Peter Minor, Carbon180 and Jack Andreasen, Breakthrough Energy

Carbon

Jan 23

Today, we have two guests, Peter Minor, Director of Science and Innovation at Carbon180, and Jack Andreasen, Policy Manager for Carbon Management at Breakthrough Energy. Peter and Jack are two of the world’s foremost experts in the world on carbon dioxide removal, or CDR as it's called in climate circles. They and their respective organizations influence public policy, support critical technology research and development, and offer various other forms of support for the burgeoning field of CDR.

*Jack Andreasen, Policy Manager for Carbon Management at Breakthrough Energy*

In this conversation, we're focused almost exclusively on ambient carbon dioxide removal and not on point source carbon capture, which is a separate but related technology focused on directly capturing emissions from hard-to-abate industrial applications like concrete, steel, and fossil fuel extraction. Ambient carbon dioxide removal (CDR) instead seeks to remove diffuse CO2 from the atmosphere directly via multiple methodologies, of which the most widely pictured method is direct air capture, or DAC, which looks like oversized fans that extract CO2 from the air. In addition, we also touch on a few biology-related CDR technologies like biochar that seek to lock biologically produced carbon up before it can become atmospheric.

There's so much to unpack in this one. Cody, Peter and Jack talk about policy tailwinds for CDR, the categories and methodologies, commercial adoption progress and challenges, how and why buyers approach the space today, and some of the speed bumps CDR will undoubtedly encounter as it scales, including but not limited to fraud and false claims. Challenges aside, it's an exciting time in this space. CDR is still very nascent and very wide open, but it also feels light years further along than just a few years ago.

*Get your CDR questions ready! Join Peter Minor and Jack Andreasen for a special MCJ Ask-Me-Anything event in Slack community starting Wednesday, January 25, 2023 at 9am PST. Our guests will be answering questions asynchronously for 24 hours. Details here.

Get connected:
Cody Simms
Peter Minor
Jack Andreasen
MCJ Podcast /Collective

*You can also reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.

Episode recorded on January 4, 2023

In this episode, we cover:

[3:08] An overview of Carbon180 and Peter's work
[5:07] Breakthrough Energy and Jack's background
[7:48] Policy tailwinds of the IRA
[12:59] Why DAC became a policy winner and other investments in the IRA
[14:36] Hybrid approaches to removing carbon dioxide from the atmosphere
[18:30] An overview of direct air capture (DAC) and mineralization
[25:03] Enhanced rock weathering
[27:46] Measuring CDR and uncertainty with open and closed systems
[32:54] Variety of ocean methods compared to terrestrial
[35:11] Biochar as a scaled solution, why it's a less prominent method, and Measurement, Reporting, and Verification (MRV)
[40:53] Analysis for selecting and purchasing CDR credits
[43:00] The role of consulting firms for companies purchasing CDR credits
[52:13] Reasons why companies are buying CDR
[55:17] Biggest risks of fraud and different levels
[1:03:03] Guardrails for preventing fraud and the role of government
[1:06:25] Innovation needs for CDR

Resources mentioned in this episode:

