even smaller, I think, than it is today. But at that time, you know, the types of credits that you could purchase, there were some of the like, you know, forestry management stuff. But a lot of it was, you know, renewable energy. So it was basically wrecks that had been kind of like resleeved as carbon credits. And that market never materialized for a number of reasons, but one of them was additionality is extremely hard to measure with that stuff. Because basically the argument you were making is that we're going to create the sleeve of credits

that are going to be representative of the avoided emissions from at that time at like an expensive solar project or wind projects or biomass energy project or whatever might be. And we have to prove that those credits are necessary for this project to pencil. It's the only way you can justify additionality. And it's just like, you know, you can create math that does that, but it's just never trustworthy. And I think it's the same, it's the point you're making right now with all this other stuff is really, really difficult in all these situations to prove additionality with a lot of the forestry stuff, with a lot of the soil stuff. So even, to your point, even if you get over the durability of that stuff, you're still

going to face the additionality problem. I think if we could focus on, knowing where to draw the line on we just can't default trust this additionality or yes we understand there is like a large and official looking paperwork apparatus generated to make this thing look additional but like it also doesn't make sense if you think about it for like 30 seconds

like if we can get over the hump on additionality I think then we can be much more flexible with their ability and price things appropriately and sure you have to make up a number with a discount rate or whatever and then it also sort of becomes made up but like I think then you can get more rigor around that I think now it's that you have such mass

of conflation of both durability and additionality, that, like, again, it's super imperfect, but as a weak proxy, the more durable something is, the more of like an aggressive action, you know, compared to whatever the system would do on its own it is. And like, especially if you're putting something back into a mineral, you're putting it in a place that's like thermodynamically favorable and you'd have to actually expend a bunch of energy to get it back into the air. Like, that tells you something about the additionality as well. And I think the other thing that we lose in this conflation for what it's worth, and like I mentioned by diversity earlier, is like, avoided deforestation, for example, is like a classically cheap

and conceptually compelling credit, especially in, you know, say the Amazon, that's, I mean, basically impossible to prove the counterfactual because there's often significant amounts of leakage. And leakage means, in this case, as you know, like, okay, cool, you can, like, draw a box around a square and say, like, we promised to not cut down trees in this square, and then, like, send me nice satellite photos of the square every year. And, like, I believe you that you won't cut down trees in the square, but you haven't done anything about the demand for pasture land or the demand for plantation land or other arable land or, you know,

urban expansion or whatever. So just, like, some proportionally similarly sized different square is going to then get deforested because you preserve that square, and the net carbon effect is basically zero. For carbon, that's not very good. But, like, land is a valuable and constrained resource. And for something like biodiversity, preserving a particular square

versus a different square might actually be what you want and be quite meaningful. I mean, like wildlife corridors and migratory routes and unique habitats with endemic species and stuff, those are all real things that are very important

but just like aren't carbon. And I think if we could try to separate this out a little bit and stop pretending everything's carbon when it kind of isn't, you could potentially try to value some of that other stuff, which is really real and important for the world. Yeah, and to that point,

I mean, you have some of the solutions that have these positive externalities, but they're externalities relative to the thing you're measuring, which is carbon, you have other solutions which have negative externalities that you have to deal with, right? Like land use or like energy use and things like that. So, I mean, I guess I'm curious how you think about,

we've talked about durability, we've talked about additionality, some of these other things that are like, you know, determinative of the scalability and the attractiveness of a particular CDR approach, be it impacts on all these other externality. qualities, how are we supposed to weigh those in as we start to think about which approaches makes sense?

Yeah, I think like there's this weird double speak going on of like, it's a commodity market. All credits are the same. That's why they make sense to use proportional to my emissions, but also like co-benefits are a thing. And like, sure, maybe we kind of on background know that the additionality isn't really here with this thing, but it like supports this community that we want to support or it has this biodiversity benefit or whatever. And like, both of the things are valuable, but you can't simultaneously have both.

Right? Like, either it's a commodity, which means that like every unit of the thing is identical to all other units of the thing, or you want the whatever you're now referring to as co-benefits, which is totally fine. It's just a different thing and should be evaluated differently. So what is it? I mean, this is the fundamental question, right? Ten years from now, is CDR a commodity market?

