In 2020, Shopify’s Sustainability Fund purchased 400 tons of stored carbon from Heirloom, a company in the process of testing fine-tuning technology to speed up a natural process called carbon mineralization. During this process, carbon dioxide in the atmosphere binds with metals and permanently turns into stone; Legacy’s goal is to achieve this in a matter of days rather than years.
“Since our purchase, they have significantly improved their ability to demonstrate carbon capture with limestone, enabling them to launch their latest Series A funding round, raising $53 million,” explained Stacey Cook, Shopify’s Head of Sustainability.
Heirloom is now preparing to scale its innovative carbon capture solution even further, as recent progress means it is eligible to sell its carbon credits to Frontier, an Advanced Market Commitment (AMC) that is putting nearly $1 billion into accelerating the development and growth of technology-based solutions. To withdraw or remove carbon on an unprecedented scale.
AMCs are financing mechanisms that have been used to catalyze vaccine development in cases where a profitable market for a life-saving product did not already exist — and may not exist at all. In the case of carbon capture, a similar gap exists in the market, and Frontier AMC is essentially promising that there will be buyers waiting once companies develop and scale their technology.
It has the potential to develop a market for decarbonization, a practice climate scientists say will be necessary to combat climate change.
Frontier was launched by a handful of tech companies mostly this spring: Besides Shopify, there’s Stripe, Alphabet, Meta, and McKinsey. Each company has been active on climate issues and Frontier is creating a way to bring one aspect of its initiatives together.
“With Frontier, we want to send a high-demand signal to entrepreneurs, researchers and investors that there is a market for permanent decarbonization: we build and we buy,” Nan Ransohoff, head of climate division at Stripe, which spearheads the initiative, said in an April press release.
Like Shopify, Stripe has already been investing in decarbonization via Stripe Climate, but the technologies are incredibly expensive. By pooling their resources together and continuing to bring in new players, companies hope to move the needle more meaningfully on climate change while balancing their own emissions.
The need to decarbonize
Leading climate scientists agree that a rapid global shift away from fossil fuels to renewable energy is the most important step in preventing catastrophic climate outcomes. However, given the amount of greenhouse gases that have already been released into the atmosphere, this shift alone would not be sufficient without removing the carbon dioxide present in the atmosphere as well. In the latest assessment from the Intergovernmental Panel on Climate Change (IPCC), experts described carbon dioxide removal as “a key component of scenarios that limit warming to 1.5°C or more likely below 2°C by 2100”.
“Decarbonization is not a substitute for deep decarbonization,” said Peter Minor, director of science and innovation at Carbon 180, a nonprofit advocacy group for decarbonization technology. “But there is no world in which we can have the lives we do enjoy without also developing this removal technology, and on a large scale.”
Nature-based sequestration projects such as forest conservation are one way to remove carbon from the atmosphere, but they are incomplete. Critics have noted that some companies use these projects as a means of offsetting carbon emissions rather than mitigating their carbon footprint. The offset often has a limited effect: in a final episode of last week tonight, John Oliver identified forests that were accounted for as reparations even though they were never threatened. In California, wildfires are destroying thousands of acres of forest previously considered carbon credit reserves, releasing all that carbon into the air.
Kauk said that these particular issues have prompted Shopify to embark on its current path of reliable and sustainable decarbonization and storage financing. There are criticisms, especially that efforts like Frontier would distract and remove funding from the more pressing need to cut back on fossil fuel use and shift to renewables. Carbon capture technologies also use a great deal of energy, so some worry they will never be viable.
Frontier evaluates its projects based on eight criteria. Carbon must be stored for at least 1,000 years, and the technology cannot create more emissions than it reduces. The projects should also demonstrate a pathway to being able to store carbon at less than $100 a ton, the threshold set by the founders would allow for technology cheap enough to scale.
Frontier’s portfolio of projects to date includes AspiraDAC and RepAir, two companies working on modular direct air capture (DAC) systems powered by renewable energy, and other companies working on carbon mineralization, including Travertine and Calcite-Origen.
There is no market available
Cost and volume are where rubber meets road that has yet to be paved. Minor said that while the solar industry had to lower the cost of its systems before it could compete with oil and gas, there has always been a market for electricity. With decarbonization, which is essentially a public good, there is no such market.
“We don’t think about how collecting recycling every week makes money, we do it because it’s good for our community. Decarbonizing lives in a very similar world.” “How do you then create the right incentives for companies to be able to raise money effectively, invest in developing the new technologies we will need to decarbonize to operate, and then convince project funders and buyers to actually pay for it?”
This is where Frontier Design comes in as an AMC. The model was applied in the early 2000s to stimulate the development and distribution of an affordable pneumococcal conjugate vaccine to low-income countries. Because countries couldn’t pay that much for the vaccines, there was no incentive for companies to manufacture them.
Then, five countries and the Gates Foundation committed $1.5 billion to AMC, essentially promising companies that if they developed a product that met established standards, they would buy it. Analytics estimates that AMC saved 700,000 lives.
said Rachel Glennerster, a University of Chicago economist who worked on developing AMC’s approach to vaccines and who advised Frontier. “AMC says, ‘We’ll make sure you’re going to have a big market, so it’s worth making the investment to produce at a very large scale. “
Glennerster noted that AMCs also encourage speed, and the climate crisis requires urgency. And since companies don’t pay in full until the technology works well enough to sequester carbon, there is less investment risk. The Frontier model requires some pre-purchase to help projects, many of which are launched by startups, get the early capital they need to develop.
Another major difference is that Frontier is a private project, while vaccine efforts have been driven by foundations and governments. Krause said the initial commitment of $925 million is a “very strong demand signal” for decarbonization companies that there is and will be a market for their products, and that it aims to motivate more investors and governments to participate in building the market.
This has already been happening to some extent. In May, the US Department of Energy announced $3.5 billion to create direct air capture hubs across the country. In July, the UK announced an investment, structured along the lines of AMC, of approximately $63 million for innovative decarbonization projects.
Minor said he believes Frontier is already making an impact in space, in terms of its own investments and signaling to others. “Compared to what we’re seeing even two or three years ago, this represents a rocket acceleration in the amount of current market capital flowing into space,” he said.
The amount of carbon these projects can capture on their current scale is so small that Frontier won’t even be able to spend $925 million on it. But Krause is confident that development will happen quickly. It predicts that as the 2030 deadline approaches and more carbon is stored and thus available for purchase, the project will bring in additional companies and increase its commitment.
“The more we can do to stack demand across Frontier, the better for the ecosystem,” she said. “We need to bring in those other buyers so we can speed up.”