Jason Jacobs (00:00:01):
Hello, everyone, this is Jason Jacobs.
Cody Simms (00:00:04):
And I'm Cody Simms.
Jason Jacobs (00:00:05):
And welcome to My Climate Journey. This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (00:00:15):
In this podcast, we traverse disciplines, industries, and opinions to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help.
Jason Jacobs (00:00:26):
We appreciate you tuning in, sharing this episode, and, if you feel like it, leaving us a review to help more people find out about us so they can figure out where they fit in addressing the problem of climate change.
Cody Simms (00:00:40):
Today, we have two guests, Peter Minor, director of science and innovation at Carbon180; and Jack Andreasen, policy manager for carbon management at Breakthrough Energy. Peter and Jack are two of the foremost experts in the world on carbon dioxide removal, or CDR as it's called in climate circles. They and their respective organizations influence public policy, support critical technology research and development, and offer a myriad other forms of support for the burgeoning field of CDR.
(00:01:11):
I should note upfront that, in this conversation, we're focused almost exclusively on ambient carbon dioxide removal and not on point source carbon capture, which is a separate but related technology focused on directly capturing emissions from hard-to-abate industrial applications like concrete, steel, and fossil fuel extraction. Ambient carbon dioxide removal, or CDR, instead seeks to remove diffuse CO2 from the atmosphere directly via multiple methodologies, of which the most widely pictured methodology is direct air capture, or DAC, which look like large fans that extract CO2 from the air. In addition, we also touch on a few biology-related CDR technologies like biochar that seeks to lock biologically produced carbon up before it can become atmospheric.
(00:01:59):
There's so much to unpack here, and we have a deep and lengthy discussion. We talk about policy tailwinds for CDR, the categories and methodologies of CDR, commercial adoption progress and challenges, how and why buyers approach the space today, and finally, we spend a bit of time at the end anticipating some of the speed bumps that the space will surely encounter as it scales, including but not limited to fraud and false claims. But those challenges aside, I think we all agree that it's a very exciting time in this space. It's still very nascent and very wide open, but it also feels light years further along than it was even just a couple of years ago. Peter, Jack, welcome to the show.
Peter Minor (00:02:41):
Thanks, Cody, really great to be here.
Jack Andreasen (00:02:43):
Yeah, thanks, Cody. Excited to be on.
Cody Simms (00:02:45):
Well, I am thrilled to have both of you on, and you are two of the foremost experts out there in the world on what is going on in carbon dioxide removal, CDR, though I think maybe we'll even talk about, maybe it's not just carbon dioxide removal, maybe it's carbon dioxide equivalent removal or something. Maybe we need a new phrase for that. But let's dive in a minute kind of with a quick introduction on each of you.
(00:03:08):
Peter, we'll start with you. You are at Carbon180, which you can describe better than me, but is one of the leading firms out there that is basically advising on policy related to carbon removal and climate change in that regard. So maybe describe a bit about what that is. We've had a few of your current and former colleagues on the pod in the past as well with Erin Burns, the executive director, and with Noah Deich, who's the founder of Carbon180 and now works at Department of Energy, I believe, right?
Peter Minor (00:03:36):
Yep. That's exactly right. And your description was fantastic. We're an NGO that's focused on building US federal policy focused on creating a gigaton-scale carbon removal industry as quickly as possible. There, I spend time as the director of science and innovation. So, my job is to talk to scientists and entrepreneurs and people building new technologies and understand what's missing for them that can be built into a policy landscape to aid them.
(00:04:02):
I helped build an entrepreneur-in-residence program at Carbon180 early on, where we helped Heirloom and Carbon Plant spin outs. I recently developed our beliefs on MRV, so monitoring, reporting, and verification, called MRV for short, or verification, focus on high accountability and generally work with lawmakers and people of the industry to figure out what are the best pathways for us to make progress in the field.
Cody Simms (00:04:26):
And Peter, you were in venture capital, I believe, before joining Carbon180, is that correct?
Peter Minor (00:04:30):
Yeah. I started a startup accelerator focused on frontier technology, so all the fun things like machine learning and robotics and new types of biology and gene editing. Then with that, also started a venture fund to go with it. But yeah, I think my background has really been around trying to think about how technology can be a massive driver for positive change in societies, and I think carbon removal very much fits into that bucket. I think, for me, it's one of the tools that can help not just reduce as much harm as possible, but eventually remove this carbon debt that we put into the atmosphere and try to restore, and do it in a just way and try to restore more justice with our climate.
Cody Simms (00:05:07):
Well, fantastic. Thanks for joining us. And Jack, how about you? So, you're the policy manager for carbon management at Breakthrough Energy. Breakthrough Energy is everywhere in the climate space, and yet I think you're our first guest on the pod from the broader, bigger Breakthrough Energy. We've had Matt Eggers from Breakthrough Energy Ventures on the pod quite some time ago, but excited to hear from you your background and what you are working on at Breakthrough Energy.
Jack Andreasen (00:05:33):
Yeah. Thanks for having me on Cody. Yeah, so like you said, I cover the carbon management portfolio here at Breakthrough on what we call our United States Policy and Advocacy team, USPA. Breakthrough has a number of different verticals that try to target some of the most difficult or, at the moment, most underinvested emissions. We've got the venture capital team, which most people know, Breakthrough Energy Ventures, but we've got an incubator accelerator called Breakthrough Energy Fellows. We've got a project-level finance team called Breakthrough Catalyst. We've got a media company called Cipher, headed up by Amy Harder. And then we've got a policy team here in the US as well in Europe. So, we cover the wide swath of the sort of clean tech climate world, and I focus on things like direct air capture, industrial CCS, and geologic storage. Previous to Breakthrough, I worked for a small utility in the southeast called Duke Energy, so I come by way of there.
Cody Simms (00:06:27):
And Jack, are you focused mostly on the policy side or broadly across the technology recommendations, kind of what's the swim lane you work within at Breakthrough Energy?
Jack Andreasen (00:06:36):
Yep. Mainly focusing on policy. Here on USPA, we work with NGOs like Carbon180 and Clear Path and Cleaner Task Force, and the like of the people who are sort of in the carbon management space to help craft policy, educate not just the general populace, but communities that could necessarily benefit from receiving some of these federal and state programs that have been put forward as well as lawmakers on the Hill. So, we are very similar in the way we do things to what Peter and Carbon180 do, just a slightly different portfolio.
Cody Simms (00:07:06):
Well, fantastic. Thanks to both of you for coming on today, and I think what we're going to try to tackle today is a little bit of what's the state of CDR, what's the state of carbon dioxide removal from a technology perspective, from a policy perspective, and from a market perspective, from an implementation perspective. That state, with it comes what's happening in the market. It also comes with where are the risks in the market today. It's still a very early and nascent space that needs to develop really rapidly. So, helping to highlight what some of the challenges are that stand in its way, I think, are also really important so that all of the entrepreneurial folks who are out there listening can think about ways that they can try to obviate those risks and solve for them.
(00:07:48):
Maybe since both of you come at it from a policy lens, we've just had, obviously coming off of 2022, a huge policy year when it came to climate change, at least in the United States. Why don't you each talk a little bit about what you've seen in terms of policy tailwinds, whether that's 45Q expansion as part of the Inflation Reduction Act or whatnot. And start from the top, like maybe describe what that is or if there are other sort of policy areas that you want to highlight, and then we'll start moving into the actual technologies and some of what we're seeing in the market.
Jack Andreasen (00:08:22):
Yeah. Sure. Would like to point out that the funding that was put forward in the Infrastructure Act as well as the IRA is wholly consequential to the progression of carbon management as a broad sort of technology and industry going forward. You look at the Infrastructure Act and you've obviously got the big shiny DAC hubs program, $3.5 billion for up to four regional hubs, but then you've also got funding for geologic storage through the Carbon Safe program, also for states to receive what's called primacy. They can have their sort of geologic survey or their environmental department is able to hand out the permits to inject CO2 underground, and there's money to help those states stand up those programs in a way that is both environmentally safe and helpful to the industry.
(00:09:10):
You've got the DAC prizes, so there's a pre-commercial prize for sort of early stage direct air capture companies as well as the commercial prize of $100 million dollars available to companies who have a higher TRL. Then there's also the CIVIA program, which deals with transportation infrastructure, and obviously with the IRA, the huge piece in the IRA was 45Q, which is really the financial mechanism that is going to drive investment going forward. This is a dedicated piece of financing that these projects can take and use and go to a bank or go to a tax equity investor or whoever it might be in the space that would like to access these, and 45Q, the upgrades to that, not only the dollar amounts were incredibly important, so $180 now for dedicated DAC, 85 for dedicated power or industrial, slightly lower for utilization and EOR at 120 and 60, respectively. But you've also got things like direct pay is now available at least for 5 years and up to 12 years depending on what sort of entity is claiming 45Q, which was a huge sticking point,
Cody Simms (00:10:09):
Can you explain what that means for folks? And also just to kind of unpack the acronym soup, DAC direct air capture. I think you said TRL, which is technology readiness level. You also mentioned DAC hubs. Maybe explain what that is just a little bit as well for folks.
Jack Andreasen (00:10:22):