Eventually, it needs to get there, I think. it's going to be really bumpy and sloppy on the way. Long-term fullness of time, CDR needs to become a commodity market. I don't think there's a mechanism to scale it otherwise. But along the way, I think what we'll see is sort of a, hopefully, and we talk about this,

a better monitoring and verification system that comes into place, that could put up something like a leaderboard of like what is the cheapest, actually delivered, genuinely real, high durability, carbon removal ton. And this is like, you know, as there become more deliveries, this basically becomes like a spot price, right?

And hopefully, like, carbon removal companies, if this thing is credible and actually does a good job of knowing whether or not a ton has been delivered, like are extremely aggressively competing to be at the top of the leaderboard or the bottom of the spot price or whatever it may be. And you start kind of coalescing the community around actual deliveries,

which is kind of far from what most of the carbon removal discussion is about, right now. It's like, it's great that funds are being raised, right? It's great that advanced market commitments are coming into place. It's great that, you know, large debt financing is being raised and all that. But at the end of the day, like, the point of all of it is to make the carbon come out of the air. And like, if we can start building a sense of pace around deliveries and clarity about deliveries, I think that's like the basic kind of narrative structure we need to turn it into a commodity eventually. But again, it's really, really far from that. And it's not going to get there unless we get meaningful volume of high quality removal to start understanding what the options are.

Right, which we absolutely do not have today. So I know this is a soapbox that you want to get on, but it is another important characteristic of this market that basically doesn't exist today, which is measurement and verification. And this is sort of what you're talking about. But, you know, obviously it differs by approach. It's much easier to measure and verify the removals associated with the direct air capture engineered solution because you're just sucking CO2 out of the air, you have a gas stream, you can measure the gas stream, you put that somewhere. You need to be certain about the permanence of the sequestration, whatever you're going to do with it. But that seems fairly straightforward. And then depending on the other

approach, it can be much more difficult to measure and verify. How do you think about where we are today in terms of M&V and what's missing? I think today the situation is that buyers are showing real leadership in giving companies that we don't know if they're going to work, but seem potentially plausible, the benefit of the doubt, and extending early purchasers, and giving them an opportunity to deliver and an opportunity to prove that they've delivered. And that is the correct first step, almost no matter what. So that's incredible to see. It is the case also that, like, a project themselves fully developing the mechanism by which they claim they deliver, the incentives are a little messy.

It's also the case that an external party or exchange that sells that project's credits for a fee developing the mechanism is also weird and clearly not how this should work. But who can the project work with to try to get it right and who can the buyer work with to try to get it right is still a little fuzzy. And I think that, like,

I believe that the majority, the significant majority of carbon removal companies and founders, are like genuinely trying to do this right and are not trying to scam people and are not trying to do bullshit stuff and they genuinely think they're working on a method that's going to work and they want to do it correctly. And I think what we need to provide

is infrastructure and a framework for them to prove that they actually are. Right. And what that could look like is any number of things. I think an important thing that is currently conflated in the market today that needs to get separated out is like right now, buyers are paying a price per ton

and buyers in, you know, such as Frontier are publishing the price per ton that they pay, which we think is really important. But that doesn't include how much it cost to verify. And I think separating out the price that the project is charging for the carbon removal and the actual cost to verify it at some bar that is deemed acceptable, which is its own kind of category of thing, would probably help. Because it's the case that some of the more expensive, methods like direct air capture are going to probably be easier to verify. And some of the potentially cheaper methods, especially those using biomass, probably going to be harder to verify.

