Last week, Mark Zuckerberg and Pricilla Chan announced their second large set of charitable gifts into the carbon removal field in the last six months. Specifically, the Chan-Zuckerberg Initiative announced $44 million in grants towards CDR. Combined with the $23 million they gave in October of 2021, the couple has given $67 million to support carbon removal in the last five months.
They join other billionaires like Jeremy Grantham and Elon Musk, whose giving has shown they also see CDR as an important part of the climate fight.
While a few foundations, such as CZI, have the resources to look deeply at supporting the carbon removal industry, many corporations rely on net-zero plans that lack full detail about carbon accounting and emissions reductions plans. A report released earlier this month by the New Climate Institute and Carbon Market Watch found that the net-zero plans of 25 of the world’s most valuable companies are not specific and don’t explain how they’ll reduce emissions by 2050.
A new coalition announced last week aims to fill this alleged gap in credibility between corporate plans and real action. Microsoft and the Climateworks Foundation announced “Carbon Call,” a partnership between 20 corporates, non-profits, and research organizations. In a statement to Axios, the group is building what they call “a carbon ledger…a global dashboard that tells you what exactly is happening in terms of emissions,” in a statement . Signatories include Deloitte, GlaxoSmithKline, and the UN Environment Program.
The coalition will use their pooled resources and expertise to improve the carbon accounting methodologies used in corporate emissions reporting. Ultimately, they hope this will allow corporate and national emission data to be accurate and directly comparable.
In this week’s business episode, hosts Radhika Moolgavkar, Susan Su, and Na’im Merchant discuss the CZI gifts, how Carbon Call aims to improve corporate emissions accounting, and the short supply of quality carbon removal available to meet the skyrocketing demand.
Full Transcript
Announcer: You’re listening to Carbon Removal Newsroom, a weekly show about current events in the world of carbon removal, from technology and innovation to policymaking and job growth. Brought to you by Nori, the carbon removal marketplace.
Radhika Moolgavkar: Hello, Carbon Removal Newsroom listeners. Welcome to our business episode this week. We’re recording a day earlier than normal. So it’s Wednesday, February 23rd to let me go skiing on our midwinter break here in the Washington state area. But with me, as always, is Susan Su, who is a partner focused on climate investing at Toba Capital. She also serves as a board member at the Carbon Business Council and is a board advisor to the Environmental Voter Project. Susan, welcome, as always.
Susan Su: Thank you. Thank you. Great to be here again, as always.
Radhika Moolgavkar: And then also joining us is Na’im Merchant, who you probably all remember from our last business episode. He’s a consultant who works with NGOs and startups on scaling carbon removal. He also writes the Carbon Curve newsletter about the carbon removal industry and the new carbon economy. Naeem, thank you again for joining us.
Na’im Merchant: Yeah, thanks so much for having me.
Radhika Moolgavkar: Yeah, our last episode, like I was telling you too, was a huge hit. So I’m looking forward to the conversation today. And then as always, I’m Radhika Moolgavkar, Head of Supply and Methodology at NORI. So let’s get started. Let’s jump in. The big news in my mind of the last couple of weeks in the business world is the Chan Zuckerberg Initiative made a huge donation to carbon dioxide removal to CDR. They announced their second large set of charitable gifts in this field within the last six months and announced $44 million in grants towards CDR.
That’s combined with $23 million they gave in October of 2021, so a total of $67 million to support carbon removal. They joined other billionaires like Jeremy Grantham and Elon Musk, who are also providing funding for CDR. And it makes for a really interesting, I think, dichotomy between the world of philanthropy and the world of business. But just to get to a few of the details, the CZI gift, that’s a bit of a tongue twister, included $21 million to the UCLA Institute of Carbon Management, which will fund the validation of three different techniques at scale.