Yeah, absolutely. Yeah. So the DAC Hubs program is, as I mentioned, $3.5 billion for four of these regional hubs. So there's a number of criteria that the DOE has set out that they'll be looking for when selecting where these hubs could go. There's things like hubs that are located in areas that previously or currently produce fossil fuels or coal. They are things like geographic diversity generally, so they don't want to lump all of these hubs in the same place. What's the state of the power grid in that area? Is it a relatively clean power grid? Is it relatively coal dependent? And a number of others concerns. These are written into the legislation.
(00:10:55):
But essentially these four hubs are an opportunity for the full value stack of direct air capture. These are the direct air capture technology providers; where necessary, transportation infrastructure providers, storage, CO2 storage providers; financeers for these, so project finance capital; EPCs people to come in and engineer these facilities, build it, procure the materials; and also an opportunity for the communities. At the end of the day, this is steel going into the ground. These are real, industrial level facilities. The DOE has a robust community engagement program, whereas these communities will have the opportunity to go back and forth with the technology providers for the hub on how they can make sure that they see benefits to these projects as well. Not only the climate benefits are realized, but also the economic benefits that these hubs will bring are realized not just from the project developers but for the communities that they will be put into.
(00:11:48):
So, four of these hubs that will be selected, the application process is open right now for the first funding opportunity. This $3.5 billion was actually split into two funding opportunities, but the first one is open now and the goal of this is to take a technology, which at the moment has one commercial facility in the world, in Iceland, the Clime Works facility, and several more being built. Clime Works is building a new one and 1.5 Carbon Engineering Oxy Low Petroleum Joint Venture is building several facilities in Texas, but there's one. And so the idea is $3.5 billion to take an industry from 4,000 tons a year to a million tons per hub per year by the time these things get built.
Cody Simms (00:12:33):
And Peter, I'm hearing from Jack, most of this is focused on direct air capture. As we'll touch on, I think direct air capture is one of many forms of technology-based carbon removal that is currently in development or being deployed around the world. How is it that direct air capture became sort of the policy winner of the different methodologies? And before we even get into the methodologies, I'm interested in how that happened.
Peter Minor (00:12:59):
It's a great question. I think there's a lot of history with direct air capture, where there's been more than a decade now of research and development. So that industry, that segment of carbon removal, has had the opportunity to really demonstrate what can be done and actually demonstrate technology in action. What I think the DOE sees with direct air capture today and why they put so much resource into them through the IRA is because this is their moment to demonstrate that this is no longer lab-bench scale technology, but deployment-scale technology. Like, this is the moment to prove to the world that carbon removal is no longer just an idea, but something that we can actually build in scale.
(00:13:36):
That being said, I think the IRA especially did have other resources allocated to more than just direct air capture. So, there were some pretty historic investments in both agriculture and forestry. In agriculture, there were investments in looking at conservation incentives, technical assistance and programs that will hopefully address historical inequities. So, that's $20 billion to the USDA to fund many of those programs. On the forestry side, they were looking at new opportunities for better forest management and wildfire suppression and management, and even looking at ways that we could do a better job of using biomass, using woody biomass as a storage mechanism for carbon removal. So, those were in the orders of billions of dollars as well.
(00:14:17):
Again, these are maybe an order of magnitude, more investment than we've seen in this space to date in just one year. And so obviously, these are not even close to being enough for what we need to actually build what is required by 2050. But this is the biggest jump I think we've ever seen, and we're very excited about this progress.
Cody Simms (00:14:36):
As part of that, that direct air capture in particular, maybe as Jack mentioned, requires steel in the ground, requires the most infrastructure to build these facilities relative to some of the other methodologies which, for lack of an informed background in this, I tend to think of as almost hybrid nature and engineered solutions. We talk about things like biochar or enhanced rock weathering or ocean alkalinity. Some of these leverage nature, in a way, more than direct air capture, which is truly building machines to do the work. How much does that factor in to DAC getting such a significant amount of funding?
Peter Minor (00:15:12):
I don't think it's a huge factor, to be honest. I would not be surprised if we saw historic levels of funding going into things like advanced weathering, direct ocean capture, ocean methods in general and biomass-fed hybrid solutions in the near future. I think right now with the IRA, one of the biggest unlocks was looking at 45Q, which is directly tied to direct air capture today. That may change in the future, but right now that is just one of the key reasons why so many resources were pointed in that direction. And also just back to this, just the TRL, the technology readiness level, DAC is just ready to be deployed, and for all these other methods, they've made significant progress in the last few years, but there are some open scientific questions that need to be answered, and I believe very strongly that we can answer those, but there's just more work that needs to be done.
(00:15:57):
Especially, the hybrid approaches are really interesting because those approach are some of the most similar to direct air capture. I think there are some questions about how you source biomass, that even though nature does a lot of the work, you need to now find those products of that work and then bring them to wherever you're getting things done. There are some companies who have some interesting technologies that allow them to pre-process biomass, and it makes transportation much easier. That's a problem that needs to be solved.
(00:16:21):
Enhanced rock weathering is super interesting, but you still need to move, eventually, billions of tons of rocks. And we do have precedent for that in our economy. So, you don't necessarily need to build new tools for that. But it's not a simple problem. I mean, the unfortunate reality is that, as always, in climate there are no silver bullets. There's just a ton of work that needs to be done across methods, but we finally are catalyzing our economy and our society towards actually accomplishing those.
Cody Simms (00:16:48):
Interesting. I'm hearing a little bit of what you're saying is direct air capture, the methodology is kind of the most trusted, like you know if you've captured CO2 through direct air capture. Like, it is captured. You can measure it. It's sort of a known quantity. It's just more expensive to scale. There's still technology hurdles to overcome to get that to scale, whereas some of the sort of hybrid, other solutions, maybe there's still some measurement work that needs to be done, some verification work that needs to be done to fully appreciate the amount of permanent sequestration that those can offer. Is that a correct assumption, or am I also mishearing what you're saying?
Peter Minor (00:17:23):
I think that's right. I mean, direct air capture is by far the most expensive today, but a lot of that is just because it is new. I mean, if I go buy custom-made Italian shoes, they're going to be much more expensive than buying sneakers from a local department store. So, scale trumps everything and learning by doing trumps everything. That's true across all methods. We see the cost and direct air capture just because they've only built, as Jack said, one facility, and we expect those costs to go down significantly.
(00:17:50):
Other methods are also actually quite expensive. We haven't heard as much about their costs, but if you look at the real costs, not just like what they're charging in the early days and what development costs are going to be going forward, it's expensive. But the way I think about it, it's not that direct air capture is somehow better or is more deserving of those resources. I really think it's just this is the type of technology that has the most history and people are most comfortable for now. It very much fits within the, I think it's William Gibson quote, science fiction author who I like, is that, "The future is already here. It's just not evenly distributed." So I think all this money towards DAC is just the tip of the iceberg and we should see historic amounts of money coming in for other methods in the very near future.
Cody Simms (00:18:30):
Jack, you just had a big tweet storm, I think, yesterday kind of breaking down another methodology, mineralization and sort of saying, "Hey, this isn't just one methodology, it's actually multiple things to consider." So maybe let's start kind of going down the rabbit hole a little bit with some of these other technologies. Obviously, we've talked about DAC. The easiest way I can describe DAC is giant fans that suck CO2 out of the atmosphere and capture it. Maybe we can start there with a bit better definition of what direct air capture is, and then have you go in and let's talk about mineralization next, and we'll kind of go down the list of four or five of these more common methodologies that are starting to emerge.
Jack Andreasen (00:19:07):
Yeah, sure. Direct air capture broadly is some sort of mechanism that removes CO2 from the ambient air and takes that CO2, compresses it, and stores it in a long-lived material, something like concrete or fibers. There's companies, really interesting companies and startups now that captures CO2 into something, into a long-lived product, whether it's a plastic or a carbon fiber, concrete. The lion's share of the CO2, what needs to happen with it, at least in the near term, it will be stored deep in geologic reserves, in geologic basins.
Cody Simms (00:19:41):
And is that mostly stored in liquid format or in gaseous format when it's stored in geologic reserves?
Jack Andreasen (00:19:46):
Yeah, so both. Right now, and this is part of the mineralization thread that I put on Twitter, was if you're storing into what are called mafic or ultramafic rocks... So this is geology terminology, but essentially, ultramafic and mafic rocks are things like basalts, peridotite, serpentinites. These are rocks that have high magnesium, calcium, or iron content. Those particular geochemistries tend to have an affinity for CO2. So when they come in contact with CO2, they do what's called mineralize very quickly. Mineralization is taking CO2 in a fluid state.
