Catalyst with Shayle Kann - Kickstarting a $1 trillion market for carbon removal

Episode Date: November 18, 2021

Stripe, a fintech startup worth $100 billion, is trying to kick-start a $1 trillion market for carbon removal. The company is being extremely transparent about its processes, which means we get a window into the exciting, messy, often very experimental world of removing gigatons of CO2 emissions from the atmosphere. Traditionally, carbon removal has involved planting lots of trees. There have also been a select few companies toiling away at expensive-but-promising direct-air capture. But it turns out there are many ways to remove CO2. The earth already has a massive carbon cycle — plants, rocks, oceans and soil are already part of it. So there are many candidates for tapping electrochemistry and synthetic biology to accelerate natural processes. It’s still a small market — and one that needs to grow massively over the coming decades. So how do we build it? Shayle addresses that question with Nan Ransohoff, Stripe’s head of climate. Shayle and Nan break down lessons from Stripe’s first two carbon-removal portfolios. They discuss whether carbon removal will become a commodity market. They also cover learning curves, the sources of demand and the parallels between carbon removal and vaccine development. And Shayle asks: What does a winner look like? Will a single technology dominate? Catalyst is a co-production of Post Script Media and Canary Media. Catalyst is supported by Atmos Financial. Atmos offers FDIC-insured checking and savings accounts that only invest in climate-positive assets like renewables, green construction and regenerative agriculture. Modern banking for climate-conscious people. Get an account in minutes at joinatmos.com.

from the studios of PostScript Media and Canary Media. I'm Shayle Khan, and this is Catalyst. Having done this two times, we're in the middle of our third round of purchases right now, we're starting to see a much more diverse set of approaches to carbon removal, which is really exciting, and that is what this field needs. We need more shots on goal, more companies trying more approaches, because 10 gigatons is a freaking huge number, and we need a lot of ingenuity in order to get there.

Stripe is a startup worth $100 billion that is trying to kickstart a multi-trillion dollar market for carbon removal. And they're being extremely transparent about it, which means we all get a window into the exciting, messy, often very experimental world of finding ways to economically remove gigatons of CO2 emissions from the atmosphere. When utilities need flexible capacity they can count on, they turn to Energy Hub. Energy Hub works with more than 170 utilities coordinating over 2.5 million devices to manage. is 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 to perform when it counts. Learn more at energy hub.com. I'm Shail Khan. I'm a partner at the venture capital firm Energy Impact Partners. welcome. Okay, so let's start with the obvious problem statement. If we're serious about limiting global temperature rise to one and a half or two degrees Celsius, we're going to need to do two things. The first, clearly, is to dramatically decrease our emissions as close to zero as possible by mid-century or earlier. But the second, because there's basically no way we actually reach true zero and because

we're already overshooting our carbon budget, is to remove gigatons, that's billions of tons of CO, that is already in the atmosphere from the atmosphere. That is the burgeoning world of carbon removal. So how do you do it? Historically, we had lots of tree planting and avoided deforestation programs, and that's a start. We've also had a select few companies, particularly carbon engineering and climb works, who've been toiling away at direct air capture, which is machines that suck CO2 out of ambient air for a decade or so. But it turns out that there are many, many ways to really,

remove CO2 from the atmosphere. In part, because Earth already has a massive carbon cycle. Plants, rocks, oceans, and soil are all already a part of it. In other words, nearly every corner of the natural world. So you can imagine if you're trying to use modern technology, electrochemistry, synthetic biology, whatever it might be, to accelerate or improve one of these natural processes, you've got plenty of candidates, not to mention direct air capture itself, which itself has many pathways. And the cost of all this stuff, as of today, is all over the place. It literally ranges from, say, $10 a ton in parts of the forestry world to thousands of dollars a ton for some first-of-a-kind permanent removals. So today, we have a very

small market that needs to be a very big market over the coming decades. We have a bevy of technology approaches with different characteristics, prices, maturities, measurability, and so on. So, thank goodness that the companies trying to spark this market are offering such full transparency. Stripe, which has been leading the charge alongside, I would say, Microsoft and Shopify, publishes all the applications it receives, along with the details of what it's selected, the prices, and the contracts. It's incredibly valuable. And if you know me, you know there's nothing I love more than getting into the weeds

on new technology pathways to decarbonize and trying to figure out how an nascent market will play out. So Nan Ransahoff, this week's guest, is the head of climate at Stripe. So she's overseeing the team who's responsible for making these procurements and figuring out how to galvanize this market, basically take it from zero to one and then hopefully from one to a billion. With no further ado, my conversation with Nan. Nan, welcome. Thanks so much for having me, too. I am excited to have you here. All right, let's start at the high level and talk about Stripe climate.