And like that should show up in the price somehow. Right. Verification is not free, especially at high quality. For some of these things, like you got to send someone out to measure some stuff. And sure, maybe you don't have to measure every single piece of biomass or whatever, but you've got to measure a reasonable percentage of them or what have you. And like that costs actual money and actual expertise and like cannot be done purely with paperwork. work, otherwise we'll be in the same situation as the rest of the market. So, like, verification actually costs money, and, like, that should probably be broken out from the cost of the ton, and then we'll see a realignment in what's actually net cheap and actually net expensive,

and then we'll see kind of verification cost change and cost per ton change, and, like, that's how it'll shape up. Is your intuition that incorporating the cost of verification or including it as an additional line item on the cost of the solution, that that's, that cost will be high enough to really realign where these sit in the cost stack. I mean, I'm thinking about, so today, direct air capture is in the minimum hundreds of dollars a ton, right? Could be even more, but whatever. Biomass-based solutions can be sub, I mean, I guess the permanent ones are over $100 a ton too, but some of the cheap ones can be sub-hundred dollars a ton.

Like, verification would have to be pretty expensive on a per ton basis for that to really realign the cost stack, I would think. And in some cases, it will be, right? Like, I think it's almost less about the direct cost. And it's more about, like, maybe it's not quite as a cost, but, like, the market somehow needs to express the uncertainty of verification in a way that is, like, meaningful to purchase decisions. Right.

So, like, whether that's as a price or, like, you know, some discount rate on the number of tons or something, like, because what you need is you need to align the sort of scientific and research community around doing some of the basic work. that is required to make the verification more certain. So take something like ocean alkalinity enhancement, right? You know, if you add alkalinity to the ocean, it can flux with the atmosphere,

bring more CO2 into the ocean, and end up storing CO2 sort of dissolved either as bicarbonate or as dissolved CO2 gas in the ocean. There's a lot of CO2 stored in the ocean. This is a real thing. Measuring, it's really hard. Most of the modeling of ocean gas exchanges is done at like large global climate model

tile sizes, not at small enough scale, to actually know what part of the ocean is actually potentially good or bad to add some alkalinity to. That modeling exercise will take a couple years that require a bunch of supercomput, and someone needs to pay for that. There's a bunch of sort of amortized research stuff that needs to happen to enable some of this verification, and like it would be great if companies and purchasers could help pull that forward. because some of the stuff is expensive because it's research that hasn't been done and research programs that haven't been done

because again until a couple years ago no one was trying to figure out carbon removal at scale right? So a lot's going to get ahead of the science there are going to be a lot of these questions so like as companies sell tons and claim to deliver that needs to try to yank the research community forward to help figure out which of these things are good and this is important because like

I mean from the investor perspective like you know in the fullness of time we think the companies that make the most money doing carbon removal are going to be the ones where their carbon removal actually works, right? Like there's probably going to be lots of bubbles along the way. There's going to be things that people were wrong about. We'll be wrong. Bars will be wrong.

But like net net, the stuff that works is going to make the most money. And that means that the sooner we figure out the stuff that works, the more time founders will spend on better stuff, right? Like, I think founders want to do it right. So the more we can help them figure out what's actually going to be good, the better for the companies and for the future. virtual power plants are becoming a reliable way for utilities to manage capacity but enrolling devices is just the start what really matters is confidence knowing those resources will perform when dispatched and being able to prove it from the control room to the living room energy hubs platform handles the full picture from near real time forecasting locational dispatch and the kind of rigorous verification that holds up when regulators grid operators or leadership ask did it deliver easy enrollment creates momentum, proven performance builds trust. That's why more than 170 utilities rely on Energy

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how incentives are structured, and how progress is actually made. Listen to Critical Capital Capital on Spotify, Apple, or wherever you get your podcasts. How much do you think, like, what do you think of as being at the high level, the big bottlenecks you worry about as this market scales? Like, I'll give you my example. I really worry about the energy consumption of engineered solutions. Like, I think, I mean, I've talked about this before, but, you know, you can presume that there is infinite amount of renewable electricity that you can construct to run at-scale direct-air capture machines. But when you think about that in the context of all of the new electricity generation, we are already going to need to build just to decarbonize the grid and electrify transportation,

electrify heat, and electrify industry and all this other stuff, and then you add, like, gigatons of direct-air capture or something like that to it. All the, like, cascading effects of that from transmission to land use to cost become really concerning to me. Do you have things like that that you're like, you know, I think at some point we're going to have to deal with this other problem that's going to pop up, not an issue today because we're only doing, you know, tens or hundreds or thousands of tons, not billions of tons, but there's no way we get to billions of tons without solving it. Oh, yeah, there's going to be so many. Like, that's, I mean, the renewable one is an extremely fair one. That's kind of what happens when you have a totally new industry, right? Like there's a bunch of demand it creates for other stuff and pulls up.