(00:20:24):
In the case of Iceland, they inject CO2 into water, and then that seltzer is put onto a basalt, and that basalt then mineralizes. As opposed to what we've most historically done, in all CO2 stores, not just DAC but in CCS and EOR and everything, which is sedimentary basins. These are sandstones. We've injected, I think to date it's around 400 million tons of CO2 into sedimentary basins. We've had no leakages. It's one of the safest climate technologies that exists. It is what the lion's share of at least early on direct air capture in the United States will be injecting into sedimentary basin. To your question, long-winded way of saying, that CO2 will be in a super critical state,
Cody Simms (00:21:06):
Okay. You mentioned CCS and just for, again, unpacking acronyms, carbon capture and storage, which is historically what are attachments in oil and gas that are capturing carbon at the point of being emitted, which is a whole other field in this world of carbon capture that we're actually not really focused on today, necessarily, because that is related to the production and creation of fossil fuels, whereas we're talking about methodologies to just take it out of the environment and atmosphere generally unrelated necessarily to the creation of industrial materials. Am I following that thread correctly?
Jack Andreasen (00:21:43):
100% correct. Yeah. We could have a whole nother podcast on CCS. But yeah, that's correct. Point source capture is also what it's called. You're pulling from cement kiln, a steel plant, a power plant, different than direct air capture, which is from the ambient air.
(00:21:57):
To your point on mineralization, as it relates to direct air capture, you can inject that captured CO2 into a sedimentary basin or you can inject it into mafic and ultramafic rocks, and that is one slice of mineralization, and that's called in situ mineralization. So this is underground, in situ essentially meaning underground, which is different than ex situ mineralization, which is everything that happens above ground.
Cody Simms (00:22:23):
Would that also be called geologic storage? Is that another way to think about that?
Jack Andreasen (00:22:26):
100%, yeah. Geologic storage, geologic sequestration. Yeah. All of these terms sort of mean the same thing. In situ mineralization is one form of geologic storage. The reason I wrote this thread is because people say mineralization broadly, and it's a very interesting idea, and it's something we've known about for decades, centuries probably. But ex situ mineralization, whether it's enhanced weathering, whether it's utilization into concrete, like what Carbon Cure is doing or Carbon Built is doing, or whether it's ocean alkalinity, industrial wastes, mine tailings. I mean, ex situ mineralization, although it follows very similar geochemical pathways, is necessarily different from in situ mineralization, not only in cost of the actual injection, of MRV, but also in our certainty around exactly how much carbon is being sequestered, where it is.
(00:23:21):
This is fundamentally something Peter and I talk about a lot. In situ and ex situ mineralization is a great introduction into the difference in CDR between open systems and closed systems, which is I think, Cody, to your point earlier, when you were saying how there's sort of these quasi nature technology blended together versus something like DAC, which is very industrial, and the more time I spend in CDR, I get into this open/closed system paradigm. I think that is useful in talking about it.
Cody Simms (00:23:55):
We're going to take a short break right now so our partner Yin can share more about the MCJ membership option.
Yin Lu (00:24:02):
Hey, folks. Yin here, a partner at MCJ Collective. Want to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning and doing that goes beyond just listening to the podcast.
(00:24:14):
We started in 2019, but have since then grown to 2,000 members globally. Each week, we're inspired by people who join with different backgrounds and perspectives. While those perspectives are different, what we all share in common is a deep curiosity to learn and bias to action around ways to accelerate solutions to climate change.
(00:24:31):
Some awesome initiatives have come out of the community. A number of founding teams have met; nonprofits have been established; a bunch of hiring has been done; many early stage investments have been made as well as ongoing events and programming like monthly women in climate meetups, idea jam sessions for early stage founders, climate book club, art workshops and more. So whether you've been in climate for a while or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to MCJcollective.com and then click on the members tab at the top. Thanks, and enjoy the rest of the show.
Cody Simms (00:25:03):
All right. Back to the show.
(00:25:07):
Another methodology that we hear about a lot is, and we've had a couple guests on the show who are working on these solutions, is enhanced rock weathering, which feels like a cousin to mineralization or even one of the subcategories of mineralization. Is that a correct way? And Peter, maybe you want to dive in and sort of unpack that for us?
Peter Minor (00:25:26):
Yeah, sure. I just want to go on the record and just say that I think in situ and ex situ are not very friendly and understandable terms for what is happening. I think this is what's led to a lot of problems, is that we probably just need to create better descriptive terms for how we create differentiation between these systems. To give you an example, like enhanced rock weathering is a set of materials, rocks like basalts or olivine, or another example where as you wear the material, it will react with CO2 in the atmosphere and create bicarbonates. Those bicarbonates can then travel over time to the ocean where it stays in effectively a buffered solution for thousands of years, tens of thousand, maybe even hundreds of thousands of years. So very exciting pathway. You can deploy them in soils, in agriculture. They can be used as a soil amendment at the same time. There's a lot of things that really work well about it.
(00:26:14):
But the mechanism for how you're removing CO2, the risks involved are very different than something like in situ mineralization or even some people are trying to do ex situ mineralization in reactors. The systems are entirely different. For example, there have been some really interesting innovations lately on trying to measure and track the weathering rates, so how quickly it happens and how much weathering you get from a baseload of material that you deploy. That actually is highly variable depending on acidity in the soil, how much rain there is, temperature. There's a ton of different variables. So, that's been an open question, a problem for the field for a while.
(00:26:48):
But there have been some recent advancements of putting tracers in those materials, that you can have something else that falls out of solution as weathering happens. So, you can directly measure how much effective bicarbonate is created.
(00:27:00):
One of the biggest challenges that still remains, though, is now you have that bicarbonate eventually going to oceans. You're great when you're in oceans, but you may get something what's called evasion between transport of those two things. So, you may not get as much CO2 removal as you expect from that. That's an example of one of the open scientific questions that need to be looked into a bit more.
(00:27:20):
People have developed some very high quality models, and I think this is an example of, I think to what Jack is getting to at, we have closed systems and we have open systems, and there's actually quite a bit of a blend between them, where this is an example where we can't necessarily directly measure exactly what's happening and how much evasion is happening, but we can actually get some data points. There is the opportunity to ground truth evasion in enhanced weathering, where there are other CDR methods where we still haven't figured out how to do that quite yet.
Cody Simms (00:27:46):
Do you expect some methodologies like this with direct air capture, like, you're directly measuring particles that are passing through the system. I think, to your point, that's a closed loop system, right? With enhanced rock weathering, where you're spreading a mineral on an agricultural field and then ultimately trying to measure the amount of CO2 that is captured through the ocean as particles flow through the watershed, you're not going to be able to measure the direct transfer of one atom from one place to another. You're having to rely on models, I'm assuming, where you're saying in general here are sort of the average amount of reaction we see. A, am I understanding that correctly; and B, does that create different sort of grades of quality level when it comes to CDR, in your mind?
Peter Minor (00:28:31):
It's a great question. I wouldn't call it grades in quality. This gets into this area that we call uncertainty. Even in direct air capture, there are areas of uncertainty that we may never be able to solve. Like, how do you exactly measure the amount of carbon involved in producing some of these facilities that went into that ton of steel that you put into the ground? There will always be ranges and there will always be uncertainties. So the trick is, how do we bound those uncertainties as much as we can? How do we reduce them wherever possible? Then, just try to understand the amount of net uncertainty that is developed across the whole chain of work that's being done. That is the way that I think about this.
(00:29:08):
I think there's a lot of new science and new technology that can be developed to reduce it further, but this is, I think, going to be a very big area of this just general discussion and work in the field for the next couple years, just understanding it well, bounding it, and then comparing that across method. So, I think that sort of creates an indirect measure of quality. But I think what's really important to realize is that these are transient measures, that there will be rapid amounts of change over the next several years.
(00:29:34):
One thing that I think Jack and I have also talked about is that there is some risk in trying to quantify and describe uncertainty as a way to just deal with it. So for example, there have been discussions of, we'll just discount. We'll measure what the uncertainty is; we'll discount that away; we'll double the amount of removals that we do, and thus a 50% uncertainty is fine. But I think what people are forgetting is that when we say uncertainty, really what we're saying is estimates. We are estimating how much actual net negativity, how much removal we're actually doing for each unit of work, and every estimate in the entire world has an error bar attached to it. There's actually uncertainty on top of all of our measured uncertainty. That likely scales linearly with the amount of uncertainty. So higher uncertainty will have much bigger error bars than smaller uncertainty.
(00:30:21):