I think it's becoming more things over time is my sense, right? Like you started out just being a buyer of carbon removal, and then now you are sort of also a supplier of carbon removal and a galvanizer of a carbon removal market and probably some other things I don't even know about yet. So how do you describe what striped climate is? Yeah. We are trying to build a large scale market for carbon removal in the absence of policy. And so for that means a couple of things.

One, we are trying to raise as much money as we can to buy Frontier Carbon Removal. And that is Stripe contributing. It's making it easy for the 2 million plus businesses on Stripe's platform to contribute a fraction of their revenue as well. Stripe has all of these different products. And if we can make it easy for businesses and consumers and employees to direct a fraction of their revenue into this pot, we then, Stripe, aggregate those funds and use it to buy carbon removal from really promising solutions that are expensive today. that have the potential to be really low cost and high volume in the future. So essentially, we're trying to help.

We're like buying the Tesla roadster of these new technologies to get them down the cost curve. So that by 2050, we have not only tree planting and soil sequestration, which we have today, but the entire portfolio of solutions that we need to hit global net zero. All right. So you mentioned tree planting and soil sequestration. Let's do a quick overview of carbon removal. What is it? Why does it matter?

and then I want to get into all the other pathways, and there are many, ways that you can remove carbon from the atmosphere permanently or semi-permanently. The world emits 50 gigatons of CO2 equivalent every single year, and we need to get that down to net zero by 2050. High level, two things we can do. We can stop emitting or we can suck CO2 out of the air and out of the oceans and store it somewhere permanently. Roughly speaking, and we're going to have to do a huge amount of emissions reduction. But in addition to that, in order to hit net zero, we're also going to have to do carbon removal. And that's because there are certain industries that are really hard to decarbonize. We also have to remove a lot of historical emissions.

And so we need a huge amount of carbon removal roughly on the order of 10 gigatons a year by 2050. And essentially what we're talking about is two parts. We need to find the 412 particles of carbon in the other million particles in the air. we need to separate those out and we need to store them permanently because a ton of emissions is permanent. So a ton of carbon removal also should be permanent as well. But a high level, there's a capture piece and there's a storage piece. Some solutions, those are inherently embedded together. And in some solutions, they are sort of more modular and you can mix and match. But high level, 10 gigatons per year by 2050. And we have a lot of work to do together.

Right. And I guess one of the thing that we should probably clarify, because I think there's still increasingly I think people are recognized what carbon removal is, but there's still some people who conflate it with carbon capture. And they can be similar and they can be different in the sense that carbon removal is permanent removal of CO2 from the atmosphere as opposed to carbon capture, or at least point source carbon capture, which is avoiding the emissions of CO2 from something that otherwise would have emitted a flu stack or something else. And you're focused on carbon removal and because specifically you think it's a gap, like it's where there needs to be a buyer of last resort for the Tesla Roadster model today. This is why Stripe has decided to like

dedicate its time and effort to carbon removal as opposed to all the other decarbonization stuff that needs to get done. Exactly. Our approach is let's look across the climate sort of ecosystem, find what we think the biggest gap is and where we think we are in a somewhat good position to move the needle on it. And carbon. removal where we're pulling CO2 out of ambient air or out of the oceans is, as you said, different than carbon capture where you're sticking something on top of a smokestack and pulling it from flue gas. So we are focused on the gap and there's a massive gap right now in sort of that pure carbon removal. All right. So I want to spend most of our time talking about two things.

One is that Stripe has already procured a bunch of carbon removal, which in this case basically means paying companies to remove CO2 from the atmosphere. And I want to talk about what you've bought and why and what it's looked like and what the early days of this market are shaping up to be. And then I want to spend a bunch of time talking about what the future of this market might look like because we're in this interesting moment where, you know, the market is in the low millions of dollars today and needs to be in the billions to trillions of dollars by mid-century. So how are we going to get from here to there? But let's start with what you've done so far. So Stripe is, as you said, been a sort of buyer itself of carbon removal and then also enabled Stripe customers to themselves contribute, but you've acted as the aggregator of those purchases.