other sectors of the economy along. And this isn't just people working on CDR, like, insulated in a little bubble who do not interact with the rest of the energy system or, you know, physical materials and supply chains and stuff. Like, it's a whole new industrial sector. And yeah, there's going to be a lot of that. I'm sure there will be regions that turn out to be a terrible place to do this stuff. I'm sure that, like, there will be real, frankly, probably supply chain bottlenecks and building some of this stuff out.

Like, I think that there is something to be said. Like, I think maybe a helpful way to think about. bottlenecks is like just taking the energy one, that's why we have so many potential pathways right now, right? Like it may be the case. I think it's hard to know for sure which of those bottlenecks are going to like squeeze how tightly when, right? Like I can't try to predict that. I mean, yeah, like I don't really know. But I think it's like you can have a number of different approaches and a number of different shots on goal in different regions with different geographies with different constraints that will run at different paces. And some will get squeezed out and some will do well.

And, you know, maybe that's a reason both to, first of all, I think geothermal could be really huge for DAC, just as a side note, but that's not like to say that that's obviously not an alternate energy use that would go somewhere else, right? Like, it's also saying that like additionalities, even with DAC not totally perfectly solved, right? Like, the additionality is kind of proportional to the alternate energy use of the energy to power the thing. I think we'll come up with new sort of electrochemical and chemical DAC systems that dramatically lower energy. I also think that we'll come up with biological approaches, ocean approaches, and otherwise,

that don't require as much energy in. This is what I was getting at with the nutrient export thing earlier. Like, one of the nice things about biology, obviously, is like just uses sunlight to take the CO2 in, but it grabs all these other nutrients along with it. And like, that could end up being a bottleneck, right? Like, you know, bottlenecks in organic systems is going to be things like nutrient export, land use, competition in the ecosystem or invasive species or that kind of thing. Bottlenecks in, you know, inorganic stuff or in DAC are going to be things like there's

not a lot of just like excess alkalinity available on Earth, right? Like the whole carbon silicate cycle does a really good job of like driving CO2 from the air into minerals and there's not just a bunch of like magnesium oxide just like floating around on the crust like chilling. So like, you know, getting alkalinity is going to require a lot of energy. there's bottlenecks all over the place. And I think that, like, I think the right way to solve them, or I think a way to solve them is have really high-quality founders, work as hard as they can in their area,

and have the ecosystem kind of really aligned around it. All right, I want to get to a slightly more... I don't know. How do you think it's going to work? How do I think it's going to work? Do you think DAC is going to just never... You might be right. I'm not saying DAC will never scale.

I'm just saying I just think... you know, we're doing it at such small scale now that there's a bunch of sort of unforeseen or foreseen, but like unsolved challenges that it's going to face as it gets to larger scale. It speaks to your point, sort of like where will it make sense, where won't it make sense? I do think the long term, the additionality question there is actually a really good one. Like if it is using energy that would be otherwise used for another purpose, what is, you know, that you get into this kind of weird version of a leakage question around that, that the time. does become challenging. So I think these are things, and that's specific to DAC. To your point, like I have, I'm actually probably less concerned about that than I am concerned about the biomass-based approaches in the long term, because if those are really going to scale, like,

we can, we can use waste biomass till the cows come home, so to speak, today. But there are going to be one competing uses for waste biomass because it has a bunch of value to do a bunch of different things. There are land use impacts. And like, we've seen what happened with corn and ethanol here in the U.S. And like, the last thing that we want is a, is to accidentally replicate that, right? But you can easily imagine that happening. The exact same thing could play out if we say like, oh, you know what?

We could use corn to do carbon removal. There's a market for carbon removal, and it's economic, and, like, you know, Iowa senators start lobbying for it. And, like, you could just watch the cycle play out again, right? And then we end up with this, like, situation we already find ourselves in, but just with a different market.