There probably are frameworks where something discounting can work as a way for us to deal with more open systems and uncertainty in models or just error in models, especially if you can get that uncertainty low enough, the estimate low enough. But there may be some cases where that's just not going to be reasonable or feasible. That's actually a really big risk in the field if we're not careful because we have to remember that we are not just building this on the back of science, we're building this on the back of economies. People actually have to build this stuff, and there'll be companies that are spun up who are selling this.
(00:30:50):
So, it matters not just what something costs, and it doesn't matter just how we best estimate uncertainty. What actually matters is the climate benefit. How much CO2 is actually being removed durably for more than a thousand years or as long as possible? That is the end goal. There's a real risk that if we try to bound things like uncertainty or don't bound uncertainty well enough, we don't create the right mechanisms for dealing with that kind of risk, that what happens is you get a proliferation of methods that are just not as effective, don't have the right climate impacts, but they've optimized on that sort of discounting costs ratio and that just dominates the field.
Cody Simms (00:31:28):
I mean, we've seen that with carbon credits, which is you end up with the lowest quality credits often costing the least, which if no one's paying attention, companies are buying those and claiming them as offsets, and in reality it's not doing a whole lot. I think that's the same risk you see potentially happening if we overly start creating discounts on methodologies that artificially reduce prices for things that potentially can scale quickly, but that we're discounting them because we don't know for sure how effective they are. Am I hearing you correctly there?
Peter Minor (00:31:59):
That's exactly right. I've actually had a great conversation with Dick Sandor, who is the founder of the Chicago Climate Exchange. This was someone who invented the idea of creating these ecological assets, and his intentions were absolutely the best. They were trying to help solve climate change even back then by creating ways for people to invest in these types of credits. But I've seen the documentation that they created around creating what they thought was high quality verification and MRV. Some of these are 80 or 90 pages long. They're extremely robust. So, these are folks who are really doing their best. But if you look at our best estimates of the amount of climate impact that's happened from things like offsets and carbon credits, it's effectively negligible, and that is the problem. It's not intentions. It's that we just have not had the mechanisms for actually measuring outcomes. And we've not done a good job of enforcing that as sort of the hero objective that we have for all of this.
Cody Simms (00:32:54):
Just to make sure we take the full coverage of the different kinds of methodologies, just to set the table here. We've talked about direct air capture; we've talked about mineralization in various forms. I feel like there's two other kind of big categories of stuff, at least the way I see it, the way I've classified it, which is not scientific in any way, but there's ocean-related stuff, which is broad. One of them is kind of a mineralization play, which is ocean alkalinity. And then there's sort of the whole macro algae play, which moves us more into biomaterial, I think, even though it's in oceans. But then you've got a bunch of biomaterial solutions, whether it's biochar, whether it's emerging fields like wood vaulting and things like that. Am I thinking about these the right way? And if so, maybe break down what each of those are, just at a very high level. We don't have to spend as much time on each of those, but just to make sure we've hit our bases here.
Peter Minor (00:33:42):
Yeah. I think you're right, that there are quite a variety of different ocean methods that are very similar to what we would see on the terrestrial side. I think for that reason, I actually prefer to bound them not by land and tech or oceans, but by chemistry and by photosynthesis. I feel like that's a much better split between them. On the ocean side, you get macro algae in the same way that we get soil carbon or biomass feed stocks like forestry on the land side. But chemistry can be done a bunch of different ways in oceans. Like you said, alkalinity enhancement is one. There's things like direct ocean capture, which are very similar to direct air capture, but you're trying to pull that CO2 or CO2 equivalence from the ocean directly. I think we'll see sort of the whole variety of what we've seen on the land side and the terrestrial side in the oceans.
(00:34:26):
I think all of these, again, have pros and cons associated with them, have challenges and problems and science that need to be really discovered. But all of them, what's really exciting is all of them have the capacity to get to this sort of key gigaton-scale that we always talk about, and very likely it'll be some combination of many of these that will be done in parallel. I think also what's really exciting is many of them actually pull from different parts of the existing economy and supply chains, and so we have less of that risk of having to build out new supply chains that could take us decades. We can actually do them all in parallel. I think there isn't much else to describe in terms of how those methods work because they are so similar to how they work on the land side. It's more about just the way that the carbon moves through the geochemistry of our planets and how they're getting stored.
Cody Simms (00:35:11):
I like the notion of kind of a chemistry-based and biology-based solutions is a good way to think about it. Let's make sure we don't miss biochar. There was a recent report that came out this week, we're recording this the first week of January, from an organization called CDR.FYI, which is sort of tracking carbon removal purchases. I was very struck that all-time delivery by method of tons of CO2 removed, 87%, according to them, is biochar. And even in 2022, 40% of purchases of CDR, which is the biggest total amount of purchase tonnage in 2022, is biochar. And yet, we don't hear a lot about biochar as a sort of future scaled solution. So, let's maybe take a minute to unpack biochar and what is causing it to be used today and also where the limitations are for it to be a fully at-scale solution.
Peter Minor (00:36:03):
Yeah. I can get us started there. So, I think probably actually all the biochar people are mad at me because I said earlier that DAC has sort of the most history and is sort of the most developed. That's actually probably not entirely true. I think people have been working on biochar for actually decades. So, from a technology readiness level perspective, it's really up there. I mean, there are systems that you can buy commercially to just do your own biochar, if you would like. Clearly, there's always more optimization that can be done, but this is generally a set of technology that works today.
(00:36:31):
I think the big question in a lot of people's minds is, how well does it work? This is a very contentious topic, which I think sort of leads to why biochar gets discounted. But I think the right answer there is not how well it works, but it's just that there are different variables and different environments for how you make biochar that lead strongly to different outcomes. So, they could be biochar that lasts for on the order of 100 years, if you use one type of process, usually it's a higher temperature process. If you don't do that higher temperature process, then it might be significantly less, in the order of decades. There are ways that you can make this so it works well as a soil amendment, and then other ways where it's just a better carbon store.
(00:37:07):
So, we don't fully understand the give and take between these optimizations, which I think is part of the problem, but it seems pretty clear that there is some give and take. So honestly, I also will come out on the record on this, that I am waiting for a biochar company to come out and say, "Here's our process; here's what we've done to really maximize outcomes for carbon removal specifically, and here's how we know this works."
(00:37:29):
I would put biochar into this larger umbrella grouping of bikers, which is just using biomass for carbon removal, generally. There are some companies that are doing that in other forms, other sort of formats besides biochar. So, bio oil is another one, and in storing that durably. There are companies who I think have gained some prominence and some scale there.
(00:37:50):
But to your core question of why, even though it is by far the most delivered today, why don't we see this as a more prominent method? I think it's just uncertainty around... No one has come out in really demonstrated certainty around the process that they're developing. And then two, probably just not as effective marketing as other companies have done. So, definitely would look for them to set that up. I think they deserve more respect and attention than they're getting.
Cody Simms (00:38:14):
It's interesting you mentioned bio oil. That same report says whereas biochar is 87% of all carbon removal tonnage that's been delivered all time to date, bio oil is the second category. It's only 9%. But I assume the bulk of that is probably Charm Industrial and they've sold and delivered sequestered bio oil. Again, it's a maturation, I think, from a TRL perspective.
(00:38:39):
Getting into MRV, biochar has a definitive sort of verification standard, I believe, at this point. Does it not? Or am I misunderstanding that? Whereas some of these other methodologies, you're somewhat reliant on the vendor or on a third-party consultant to come in and try to help understand if you're a buyer, to try to understand what this methodology looks like.
Peter Minor (00:39:00):
I think that's true. It's not quite what it seems, where there are actually quite a few protocols that have been developed for carbon removal methodologies. Soil carbon is one where they have actually some of the most number of protocols, but the number of protocols isn't necessarily proportional to how well you actually measure with those protocols. That's just because some of these things are extremely hard, that in a lot of cases what you're trying to measure is not actually directly measurable. So, you have to work with second-order heuristics, and you have to rely on counterfactuals, which by definition cannot be proven. So usually, what happens is these are practices, like, these are methods, things that you do; pack the soil this way, develop your biochar using this kind of reactor, and that hopefully equates to the outcomes that you're hoping for.
(00:39:44):