Some direct ocean water capture, electrochemical direct air capture, and zero emission cement production. Another huge area lately is the zero emission cement production area. $20 million to carbon to fuel and product startups 12, $2. 5 million in direct carbon removal purchases from six organizations, including Charm Industrial, who does geological storage of bio-oil. Ferris Lumber, a lumber producer who makes biochar. They’re based out of Oregon, interestingly enough to me. The International Small Group in Tree Planting Program, TIST, that’s doing reforestation, another interesting topic that we won’t cover. Mission Zero, Direct Air Capture, Oregon Biochar Solutions, Biochar from Wood Waste, Running Tide, and then $500,000 to an accelerator that’s focused on social equity in the climtech industry.
So... Susan, let’s start with you. How do you see this kind of intersection of tech, philanthropy, and startups? And what do you kind of see as the direction this is going? And is this sort of heralding that carbon removal has caught the attention of these folks?
Susan Su: I think this is great. I mean, it’s always great to see more headlines and more money going towards carbon removal. I do think that if you So you started out, you kind of introduced this, Radhika, you said that it’s huge news and they are making this like huge donation. I do think it’s really important to contextualize it. First, I will say that this is absolutely awesome, no matter what, any size check is better than zero. However, to put it into context, it’s 0. 09% of Mark Zuckerberg’s current net worth, 0.
09%. So it’s just a hair shy of one tenth of a percent. That means if your own net worth, let’s say you live somewhere in Silicon Valley and you’re like doing okay for yourself, but haven’t had an exit yet. That means if your own net worth is say a million bucks, that’d be a donation of $900. The median US net worth is for retirees, the richest subset of our population is around 250K. 0. 09% of 250K would be, this is net worth, okay, not total income or savings or anything like that would be $225.
So I do think not to minimize it, but I do think it’s really important to put it into context. And in absolute terms, it’s a huge amount of money. But I will say, and you asked about the comparison to tech, it’s not an insane amount of money, especially given that climate tech companies collectively mobilized from venture capital over $40 billion in 2021 alone. And I believe it was close to $20 billion in 2020. So that’s like collectively almost $60 billion in the two years of the pandemic that we’ve had so far.
So it’s really a lot that’s coming from private funding that’s going into scale-up ready tech. And I think that’s fantastic as well. Again, it’s like a big 10. Everybody’s welcome to the party. If you have a buck, you can come. Like, it’s great. Any amount is good. I do think though, if you look at that 40 billion that went into private funding of climate technologies, a lot of that was in mobility and food. Food and Ag, I should say food tech. And so, you know, it’s awesome that the CZI initiative, the gift is specifically around carbon removal, because that’s definitely been a more overlooked subset of the And so this is great that this is just dedicated to that.
I will say though, like we should look a little bit closely at how they’re directing the funds. I think the money that they’re putting towards carbon Carbon Removal Purchases is incredible. It’s super, super important. It’s reminiscent of what private companies like Stripe have been doing for several years now. I believe Stripe’s initial commitment was a million dollars, and then they actually re-upped on that in the subsequent year. So Stripe has now put more money towards carbon removal than this current CZI push has done. And I think it’s great, but I also think that probably the carbon removal purchases would have been so awesome to put more than the 2.
5 million to awards because it’s so important as a market maker and a driver of change for technologies that are just on the cusp of being able to scale and become more affordable. And it really sort of, they can serve in a very catalytic role there. I guess you can probably hear from the tone of my voice and maybe my approach here that I’m somewhat cynical about many billionaire donations because of maybe colored by my own experience in the world of philanthropy. In my experience, it sometimes is about following practices of effective altruism.
And if anybody doesn’t know what effective altruism refers to, it’s a very specific Modality of giving that focuses on impact first and very rigorous measurement around that. Sometimes it’s about that. And a lot of times it’s actually an emotional exercise that has to do with what can I put my name on? And still we get a lot of really great things out of that, right? Society gets hospitals, we get roads, we get research chairs, but that’s not the same as true effective altruism. You can’t put your name on a carbon removal purchase in the same way as you can put your name onto a research initiative, a research institute, or research chair at a university.