And you've done two cycles of this so far, at least that have been announced publicly where you've not only issued a call for proposals, but then actually procured some of them and published everything that you've done. How would you high-level categorize the pathways for carbon removal that you've actually seen? selected thus far in the procurements that you've made? Yeah. So maybe we'll start with talking about what we look for when we're looking for looking to purchase carbon removal. And what we've, we've, we've published a set of target criteria. And the intention of these target criteria is to characterize the gap that we currently see in that portfolio of solutions. So we're, we're quite agnostic as, as to the pathway. We're agnostic as to the technology type, whether it's quote unquote, nature basis.

or engineered or synthetic, rather we're trying to really highlight what we're looking for. And what we're looking for is solutions that have more than 1,000 years of permanence that have a pathway to sub-a-hundred-dollar-a-ton removal, even if they're expensive today. And we've paid more than $2,000 per ton from heirloom this last cycle. We're not hunting for the cheapest tons. Three, we're looking for solutions that have the potential to get to more than half a gig a ton. And then in addition, we're looking for solutions that, are not competing with other uses of arable land.

So it doesn't compete for land that would be used for food or for shelter, et cetera. And so our solutions take a bunch of different shapes, but that is the target that we're looking for. And practice, this allows us to look at a pretty diverse set of technologies. I'll give you a couple examples. One of the companies in our first round of purchases

was a company called Charm Industrial. And essentially, they take biomass waste. So corn stover when you're farming in Indiana and there's leftover, there's leftover corn biomass from the corn, they will pick that up, pyralyze it, which just means heating it up really fast, turning it into a bio oil, and then they'll inject that underground. That is a sort of synthetic, that is a hybrid solution that it is using nature to do the capture, and then it is making nature permanence through paralysis and turning it into bio oil and injecting an underground. Another interesting example is running tide. Running.

tie takes rope. They seed that rope with kelp spores. They floated out into the middle of the ocean over six to nine months when the kelp grows. And then at that point when it's mature, it sinks to the bottom of the ocean. And once it's below the thermocline, it stays there permanently forever. So these are some of the solutions that, like, they use what nature is doing already. They are self-replocates. Nature does photosynthesis, does the capture piece for free. But nature is often not permanent and it's often takes up arable land and these solutions are trying to solve some of those challenges. Yeah, it's like hacking nature, those solutions. And that's as, and that's the, you mentioned sort of the distinction, which isn't always a clear dividing line

because the reasons you just described between quote unquote nature based solutions and engineered or synthetic. But you've also procured from the sort of like purely engineered, the most extreme example of which is direct air capture machines, which are literally just machines that sucks CO2 out of the sky. Exactly. So Climarks is a great example of that. They just opened the largest direct air capture facility in Iceland, which is doing 4,000 tons a year.

Large, but also, it's very large, but also very tiny. And essentially, they are, they use big fans. They air gets sucked into it. They use a sorbent to capture and separate the CO2 from the rest of the air part. particles, they mix that CO2 with water to make fizzy water, and then they inject it underground where it mineralizes in basalt rock. So that's a great example of, as you mentioned, a more engineered solutions. But we are starting to, having done this two times, we're in the middle of our third round of purchases right now, we're starting to see a much more diverse set of approaches to carbon

removal, which is really exciting. And that is what this field needs. We need more shots on goal, more companies trying more approaches because 10 gigatons is a freaking huge number and we need a lot of a lot of ingenuity in order to get there. I want to talk about, you know, what the future looks like for all these different technologies and all these entrepreneurs who are pursuing them. But I agree that, you know, my one learning for me has been, it's amazing how many different pathways there are to carbon removal, to even permanent carbon removal, like set your, you know, set your thousand years guideline. That obviously limits you to some degree. But nonetheless, like there's a, a surprising number of different ways that you can do that. And it's cool to see all different

options, including you guys are seeding more in the sense that you're partnering with like early stage incubators and accelerator programs and saying, look, if you can build a new carbon removal company, we will be your first buyer. So presumably your thought there is like there's a bunch of undiscovered pathways that we haven't even looked at yet. Yes. One of our big observations over these past two rounds of purchases has been, you know, we have a massive supply shortage. Currently, Striped climate is buying carbon removal years into the future for some of these companies, 2025, 2026. And we're not buying huge volumes at this point in time. So we've given a lot of thought over the past six months or so of how do we get more companies to the starting line?