And instead of producing ethanol, we're producing carbon removal using a bunch of corn and a bunch of land, that should be used for something else. Cornstover might be a good thing to use. It's different than the kernels, obviously. But no, I mean, I was doing some reading on the ethanol stuff recently, and like, this was before I got into the space,

but it's easy to look back and be like, this seems like such an obviously stupid idea. Why did everyone push for this? And I think all the time about what are the things we're pushing now that a few years from now are going to look like that. And I think it's important that the space is wide and resilient enough that a few of those don't blow it up for everyone, because it's not going to be perfect.

We're going to try some stuff that's not going to work. All right. I want to get briefly into a slightly more esoteric topic, but I've seen you talk about it a little bit, and I find it pretty interesting, which is, like, will we at some point or should we at some point move from the idea of just like a carbon credit measured in dollars per ton of CO2 equivalent

to radiative forcing credits? So I guess first explain what a radiative forcing credit would be and why it's potentially a, smarter, albeit perhaps wonkier and never to come to pass version of this market. So radiative forcing is this idea of like the actual change in net energy in Earth's atmosphere from, you know, sunlight coming in combined with the stuff in the atmosphere and the reflectiveness of the earth, right? You know, when people talk about like, you know, RCP or SSP 2. When people argue about, say, like RCP 8.5, right? Like this very, very high end climate

scenario. The 8.5 means 8.5 watts per meter squared of radiative forcing, right? You know, these models go from like two, you know, one to two-ish all the way up to eight, which is, again, probably unrealistic, in terms of how much actual net energy is absorbed per meter of Earth. And the things that influence radio forcing primarily are the greenhouse effect, obviously CO2, methane, all the greenhouse gases, but also albedo, which is sort of just like shininess, right? Like if you've sat in like a black car in a hot parking lot versus. a white car and a hot parking lot, like, absorbs more heat.

That's how the optics and the physics work, right? So the vast majority of sort of climate work has focused on greenhouse gases, and specifically CO2. And, you know, starting off in this field, you would think that, like, carbon budgets and carbon emissions are the entire world. They're a portion of radio-de-forcing, but not the whole thing, right? And I think that the idea here is less that, like,

maybe we should be crediting this stuff, and more that like we should be trying to take a more holistic understanding of the climate system when we think about different interventions. Right. So, you know, one that's counterintuitive, but I think interesting to think about is aerosol is not in the sunlight reflection case, but that's sort of a separate conversation. But just for intuition for the system, like the Clean Air Act was pretty meaningfully net warming for Earth. Right. Like it was an objectively good thing, obviously. Like, it saved probably millions of lives.

It protected millions of people, and especially vulnerable communities from really nasty pollutants and, like, you know, dramatically reduced asthma rates and all of this stuff. But it is the case that, like, when you burn coal, you also emit a bunch of particulates into the atmosphere that end up reflecting sunlight and masking the warming effect of the coal burning pretty significantly. Right? And when you burn bunker fuel in ships, you also emit, you know, sulfates and other particles into marine clouds that end up masking some of the emissions.

pretty significantly. It's counterintuitive for people. And it's not, I think, I think where I'm going with the idea of, like, we should just be looking more directly at radiative forcing is that, like, some actions have pretty meaningful tradeoffs on things that influence radiative forcing that aren't carbon, right? Including, like, reforesting certain latitudes would likely be, you know, depending on the paper you read, either netwarming because it's darkening a high latitude, which is, you know, meaningful for the albedo effect and will make Earth absorb more sunlight, or maybe actually not because, like, those trees transpire water, which, like, if that happens at certain latitudes, it cancels that out.

But, like, no freaking forest carbon protocol accounts for albedo. And in some cases, it's, like, enough to almost undo the carbon storage provided by the forest. So, like, I feel like we've gotten a little too lensed on pure CO2 and pure greenhouse, really just pure CO2, both to the extent of other greenhouse gases and to the fact that, like, the color you make certain parts of the earth can be incredibly important for climate in a kind of weird way. So I just kind of want to expand the frame a little bit.