So I think we should be very clear-eyed about that. And that doesn’t mean that those research initiatives aren’t great and super important, but there is a distinction between what we’re sort of getting for each dollar there. Finally, I’ll just say that when you look at the three research categories that they’re financing at UCLA, so direct ocean water capture, electrochemical direct air capture, and finally zero emission cement production, These are actually all solution areas that currently do have demonstration ready, or in some cases even scale ready technologies already out there in the world, not within the research kind of incubation stage of UCLA.
So I think a really good question for us as bystanders to be asking is, Is funding validation, so-called validation, at the R&D level really the best use of these funds? Now, I’m not sure of all the details, but I do think it’s really important for us as a general public to always ask ourselves these kind of probing questions about the Philanthropy and its goals and its outcomes because there so much philanthropy money out there. It’s bigger than venture capital. It actually dwarfs venture capital. It moves a lot of markets that are invisible to most of us who are not philanthropists, which is the 99.
99% of the world. And we, as both sometimes beneficiaries, but also stakeholders in the world that it produces, should be asking ourselves these kind of tougher questions about its intent and it’s also what it produces.
Radhika Moolgavkar: I agree with so much of what you said, Susan, particularly around philanthropy and the emotional tie that it has. It’s funny. I, as most people who listen know, live up in Washington State. And I even saw a difference between philanthropy in California when I lived there and the need to name things even then compared to Washington State. And just as a side, I often think that the way that the ex-Mrs. Bezos is donating money is a really interesting new model that I hope other philanthropists follow, which is basically doing it anonymously and with very few strings attached because you are also right, we don’t know anything about the strings attached to this philanthropy money.
And I have myself seen how that can impact projects in not the most positive way. But Naeem, to turn it to you, kind of would love to get your perspective too on this because this is an interesting intersection again where they’re funding things that could be part of the voluntary markets or could be part of regulatory markets. And how do you feel about philanthropists potentially intersecting with the voluntary and regulatory marketplaces?
Na’im Merchant: That’s a really good question. You know, I probably share some of the concerns with, you know, with philanthropy engaging in this space. But I think, you know, I think overall this, you know, something like this Chan Zuckerberg Initiative, you know, investment or the Elon Musk X Prize, for example, these are, you know, these are still welcome, you know, investments. This is still a net positive for the CDR space. You know, I think the carbon removal purchases that were part of this are probably the smartest, the smallest part of this news.
But, you know, I think the issue isn’t so much that, you know, the personalities behind the CDR initiatives or the philanthropies behind the CDR initiatives, you know, that’s the support that we’re getting today and that’s good for the space. I think the challenge is a lack of kind of You know, diversity of the support that the CDR space gets that makes it less resilient. So the fact that like, you know, these tech billionaire philanthropists are supporting the space right now is fine. Like I don’t have a real kind of opinion about that, but I think it’s important that we spend our time and energy finding new proponents for CDR, whether that’s in other industries, whether that’s policymakers that want to include this in their agenda.
Notable kind of influential people from other countries outside of the United States. And I think that the challenge that I see is we see kind of a clustering of support for carbon removal from very specific groups of wealthy individuals or wealthy foundations. And that’s great. 2% of philanthropic capital, it goes to climate right now. So it could be, this is a good thing. But, you know, we could really benefit from just more stakeholders from different parts the world, different industries, getting involved and throwing the support behind carbon removal in that way.
Radhika Moolgavkar: So one thing that you alluded to, but I kind of am going to take a little twist on is it also feels like to me, and I wonder, I’d love to get both of your perspectives, is there are sort of darlings within the CDR industry that get a huge amount of funding, like Running Tide, we hear about them all the time. Stripe, Shopify, Microsoft, you name it, they’ve been funded probably by them. Also kind of zero emission cement to Susan’s perspective, like there are companies already out there purchasing or building zero emission cement.