How do we get more approaches to the starting line? And our partnership with Activates and with deep science ventures is essentially saying, you know, we will, for any company that meets our target criteria, we will give you a $500,000 procurement contract to be your first buyer and help bridge that commercialization gap. So we spend a bunch of time with DSV and activate aligning on what those criteria are to make sure that everyone is sort of running after the same point. And exactly like you said, we are super hopeful that we're going to get, you know, we've 10 companies are a portfolio right now and we'd love to add a zero to that. All right. So let's talk about prices for a second. You mentioned, what you paid for for heirloom, which was like $2,000 a ton. You also mentioned that the

benchmark for anybody that you're going to procure from is a pathway to sub $100 a ton. I guess, you know, there's a lot of talk about the kind of $100 a ton being the long-term benchmark for permanent carbon removal. It's not going to be why that's the number. Exactly. If we just collectively decided, like, well, if we can get to $100 a ton, then what it's going to take to remove 10 gigatons is palatable. Yeah, I mean, it's a little hand-weedy. I think 100 is sort of in the ballpark of what we're going for, but it could be higher and it could be lower. You know, right now, carbon market, you know, price in the carbon market are in most places lower than $100.

I think the expectation is that those are going to rise. But whether it settles around $50 or $200, we don't know. And candidly, these technologies are so early that they can make it case to sub $100 and some of them will get there and knock it out of the park and some of them won't. But like our view here has been, and I think the view of the field is let's set a directional price. Like directionally, it needs to be near $100 and then, you know, we'll land somewhere close to that and can assess at that point. The bottom line is it needs to be a lot cheaper than it is today. Definitely. And that's as evidenced by all the different procurements that you've made so far, which are all above that, basically.

And some of them, like you said, more than order of magnitude above that. So to that, I guess my question is, to the extent that this is a market today, I'll be at a nascent one, does pricing matter? Do you care about pricing today? Or do you care about what the price will be in 20 years when they get to scale? So we Stripe don't care what the price is today. We are very focused on trying to understand what the glide path for each of these technologies looks like on the way to sub $100 and more than half a gigat ton. there, you know, does the underlying, you know, physics or chemistry, et cetera, work? Are there other limitations that would prevent it from getting to the scale necessary? We are really focused on long-term, how cheap can this be, and much more agnostic as to, as to the price today. For most companies, we are giving them the same dollar value or just buying different number of tons from them. We sort of back-solved the number of tons based on the total contract value.

And this is, you know, this is another application of learning curves, right? Tesla roads are expensive at first, and it takes them multiple models to get down the cost curve. We are essentially buying the Tesla Roadsters for all of these different technologies, but only if we believe that, again, there is a path to sub $100 over the coming decades. I guess final question on the current procurements that you're making. You mentioned that you're buying removals out into the future, and I guess I have two questions related to that. One is, what are you seeing in terms of timing when some of this stuff looks like it actually can scale into the thousands, tens of thousands, hundreds of thousands of tons, how quickly can this stuff really get big?

And secondly, historically, with all these kind of big capital-intensive project development-e assets, which a lot of this stuff is, you know, you need a lot of. long-term contract to go become bankable and finance and asset off your balance sheet, which is what all these companies, carbon removal companies would love to be able to do. So do you think the market will head toward, you know, U.S. Stripe and everybody else who's buying credits, buying strips of 10 years worth or 20 years worth of carbon removal from a given asset at a time as opposed to transacting on an annual basis? Yeah. So to answer your first question, when are these technologies going to get to scale?

there's a lot of uncertainty right now, and I would say generally this field is not currently on track for carbon removal to make a material dense in the climate crisis. Like, even with the recent progress, even with all these companies that we're finding and funding in all the press and, you know, strike purchases and Microsoft purchases, like we are still so far off target. And it's a problem. So we can talk a little bit more about how to fix that and what needs to happen in order to get this field on the best. possible trajectory, but currently we're not on track to scale. In terms of contracts, yeah, so Google pioneered this back in, you know, in the 90s with renewables where they essentially said, we will pay a premium to purchase clean energy from solar, wind, et cetera, companies. And in order for those companies to get the financing to build out their plans, they needed a

customer offtake because banks are worried about, you know, there's going to be nobody to buy this ultra-expensive power that you're producing. And so we, this field is going to benefit from a very similar construct of off-takes. Right. So these companies need to de-risk, especially in carbon removal when there, you know, isn't an intrinsic use like there is with energy. Banks want to understand that there really is going to be a buyer if they give heirloom, charm, climber, etc., bunch of money to build a new facility. Off takes, I think, are going to be really important. And there's a number of different ways to think about how to do those.