Painting the roof white is a real thing that helps. Right, right. The color of stuff matters. Generate some value, right. It's weird. But what I like about this is that you're getting down to first principles here, which is like what we care about at the end of the day

is impact on climate change, on anthropogenic climate change. And that is measured in radiative forcing, not in tons of greenhouse, not in tons of CO2 equivalent. And so we use tons of CO2 equivalent as a proxy for that because it is like the predominant force that, one, is, I guess, more straightforward to understand, albeit complicated because there are different greenhouse gases

and lifetimes and all that. But two, it's like what we've come to understand best. I think the radio enforcing stuff, it's the correct way to think about it. What we care about is mitigating the things that will have the biggest impact on climate change. But as you said, it's like incredibly complicated and interdependent and sometimes counterintuitive. So I will say I'll get on your soapbox with you, which is like there is not nearly enough

conversation about thinking about the holistic impacts of any decision on climate change, not just on greenhouse gas emissions. Totally with you. I don't know that we get there. but we, but like, let's, let's elevate that a little bit. Yeah, I'm totally with you. I think, like, if you want to first principles it, there's like two frames that I go back and forth with.

And, like, I don't know. They're both useful for different things. One is like, okay, yeah, obviously it's not all about carbon budgets. It's rated to forcing, which is, you know, greenhouse gases in albedo, but also, like, you know, changing one without the other can change weather patterns and all this sort of stuff, right? So that's, that's this one frame. The other frame that I also don't feel like we talk about at all is like,

where are all the adaptation people? The whole job of the carbon removal people is to make the adaptations people's job somewhat easier, right? Because either day, we don't even really care about radio enforcing. We care about, like, impact to human and animal and plant life and, like, losses and, like, whether people have to

migrate and whether crops fail, and, like, at the end of the day, like, impact on people. And, like, the alternate frame that, like, I would love better understanding of is, like, I don't have a good understanding personally of where we're at on the adaptation stuff. Right. And like, at the end of the day, like, that's actually what matters. Like, if we can adapt to a tiny bit more forcing, then we can adapt to a tiny bit more forcing.

But I don't have intuition for how that's going to play out. Yeah, that's actually, it's an interesting point and one that warrants its own separate conversation that we don't have time for now. I think there's been a challenge in thinking with clear eyes about adaptation. because in some ways it's like, one, we don't know how much of it exactly we need to do yet because there are these different pathways. It sounds like what people argue about with carbon removal or did five years ago. Yeah, and two, I guess also very similar to carbon removal, it's like a little bit politically fraught, right? Like, it seems like giving up, which also is the argument against carbon removal.

So maybe that's a fair point that like adaptation should be thought of in the same frame or maybe carbon removal should be thought of in the same frame as adaptation. But maybe we'll come back and talk about adaptation, actually. I think that would be an interesting one. The point is to preserve human safety and flourishing and biodiversity and stuff. And like all of these are levers by which to do that. And like, I think we don't holistically understand them. I mean, I've never seen an adaptation person at any carbon removal event or conference I've literally ever been to. And I've always thought it was weird.

I'm sure there's good work being done. It's just in a separate world. Yes, right. I agree with you. They sort of live independently at the moment. All right, that's all the time that we've got right now, but we've got plenty of threads that we could pull on in a future conversation. So I'll have you back on for sure.

But Ryan, thanks so much for joining. Thank you, Shia. I really appreciate it. This is fun. Ryan Orbock is a partner at Lower Carbon Capital. This show is a co-production of PostScript Media and Canary Media. Find the show on Twitter at At CatalystPod. You can also find me, PostScript, and Canary there.

And as always, we welcome your feedback. If you like the show, please go. over to Spotify or Apple Podcasts or wherever you get the show and leave us a rating and review or just share the episode with Friend. You can find links for this episode's topic and guest in the show notes on canarymedia.com. PostScript is, as ever, supported by Prelude Ventures, a venture capital firm with the longest tagline in the game. They partner with entrepreneurs to address climate change across a range of sectors, including advanced energy, food and agriculture, transportation and logistics, advanced materials in manufacturing, and advanced computing. The producers for this episode were Daniel Waldorf and Stephen Lacey, mixing by Greg Vilfrank and Sean Marquand, theme song by Sean Marquand. I'm Shale Khan, and this is Catalyst.