So why do you think that there’s such a fascination with an even These philanthropies and funding for these sort of very specific companies or niches within CDR and not more of a broad, as you again alluded to Susan, funding of maybe things that are a little bit earlier stage and need more of that kind of risk capital. I’ll start with you Naeem and then I’ll love to hear your perspective too Susan.
Na’im Merchant: I think that’s a really good observation. I think we have a lot of focus on a few kind of CDR companies. I think that just points to the fact that we need more companies, we need more founders out there. I think we’re seeing some companies There are companies like Charm Industrial, for example, that are being able to deliver on some of their commitments, which is farther along than most carbon removal companies at least durable carbon removal companies. And so that’s, you know, that’s attractive to a lot of buyers. And that’s how markets work.
But I think we need to see more early stage capital and more founders starting more carbon removal companies to address the supply constraints. Susan?
Susan Su: Yeah, I think all of the above, absolutely. Those are resonant reasons. I would say one additional thing on top of that could just be, you know, I mean, it’s similar to what happens in venture capital, right? We just have path dependency, which simply refers to the phenomenon that the successful continues succeeding. And I think part of it is, you know, some of these companies get validated by a well-regarded Some early catalytic capital or a well-regarded accelerator. They get validated by a Stripe purchase or a Shopify purchase. The names get out there and really large philanthropic initiatives or these large, not necessarily just in terms of the dollars, but in terms of the publicity that they attach, they’re not really out there to stick their necks out and Be super different and take a huge risk on something that’s going to fail.
There’s a lot of reputational weight that goes into this kind of decision making, and it doesn’t really make sense for them to Do anything other than pile on to what are perceived as the winners. So I think that’s part of the reason we see this clustering. And part of the reason the winners are the winners is because like Naeem said, they deliver. But I think another part of it is they’re enabled to deliver So it’s very hard to tease out actually whether the chicken or the egg comes first. I do agree that more players in the market will ultimately be probably the best thing for all of this.
However, it’s, you know, it’s easy for us to kind of sit here and call for that. I think the hard part is how do you actually ensure that As supply diversifies, that each one of those players actually has a fair shot. And so what are the instruments that need to either be enhanced or empowered or introduced into the market? And I’m talking about financing instruments primarily, but sometimes it’s even know-how or other types of enablement. To make it possible for founders outside of CarbonCure. I know we’ve been talking about them a lot and they’re such a great company, but they’re quite well known.
Outside of a company of that kind of scale in the public imagination to succeed.
Radhika Moolgavkar: Yeah, that was actually going to be my question for both of you. Again, is how do you break this winner mentality in an inherently risky way? Endeavor, which carbon CDR is, right? I mean, it’s a very nascent technology, not to mention a nascent marketplace with so many unknowns around the regulatory future of it. So if all the capital wants to go to things that are relatively low risk in an already high risk environment, what type of mechanisms do we need to tease out new talent, new technologies and ensure that As you said, Susan, people get a fair shake.
If you could design something, what would you design? Susan, I’ll start with you, and Naeem, I’ll flip it over to you afterwards.
Susan Su: Well, ideally, I think that’s where philanthropic capital and that’s where university-backed R&D should come in, which is the reason why I say with these three UCLA initiatives, just to bring it back to our original impetus for this discussion, I was surprised that it’s ocean water capture, electrochemical DAC, and zero emission cement because there could be other things out there. Now, maybe what we’re seeing is that These are just the three that have the most promise from a technological standpoint. But I still think we’re very early in all of this. We don’t know what we don’t know.
And I think that there’s a pile on effect that even happens in academia and at the R&D stages. And so I think that’s partly just sort of like a human psychological bias that we have to really push ourselves to overcome. In terms of how exactly do you do that? I don’t know. That is where I would have said, philanthropists, catalytic capital, really big risk takers that come out of cool universities. But it seems that even in those circles, we are fighting the same kind of biases that we see in private markets.
Radhika Moolgavkar: Naeem, what about you? Is there a place that maybe government or research funding through the government could play? Do you see that as an option?