But ensuring that people are actually doing the steps properly is extremely hard. I've been on the phone with folks from USDA and folks who actually do soil carbon work, and there's sometimes a very big misalignment between what we think is reasonable and what actually makes sense, boots-on-the-ground, hard-hats-on-the-head, making it happen. And so I think there's just more work that needs to be done on, one, narrowing the gap and how directly we can measure carbon in some of these other modalities, and then I think the other thing is just creating better practices that are anchored in people who actually know how this is done.
Cody Simms (00:40:16):
I think another report that came out recently was from Shopify, who I think maybe last month or two months ago released essentially a buyer's guide to CDR. They're one of the most active buyers of CDR in the world today, and they were releasing what they've learned to help other organizations decide, who want to maybe lean into this space, to kind of pick up on what they've learned. And one of the things that struck me, we see it all the time just because we work with so many companies in the space, but from the outside looking in, it may not be quite as obvious. If you're buying carbon credits, you're going to a broker; you're going to a marketplace. You're buying it from some third party who has access to credits.
(00:40:53):
With CDR, you're mostly buying it directly from the company that is claiming the methodology today, right? You're buying it from the technology company themselves, direct. How does that happen? So, if I am Airbus, and Airbus is now, I think, it has a single largest CDR purchase in history, right? They purchased a couple, what, 400,000 tons or something like that over a four or five-year period of DAC from 1.5. If I'm going out and I'm looking at different suppliers to help me buy my carbon removal credit, how am I doing that analysis? Because I'm an airline manufacturer, I don't know anything about the technology methodologies of carbon dioxide removal, and yet I'm going one by one to different vendors and talking to them about their methodology. How do I decide this is the right one for me to buy?
Jack Andreasen (00:41:49):
I mean, that's a great question. It's something that companies like Microsoft, companies like Shopify have been on the forefront of figuring out. What are these methodologies that have a basis in reality, a basis in scientific fact, and how do we wrap our heads around these incredibly complicated physical dynamics? Because, right, carbon removal at the end of the day is molecules moving in one way or another.
(00:42:12):
But just to go back for a second on how complex some of these things are and why it's difficult for these companies to quantify some of these, is there was a report, a scientific paper that came out that showed that some biochar application decreases albedo on the soils, meaning decreases the reflectivity of the soils. This is also true. There was, maybe I'm being overly dramatic, but a cataclysmic paper that came out that talked about tree planting in northern latitudes and how if you plant trees in the northern latitude, the decrease in albedo basically cuts the carbon savings of those trees in half. So, it's not just about how much carbon it removes. At the end of the day, when you look at the total system, there are things like albedo that make this really difficult...
Cody Simms (00:42:56):
Decrease in albedo means we're not reflecting as much...
Jack Andreasen (00:42:58):
Exactly.
Cody Simms (00:42:59):
... heat back out in the space, right?
Jack Andreasen (00:43:00):
Yes. It's absorbing more heat. Yeah. It's absorbing more sunlight. These all take into account the total climate effects of these technologies. And so, really, what you need is a dedicated, highly technical knowledgeable team in order to be able to make these decisions. There are consultant firms. All the big ones do this; BCG does this; McKenzie does this. But also there's a group like Carbon Direct, which is a consulting organization as well as they have a venture capital investment wing. But if you look at the roster of the team they've put together, in my opinion, second to none in the consulting space for the brain trust that they have there, the deep institutional knowledge. It takes this level of knowledge to be able to parse these out.
(00:43:40):
So if I'm Airbus, I don't know specifically what they did on this deal, but, in my opinion, that's what you have to do. You have to go find the experts in these particular, sometimes myopic and niche technologies and worlds, in order to suss out the risks. And then, most importantly, and Peter has spoken to this earlier, it's going to take a robust portfolio of approaches. So, although Airbus just this purchase was stacked, you look at a lot of these companies and they're purchasing a portfolio of removal options from soil, from biochar all the way up to direct air capture. This is critical for the advancement of every technology such that we don't get technology lock-in because that's a risk really early on, which is where we are.
Cody Simms (00:44:23):
Yep. And today, the reasons that companies are doing this, it feels like most of them, today at least, are still, "Hey, we're going to help be a market maker. We're going to get access to preferential supply because, hey, we backed you when you were early. Now, that you're supply constrained, you're going to remember us, right?" There's a little bit of tragedy of the commons, I feel like, element to who's jumping in today because no one's telling anyone they have to do it. There's no requirement to do it. There's no regulation around needing to do it. So, it very much today is sort of a coterie of forward-thinking organizations, to some extent. Is that the right way to think about it? And how do you see that evolving over the next few years? Hopefully not decades, but at least the next few years.
Jack Andreasen (00:45:10):
As we jump into briefly how removals, just looking at the tonnage amount that we need to remove, necessarily I think has to go forward. It wouldn't be a CDR podcast or me speaking in any sort of public manner about CDR without stating that we need to reduce emissions first. We need to electrify as much as we can, employ all sort of reduction technologies to the tune of 90%, the more is better. And we need to have these removals for whatever is left after we can't reduce. Without reductions, removals are actually useless. If you don't reduce as much as possible, if you only reduce 50%, then the removals that you could do up to 10% don't really mean very much if you don't reduce enough. So, we're talking about a relatively small amount of the total emissions, and that's important when viewing this, and by their very nature, to your point about how this market moves forward is these early adopters, this is the voluntary carbon market. You'll see VCM, throw it out all the time, it's the acronym. Then you move into the next sort of level up is compliance markets.
Cody Simms (00:46:11):
I know there's controversy around why are we removing before we've reduced, but the way I think about it is if my house is hot, I'm going to open the windows, but I'm sure as well going to turn off the heater as well. I mean, you have to do both, right? That feels obvious to me. I get that there's controversy, but for what it's worth, that analogy just has helped me think about it.
Jack Andreasen (00:46:29):
Yes. 100%. We have to do both and we can do both concurrently. We've done parallel tracks of technologies for as long as we've been around, so we can do both. We need to do both, but just sort of level setting the percentages in terms of where the emissions are going to be reduced or removed from, I think, is important for context and looking at the market, rights to the voluntary carbon markets. Then you move into compliance markets. These are things like the low carbon fuel standard in California. Removals will be added to some extent in the European emissions trading system, the ETS. So you look at these, right? This is more of the pure quote-unquote market play, as what gets included in compliance markets will largely drive the price, or maybe what doesn't get included drives the price.
(00:47:12):
Then, based on the gigaton per year scale of removals that we know we're going to need to meet net zero by 2050, direct government procurement is going to be the lion's share of what drives removals. There's already a piece of legislation that's been put forward in the United States that is a pilot program for how the United States government could procure CO2. There was also a bill in the New York state legislature. So, we see the early churnings of this large scale government procurement, although 45Q for direct air capture and CCS is de facto government procurement. That is, more or less, at the end of the day, that they are purchasing tons of CO2. Now, obviously, a CDR-specific program would be different and likely would have different characteristics to it. But in general, that's my schema, is voluntary carbon markets, compliance, government procurement.
Cody Simms (00:48:04):
Yeah. Interesting. We started the conversation today on the different pieces of legislation that came into effect in 2022, and we talked about, hey, it's funding the creation of these systems, actually funding the infrastructure to build this stuff. Then, there are essentially rebates to help make the purchase of it reduced, which is a subsidy. It's the government basically buying a portion of every ton that's purchased, but they don't own it. They're just helping the commercial buyer buy it. But what you're saying is that should and probably will likely evolve into governments around the world actually directly purchasing tonnage in some way, shape, or form. Is this sort of the speculation I'm hearing from you in addition to a compliance market being built around it that's going to compel corporations to need to remove CO2?
Jack Andreasen (00:48:53):
Yeah. I mean, at the end of the day, the dollar amount for tons that need to be removed, at current prices, it's just not feasible, at least in the current policy landscape to have this done through voluntary markets or compliance markets. I mean, it's in the trillions of tens of trillions of dollars in order to be able to meet this. So, government procurement is sort of the lion's share of tons, total tons of carbon removal that we would need to hit in order to meet the net zero 2050 goals. This is all under the guise of meeting sort of that effort. I'll let Peter jump in here.
Peter Minor (00:49:26):
I would suggest that actually one of the reasons why it will take us time to get to something like government procurement, we actually have a lot of analogs for why we are even struggling to get high quality carbon removal into Fortune 500 in the corporate landscape. Another key thing that came out of the CDR FYI report is actually the small number of companies that are actually engaged in purchasing carbon removal from this field. So, I think we talk a lot about the price of CDR. I mean, I think what you're pointing out, both of you just now, and I think what Shopify's trying to solve is trying to solve some of the complexity of understanding the different types of technologies and how do you compare different types of carbon removal credits that you would buy. That's all really hard.
(00:50:05):