But that will certainly be an increasingly important component for this field. 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 Hub's 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 Hub to manage over 2.5 million devices delivering 3.4 gigawatts of flexible capacity. See what that looks like at Energyhub.com. All right, let's transition to talking about the future of this market. So as it stands today, it's a relatively small market with a relatively small number of buyers, and yet, as you said, it's still supply constrained, right? There's an even fewer number of sellers who actually have something that they could sell you today

in the sense of removals that are occurring right now. So there's lots of folks who can, you know, promise you removals out into the future and very few who can deliver today. But let's presume that that changes. And more buyers show up. and more supply shows up as well. I guess there's a fundamental question that is my, probably the one that I grapple with the most about the future of carbon removal, which is, does this just become a normal commodity market, right? Like, is there going to be a single price, single dollar per ton price that the

market will bear for carbon removal? Will it all be standardized? And so at the end of the day, as long as you meet the criteria, say they're your criteria, a thousand years of permanence and all that, then if you're the cheapest dollar per ton, you win? Or is it going to have to be more nuanced than that, in which case, like, what does this market end up being structured like? In the really long term, I don't, I probably don't have a fully formed opinion on this, but, you know, my initial thoughts are that in the long run, I could see this becoming a commodity market if that market takes into account different characteristics of a ton of carbon removal, right? A tree planted for a hundred, the last for a hundred years is very different from

Climworks, a ton from Climworks, which is mineralizing the CO2 underground. And so if we can come up with a way to incorporate all of that information into the price per ton, I think there is a past, this looking and feeling more like a commodity, maybe there are different tiers or something like that. Maybe we end up looking at a price per ton. year, for example, to take into account the number, the number, the amount of permanence. But, you know, I think we're the, the something that I worry about is that we are really far from getting to the point where, where carbon removal is a commodity. And I worry that there's a lot of pull to treat it like that right now. And there's a lot of pull to sort of, to, to, you know,

list everything on a carbon market and have it compete with. $10 per ton offsets, and I don't think that's going to set it up for success. But it is an interesting question of how do you, I mean, you know, you have the benefit of taking a very, you're taking a portfolio approach and the sort of intent is to build as rich an ecosystem as possible of carbon removal pathways and technologies and companies. And so you inherently are going to say, okay, well, these different things have different characteristics, but they all meet our filter and so we'll procure some of all of them at drastically different prices from each other.

But it feels to me like for this market to even scale up to maybe the next level or two levels from now, we need some kind of benchmark, at least heuristics for like, here are the categories, right? Thousand years of permanence, infinite scalability, whatever, you know, you come up with your list. That's the, that's gold level. and then there's silver level and there's bronze. Exactly.

There's something like that because as it stands right now, at least my perception of it is just like, because these pathways are so different from each other, you can drop kelp in the ocean or you can turn CO2 into rocks, basically. How do we think about those relative to each other? And not everybody's going to be as sophisticated as stripe. And this is one of the big things that happened in the renewables world, right?

It was like Google and a bunch of these other companies in corporate renewables, they pioneered the model, but they had the sophistication and the resources to be able to say, all right, we're going to figure out how to negotiate these complex synthetic PPA structures and hedge against them and all of that. And we can afford to pay a little bit more. But it took a lot more standardization and simplicity to get the kind of next level of companies involved. And so I'm trying to figure out how that's going to happen in carbon removal world when you have such dramatically different pathways to achieving similar ends. Yeah, I think that's a great point. And the criteria that we talked about a couple of minutes ago around, you know, permanence, scalability, cost, additionality, et cetera, I hope that it's some version of those criteria that end up getting incorporated into this market. I think what you described makes a ton of sense. Each technology, like those are abstract enough that each technology should be able to have an answer to each of those characteristics. and then we can categorize them and price them as such. I just think that, you know, for them to be even in the realm of similar prices is going to take, you know, we are basically putting the first dot on the cost curves right now. And those cost curves look different for every single company.

And it's going to take years or decades for them to even get close to one another. And so while I do think that is a, that will happen, it just will take a little bit of time to get it there. There's some of these pathways that theoretically at least could scale to the size of the whole problem, right? Direct air capture in principle could do 50 gig or do 10 gigatons a year, I guess, of removal. Some of the other ones could do. Some of them have limitations, right? If you're trying to like turn biomass into bio oil and injected underground, you're limited by the volume of biomass that's available to you. So there's some natural limitations. But one of the other questions that I have about this market is sort of, is there a possibility that there's a winner here,

not necessarily a company winner, but a technology winner? We solve it with DAC, for example, or is there just no way that's going to happen because everything has some kind of a resource constraint that's going to mean it can't scale to the total size of the problem? I don't think we know at this point. I think it's too early to pick a horse. I think it's probably too early to pick multiple horses. My hunch is that there will likely be a few kind of winning solutions in different areas and companies that are leaders in those areas that collectively get you to the 10 gigaton. I think if you purely think about this from the perspective of what is your, you know,

Kager need to look like from now until 2050 to get to a 10 gigaton number, it's hard to imagine a single company or a single technology growing that quickly, you probably need to parallelize a few different technologies so that in some they aggregate up to that 10 gig a 10 number. But it's possible. It is certainly possible that the charm folks or the Climbworks folks, you know, figure out how to scale this really massively. And I, you know, let's compete for that. Like, let's let's see what we can do and try to get there as quickly as possible. Right. To your point on Kager, right? So you mentioned the Climborks facility. is the largest DAC facility in the world. It's doing 4,000 tons a year. 10 gigatons is 10 billion tons.

So you got to go from 4,000 to 10 billion. That's the scale effect that you need. Exactly. We are, just to give you a sense of what this will look like in 2050, if you believe that the price of CO2 is $100 and you believe, you know, or call it $10. In the most wildly optimistic scenario, that's $100 billion to a trillion dollars a year. year in purchases by 2050. For context to date, probably about 30 million total has been spent on frontier carbon removal and less than 10,000 tons that have actually been permanently removed. So we need a million times the supply that we have today per year by 2050 and a massive, massive assist on the demand side in order to get in order to scale the market. Yeah, so let's talk

about the demand side then. You said at the beginning when you were describing Stripes, Stripe climate and how you think about it, that you're spurring the market for carbon removal in the absence of policy. So does that mean that you are bridging the gap until there is policy? I mean, it's, tell me if you disagree with this. It's very hard to imagine we get to 10 gigatons of removal without substantial policy, basically global policy, right? Because no, you're not going to be able to like get $100 billion to a trillion dollars worth of worth of investment in this space just from corporates like Stripe. So we need some kind of policy at some point.

Completely agree. Yes. I think about this like the private sector is pitching in to help get us to first base and then policy needs to take us the rest of the way there. A voluntary market of a trillion dollars a year is highly unlikely to happen. Right. Stripe's going to be a very big company by then, I'm sure, but a trillion dollars is not insubstantial.

I do want to talk about startups, right? Because one of the things that I think has been interesting is that you just look at your procurements so far and who you're procuring from. And it is mostly early stage technology companies, like venture-backed early-stage companies. And I wonder, first of all, why that is. I mean, is it that you're not getting applications from are the big players you can imagine in the long term, right? There's lots of companies that have scale and can do big things and probably should be the ones,

whether they invent the technology themselves or acquire it or license it or whatever that doing this, is it that they're not yet getting into the carbon removal game? It's too early in market for them? Or is it that you have a preference to spark innovation and early stage tech startups because that's Stripes DNA? So far, the companies that have applied to our RFP are all startups. And we were the first customer for 7 of 10. We're not opposed to buying from later stage companies, but we haven't seen them. I think for the most part, That is driven by the fact that carbon removal hasn't made a compelling enough business case for them to actually do anything in the space. And historically, nobody wants to build carbon removal if there's no market for it.