One thing I think we don't talk enough about is that there's scar tissue that we're dealing with from previous climate interventions that were not effective. Probably every CFO and sustainability leader in Fortune 500 has a story of credits that they've bought, that they thought they were doing the right thing in trying to really neutralize their emission in robust ways, and it came out that that was either pure fraud, not nearly as effective as they thought it was. In a lot of cases, these come out publicly, and it ends up having huge amount of brand damage to their efforts, and so a lot of them are probably looking at carbon removal and saying, like, "Ooh, I don't really understand this. This is extremely complex." Like, me as PhD doing this full-time job, I struggle to understand sometimes what's going on in the difference between some of these methods.
(00:50:50):
And so, asking these folks to do it is unreasonable. They're saying like, "Cool, this sounds better in some ways, but I have been burned before. Why should I take a risk here? Why don't I just wait? Because that seems like the most rational thing to do." So, I think there's a lot more work that we need to do to try to make this easier for corporates to adopt, to answer some of those questions, do a lot of education.
(00:51:09):
I do think that that actually is the same problem we have on the government side, that there is still a lot of lack of trust, ultimately, that CDR is a solution that will actually help, that it's not just greenwashing, that it's not just a tool for the fossil fuel industry. That, I think if people, the industry could do a better job of really highlighting that and creating the right safeguards and really bounding what we're doing around accountability in extremely robust measurement reporting and verification, that we could change this. But we need to take some responsibility, that a lot of the reason why we're not seeing adoption is because of scar tissue and lack of trust. That will not change on its own. We have to change that.
Cody Simms (00:51:46):
When I think about the motivations of a corporation for buying in the first place, one of my favorite questions to ask any startup I meet is, "Who's your customer and what are they buying?" Not, "What are you selling?" But, "What are they buying?" Oftentimes, companies are buying peace of mind or they're buying simplicity or they're buying employee satisfaction. The reasons they're buying something is very different, often, than what a company thinks they're selling.
(00:52:13):
When it comes to CDR, it feels like, and we mentioned a few of the reasons they might be buying, which is they want access to preferential supply in the future, et cetera, but even that has an underlying assumption that there's a reason why they care about that in the first place. It feels to me like one of the biggest reasons they're buying right now is either, A, they want to be seen as a climate-friendly brand; or B, they feel like credits are fraudulent and they want to buy something that is bulletproof From a PR perspective going forward. When I get down to the ultimate motivations, am I thinking about that the right way? Or have you heard from some of these larger corporations that there are other tangible, or maybe not tangible, psychological reasons why they're buying carbon removal today and how you see that changing?
Peter Minor (00:53:01):
Yeah. I mean, brand is obviously a part of it. Like, this is a new industry and this is a chance for a company to be at the forefront, to try to build and scale this, and they get a lot of credit for doing that. But I think it goes deeper than that. I think it's not just PR washing. I think in a lot of cases these companies understand that climate change is an existential risk to their business, to their customers. They're hearing from their employees, oftentimes, that they want robust sustainability plans and they want them to address climate. I've heard from companies, like, that affects them in their hiring. It's not obviously the number one concern, but it's in the top five. Is this company... Genuinely, can you argue that they're doing decent for the world or not? So, I think that makes a big difference in how they think about the future for what they're trying to build.
(00:53:43):
In some cases, I've actually talked to companies who are building products that they want to say are better for the environment or have lower impact, or in some cases carbon negative. What's really interesting is in some of these companies, they're in commodity businesses. They're easily can get destroyed by other companies just trying to build for the lowest common denominator. What allows them to succeed is this environmental message, that they're trying to do something that is sustainable.
(00:54:06):
So talking to them, a lot of them have in the past bought some of these legacy carbon credits. In some cases, the better ones, they actually got in early. So maybe they locked down the stuff that was actually provably additional. You could actually demonstrate that the impact was real. But they know that the time on that is up, that they need to switch. I've talked to them about the different types of opportunities of avoidance credits and carbon removal, and what I hear from them is, like, "Look, we just don't want to take risks on this. We are promising our customers that we're going to do right," and trust for them is just as important as trust in the carbon removal industry, and they don't want to do anything to remove that trust.
(00:54:40):
I think a lot of really smart companies also see that the world is changing, even from a regulatory perspective, that there may be a world in the future where they need to disclose what their climate action is through the SEC. That's some guidance that is being put on the board right now. In Europe, like through the ETS, they're going to require companies to take more direct action. At one point, it seemed almost inconceivable that we could have something similar to that in the US, but it doesn't feel that way anymore. So I think a lot of companies are saying, "Hey, I don't really understand this. I need to do something. I need to get involved because this might be something I'm required to do." So, I think they're being very pragmatic about their thinking on this.
Cody Simms (00:55:17):
We've just lived through a 6-month, 12-month period in a totally different field, where a very unregulated, emerging technology just went through a huge wave of fraudulent issues, particularly in the cryptocurrency space. I'm interested to hear where you think the biggest risks are of fraud from a CDR perspective as we go through, presumably, a very large growth wave over the next couple of years, just for people to be on the lookout for.
Peter Minor (00:55:45):
That's actually what got us here on the podcast to begin with. Jack and I were tweeting with Jason about FTX and Sam Bankman Fried, who architected a multi-billion dollar fraud that it's been all over the news. So, I think Jack and myself, being way too deep into the carbon removal field, we immediately started to think about how this could apply to the CDR. How does this happen for us? I think there's no question that even though we're outliers and we're probably thinking about this sooner than everyone else, this is going to be a problem. The reason why we this is because it's a problem for almost every other industry, and it leads to all kinds of harms, economic, environmental, erosion of trust, like we've talked about.
(00:56:25):
I think there have been some very prominent examples of this outside of climates, lately. So, the Paycheck Protection Act, where billions of dollars were sent to people to try to deal with COVID and make sure that people didn't lose their jobs. That was something that happened quickly. And thus there is, I think, one of the estimates that I found was $64 billion worth of documented fraud that likely happened there. This is actually a big deal in California, where the tax basis of what you pay for your house is set to when it's bought or sold or when you do major renovations.
(00:56:55):
Actually, I talked to an electrician who did a bunch of inspections, said that he would estimate 30-40% of the jobs that he was doing were unpermitted for that reason, like a massive amount of them were being done under-the-table because they didn't want to reset their tax basis.
(00:57:10):
Then on the climate side, this is a famous one that we all know, but there was VW who installed software in their cars, their diesel engines to defeat EPA regulations. What's really interesting as we hear a lot about this being VW, but there were a handful of manufacturers who did this outside of VW, and they were all doing it in very similar ways, which likely means that they were talking about it. I wouldn't say they were colluding. That's probably going too far. But this was clearly not like a giant secrets. So, the idea that a company is going to always do the right thing when two things exist, I think, one, there is economic incentive to not do the right thing; and two, just not enough oversight to prevent it. I think it's going to happen.
(00:57:51):
If you look at CDR, we have some of those same elements, unfortunately. I think on one side, CO2 is an invisible, inert, highly-diffused gas in the atmosphere that's hard to track the effects of. So doing proper verification, doing auditing, doing governance is extremely challenging.
(00:58:08):
On the other side, you have companies who are right now willing to pay $100-$1,000 a ton. Government's willing to pay $180 a ton uncapped for direct air capture into the ground. So, there could be potentially massive economic incentives.
(00:58:23):
I've met, and I know Jack has met, many of the founders who are working in this space today, and they're all incredible people who really care deeply about climate. So, I have no concerns about this really happening today. But both of our organizations, Carbon180 and Breakthrough, our goal is to try to think about how do we build a gigaton-scale carbon removal by 2050, and ideally maybe even sooner than that. So, part of that work is how do we think about what are the roadblocks in front of us? Where are we going to stumble? How can we prevent the worst from happening and make sure that we enable and continue having trust in this work and in this field?
(00:58:57):
So while fraud is maybe not an issue today, it's important to look ahead and project the state of the field by 2050, and it's very likely that the field looks very differently than it does today. Fraud is a huge concern. It's something that I obsess over, and I think we need to be taking action and talking about this openly today.
Cody Simms (00:59:14):
It feels a little bit like a world where today, again, you're buying directly from vendors. You may hire a consultant to come in and sort of verify the methodology that that vendor is using, but there's no oversight on what the incentives are for that consultant and how they're getting paid, what their incentive mechanisms are on either side of the transaction, et cetera. These all feel like things that happened back in the Enron days or the Qualcomm days where just the oversight wasn't quite there yet. These consultant companies are doing amazing work today. But just if I'm reading the tea leaves and I see where there are avenues for things to get taken advantage of, that all feels very ripe. I don't know how that changes, like what that means, what needs to get put in place to prevent that at a time when money's flowing egregiously in the future.