You don't want to build a product when there's not going to be a buyer for it. And when especially large companies are looking at how to evaluate resources that is certainly part of a big part of the ROI calculation that would go into a decision like that. we need to fix that. We've been thinking a lot about a similar concepts in vaccine development that's helped solve some of these market problems. So there's something called an advanced market commitment. And this is essentially used when you want to develop, for example, a vaccine for the developing world, malaria or the PBC, a PVC vaccine. And Pfizer and Glaxo will say, you know, hey, I'm not going to spend the resources developing this vaccine because, if I do, nobody's going to buy it. The buyers in this country are poor. So in 2007,

to come up with a PVC vaccine, philanthropists and governments decided to put a huge amount of money into a pot and basically say, here's a billion and a half dollars. If somebody can develop a vaccine for this market, there is a guaranteed pot of money for purchasing doses of this vaccine. And it worked. The, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the. The pharmaceutical companies came up with a vaccine, shaped estimated five years off of the development cycle, and saved on average an additional 700,000 lives. And there's a lot of similarities between vaccines and carbon removal

and that they both suffer from the lack of a market. We've been thinking a lot about what a carbon removal AMC might look like. If we could put one or $10 billion into a pot and basically say, we promised to buy carbon removal at least at the, this scale, what kind of confidence would that give to investors who are thinking about getting it to the space? Big companies who have been hesitant to get in because they're unsure if there's going to be a market. Researchers, scientists, entrepreneurs, like we are missing currently that big demand signal to give the rest of the players in the ecosystem the confidence that they need to

jump in and do something and we need to fix that piece. All right. Just to close out, I guess. So you're doing a lot to get this market and all the different. pathways that are worthy of exploration up and rolling. Is there anything that you don't see happening yet? Either areas of carbon removal promise that you don't see being explored sufficiently or a part of the ecosystem, for example, you mentioned at the beginning that some carbon removal technologies have storage or sequestration kind of baked in. Some do not. So is there a separate role for, you know, purchasing carbon removal storage or sequestration? Like, is there a part of the ecosystem that is behind other parts? Where to begin? Um, there is all behind. It's all, I mean,

it is all behind. That is the top line message is that is the supplies behind, the demands behind. Um, but I'll call out a couple of, of pieces here. You mentioned storage. Um, transportation and storage of CO2 streams is something that we are seeing a lot of the companies that apply a striped climate struggle with. You know, they will have a really compelling capture technology and can essentially use lots of different storage. They could pair that with a number of different storage technologies, but, you know, there aren't any in the U.S.

Carb fix is, for example, what ClimWorks uses in Iceland, but we don't have a carb fix in the U.S. yet. We are actually evolving our striped climate purchase process this year to think about capture and storage separately so that there's going to be a lot. storage track and a capture track, and we can help sort of mix and match those. That is certainly a big piece. I think a second one is how do we actually do verification for these different pathways, verifying that a column of kelp actually got grown and sunk is very different from verifying

that CO2 mineralized in basalt rock in Iceland. And so how are we going to standardize the verification piece across all these technologies, that's a big gap. And then on the demand side, net zero commitments, everybody's making net zero commitments and there's two big components of that. It's reduced emissions as much as you can and then deal with the rest. And the deal with the rest has been really squishy. It hasn't actually translated into a demand signal for this market yet because nobody knows whether every company is just going to spend it on trees or if they're going to spend it on really trying to help frontier carbon removal. And so

firming up those commitments into contracts to actually send the demand signal to the rest of the market is a huge thing that is missing. Otherwise, again, we don't have confidence that, you know, there is going to be a big piece. And I think the final one that I'll call out is something you mentioned. We need to step on the gas on the policy side. Government should be procuring carbon removal as part of their own net zero programs. And they should be be creating the incentive structures to encourage all the corporates to be doing the same. And we, you know, we are trying at Stripe to buy ourselves some time to do that. But that is going to take time and we need to be moving faster than we are.

Nan, thank you so much for doing this. This is a lot of fun. Thanks so much for having me. Nan Ransoff is the head of climate at Stripe. Now, if you listen to last week's episode, you already know this to be true. but just as a reminder, my wife and I have agreed that our unborn child

who is due in February of 2022 will be given the middle name net zero if this podcast reaches 100,000 downloads in its first month of existence. This is week two, just as a reminder. Catalyst is hosted by me, Shail Khan. This show is a co-production

of PostScript Media and Canary Media. You can find any of us, me, Canary, or PostScript on Twitter, tag us if you want to provide feedback on this episode or if you want to suggest future topics. You can find links to this episode's topic and our guests in the show notes, or you can go to canarymedia.com. Our producers are Daniel Waldorf and Stephen Lacey. Sean Markwan composed our theme song. I'm Shale Khan, and this is Catalyst.