Peter Minor (01:00:06):
I think the first thing you do is to try to understand it. I would say, Jack, you actually were talking about you can sort of bank this into three different categories. You want to go through those real fast?
Jack Andreasen (01:00:13):
Yeah. Yeah. I think it's important to delineate fraud as a salacious and headline-grabbing term. Certainly, there has been carbon removal-based fraud in the past. I mean, we've seen projects not get built, replanting forests, reforestation that just never happened and people ran with the money. So, that has occurred in the past. That is the sort of capital F fraud. It's deceiving people purposefully.
(01:00:36):
Then you've got, we sort of think of as the next step down from that, which is not delivering on climate results. This is making a claim about what your technology can do for climate specifically. There's a whole bunch of things baked into this, additionality, lifecycle analyses, how these are conducted, what happens to the CO2 after it's in its end state. This gets around something that Peter and I talk with frequently about the fungibility of a molecule of CO2. Ideally, it's perfectly fungible across all technologies, but currently it's not, right?
(01:01:11):
So you've got capital F fraud; you've got not delivering on climate results, and then there's one even removed from that, which is this fulfilling public claims and promises. So, this is you've stated publicly you can do X, and this is not just with climate, but this is also community benefit agreements. This is what you said that you could do, not just for the betterment of the larger environment, but all of the claims your company makes.
(01:01:37):
Undoubtedly, companies are going to fall into these three buckets at some point. And to Peter's point, unless it's in the first bucket of capital F fraud, these are just bumps along the way of CDR. These are just the difficulties of a product, CO2, which the large market is completely voluntary, as you pointed out earlier. The market for this is a little flippant, and so that's a difficult place to be in as a seller of CO2. I think that those are how we sort of bucket these three levels of fraud. It's important to note that most of the people in this space, the overwhelming majority, 99% or whatever, are goodhearted entrepreneurs, technologists trying to do their best to make sure that they can leave a better world for their kids.
Cody Simms (01:02:22):
Jack, it strikes me that all three of those are on the supply side. I would assume there's probably a use case that unfortunately we will run into in the world where there's demand side fraud as well, which is, I buy a methodology knowing full well that it's not good or it's not going to work, but I claim it anyway on my books. In fact, if I were going to rank them, that one feels like that may be the most likely to happen. I don't know. But that's back to Peter's example of the diesel engine issues with Volkswagen. They knew full well that it wasn't correct, and they did it anyway. So, I'm curious how you see that being prevented in any way, shape, or form, if you have any ideas on that.
Jack Andreasen (01:03:03):
Yeah. I'll actually turn this over to Peter. I mean, there's a number of different policy prescriptions that you can put in place in terms of things that the government can do. But saying frequently and write in CDR is MRV is the product, and Peter has a deep expertise in this, so I'll kick it over him for how MRV can do this. But, yeah, I generally think there are guardrails that are possible. And Peter, you can talk about what you think here.
Peter Minor (01:03:25):
Yeah. At Carbon180, we recently put out what we're calling principles of high accountability, measurement reporting, and verification. I won't go into that detail. We have other sort of resources your listeners can go to if they're interested. But I think the core outcomes of that are you really need to do a few things that just solve that problem. I mean, they're hard things, but they're just only a few of them.
(01:03:44):
I think the first is, as much as you can, as we talked before, try to do direct accounting of removals and impacts. If you have to do models, make sure they're peer-reviewed, robust models that have significant ground truthing. You also want to make sure that you can trace the status of that storage over time, that oftentimes reversals happen in ways that we don't expect. There's a lot of unknown unknowns in carbon removal still. So, being able to have some sort of way of measuring that the impacts and durability of what you're putting into storage can persist.
(01:04:13):
Data transparency is another thing that's incredibly important. We need to make sure that that's being communicated to all stakeholders, not just buyers, probably even folks like community members, but that data transparency is the best way for us to really understand what's happening and keep everyone accountable.
(01:04:29):
Then the last thing, which I think we've also touched on is just appropriate incentive structure, that this needs to happen in a financial structure that minimizes things like fraud and maximizes public benefit. So, the right structure of all of this, like how we do this, how we create a market that enables these things, it doesn't exist today. What I just described, those four things are not possible to do today. That's another example of why we have so much work ahead of us.
(01:04:52):
But I mean, even on the demand side, I think we see a lot of that happening today, where people buy credits, claim them, even though they were $2 or $3 a ton. It's like, if I wanted to emit a ton of CO2, go buy some wood or some coal, it would cost me $30 or $40 a ton. So thermodynamically, the idea that I can remove it cheaper than I can emit, just like doesn't even pass the basic smell test. They obviously know that; they're smart people. But I think we've also created an environment where we're telling everyone that we need to stop emitting today even when there are not solutions, and they have to get to net zero today. Even if everyone was interested in buying the highest quality CDR, it doesn't exist today. You cannot buy the scale that is required.
(01:05:33):
So, my hope is that there are companies who are willing to do the better thing once supply comes online. But I think, to Jack's point, at the end of the day, this is about governance, that we need government to come in and help clarify the rules of how we define quality, make sure that those climate impacts are there, and that this is being done in a way that's safe for communities and hopefully brings value to them at the same time.
Cody Simms (01:05:55):
Well, I'm just grateful we're having this conversation. We're anticipating the growing pains of this industry, and just the fact that we're doing so means that we all believe it's absolutely a growing industry. I think the report that CDR FYI put out this week shows that it's still very early, but the trends are absolutely growing, both in terms of number of tons being purchased and number of tons being delivered.
(01:06:18):
What else didn't we cover? We've had a nice, long robust discussion. But anything else I should have asked that I didn't?
Peter Minor (01:06:25):
We were pretty comprehensive. I think the last thing I would sort of leave it on is that MCJ, I know, is a very innovation-focused organization, and in podcasts that we talk a lot about the new innovations that are happening in carbon removal itself. But there's going to be a ton of innovation that's required around that as well.
(01:06:42):
One thing that's one of the big challenges that we're hearing about for something like DAC hubs is how do you provide 24 hours a day, firm, zero carbon energy? This is actually not a simple engineering problem. It hasn't really been done. Organizations like Google are still trying to figure that out for their own data centers, and so that's the kind of place where we still need it. Even renewables have come so far. We still have a lot of innovation that's required there.
(01:07:05):
On the MRV side, people have been working on carbon removal for at least a decade now, but for on an MRV, realistically, just a few years. And so there's a massive amount of innovation that's available there that needs to be done. There's just so much fun, interesting work that's going to happen in the next couple of years that'll completely change how we see carbon removal. The field today is going to be look completely different than it will in just a few years, and I think much for the better in a few years. So, I think a lot about not just what the problems are today, but what can we solve that unlocks new ability, new capacity, new purchasing, and new impacts tomorrow?
Cody Simms (01:07:40):
Peter, that's such a great thing to end on, even just tying it back to some of the conversations we had. In the Shopify carbon removal buying guide, one of the last slides was, "How do I manage the credits that I've already purchased?" And Shopify's advice is make a spreadsheet. "Here's a copy of our spreadsheet that we use today." Like, oh, my gosh, of course, sure. Use a spreadsheet for now, but there's definitely a software solution there that needs to get built for somebody over time. I'm sure the companies that are selling credits as well probably need some kind of inventory management system on the credits they're selling and the purchases that have already been made and when they're going to deliver them, et cetera, also.
(01:08:19):
So, there's a lot of picks and shovels. I think, as you were saying that that will need to get built here. For anyone listening, lots of good room for you to navigate as an entrepreneur.
(01:08:28):
Well, guys, thank you so much. What a fun way to kick off the new year for me. Hopefully, all the listeners enjoy it and can't wait to see what happens here in 2023.
Peter Minor (01:08:36):
Thank you, Cody. This was a fantastic conversation.
Jack Andreasen (01:08:39):
Yeah. Really appreciate it, Cody.
Jason Jacobs (01:08:41):
Thanks again for joining us on the My Climate Journey podcast.
Cody Simms (01:08:44):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem-solving capacity. To do this, we focus on three main pillars: content, like this podcast and our weekly newsletter; capital to fund companies that are working to address climate change; and our member community to bring people together, as Yin described earlier.
Jason Jacobs (01:09:07):
If you'd like to learn more about MCJ Collective, visit us at www.mcjcollective.com; and if you have guest suggestions, feel free to let us know on Twitter @MCJpod.
Cody Simms (01:09:21):
Thanks, and see you next episode.

Direct Air CaptureCarbon RemovalCarbon MarketCarbon Credits

FRINGE22 Studio https://www.fringe22.com

Peter Minor, Carbon180 and Jack Andreasen, Breakthrough Energy

Episode Transcript

Startup Series: Impulse

Startup Series: Made of Air