Na’im Merchant: Absolutely. I think research funding through the government could help address some of this. I think if you look at companies and research institutions and universities that have received funding from the DOE to do Research and development, it’s still been largely concentrated around direct air capture. And there are companies taking different approaches to this, which is exciting and very cool. But ultimately, I think it does kind of lead to that ongoing pylon effect that Susan was mentioning. I think another way to just to kind of go back to financing instruments a little bit is to kind of explore financing mechanisms that are a bit more technology agnostic.
That have encourage investment in carbon removal technologies that maybe have that call for features like a degree of permanence or a price point, but it’s not particularly kind of married to one specific technology. So one area is something like advanced market commitments, which I’ve recently written about. That would send a market signal to innovators to build carbon removal Production now and help attract investment, knowing that there was a contractual obligation to buy what they build down the line. The key is how do you do that in a way that doesn’t kind of continue to reinforce this, you know, this pylon effect.
And, and so by Having kind of an explicit agreement by buyers to buy carbon removal that is at a certain price point or relative price point that has certain features around verifiability or permanence or whatever the case may be, but is otherwise technology agnostic could also help kind of drive investment in more kind of diverse or interesting kind of avenues of carbon removal that we’re not exploring so much today.
Radhika Moolgavkar: Maybe the psychological aspect is as simple as people acknowledging it and then excluding certain groups from receiving funding or making a commitment through their philanthropic efforts to choose higher and higher risk endeavors, knowing that the payoff is greater. I don’t know. There’s no answer to it, but it’s really interesting as a person who’s in the space every single day, Talking to different people who have supply, how the same names constantly get brought up and you know that the amount of supply they’re creating is not enough to meet the needs. So my last question for you guys about this whole endeavor, and Susan, I think you touched on it a little bit, but I’d still be curious, is what was surprising to you in what they chose to fund?
For me personally, I thought it was interesting that they chose reforestation and It’s a notoriously tricky area. I think more and more science is coming out about how reforestation can’t be how it’s been done. Typically, I don’t know what this group is doing, so I assume they’re doing it to the best science, but still kind of a hot button area to fund. But I’d be curious, Naeem, what you were most surprised about and Susan then make your thoughts as well.
Na’im Merchant: You know, I was also a little surprised by the reforestation piece, but overall, I mean, you know, we have some familiar names there like Charm Industrial and Running Tide, as you mentioned before. It was really cool to see Mission Zero, you know, on there as well as a DAC company looking at the electrochemical approach. So that was, I think, interesting to me. So nothing really kind of other than that really stood out because frankly, The carbon removal purchase was the smallest part of the announcement, in my view, like it was two and a half million dollars.
And I think a couple of years ago, that’s maybe a bigger deal than it is today. But, you know, I think what’s more interesting is that the 20 million grant to 12, the kind of carbon tech company using kind of carbon to produce, you know, e-fuels and other kind of materials, I think You know, there’s a number of companies working on carbon tech innovations around sustainable aviation fuels or building materials or plastics or whatever the case is. And it seems like a lot of concentrated resources going to one company. I thought that was kind of more surprising than the actual kind of carbon removal purchases that they ended up making.
Radhika Moolgavkar: Susan, what are your thoughts?
Susan Su: I think nothing, there wasn’t anything that really shocked me in terms of the carbon removal purchase selections. However, I will say kind of opposite to you, Radhika, I was, if anything, would be surprised by their selection of a well-known, still subscale, but a well-known company like Charm. I think Charm is really awesome, but they... The train is on the tracks already for them. And I think about these sort of like catalytic carbon removal purchases as not just purchases, but actually these sort of instigators, right? They’re supposed to be catalyzing a market around something that doesn’t already have a market.
And I just, and maybe this is, maybe this is false, but I just don’t see Charm Industrial that way. I hold them in very, very high regard. I think it’s a great company. And they’re not on the same level in terms of their maturity as Oregon Biochar Solutions, for example. So I was a little bit surprised to see the kind of like high-low diversity within this batch. I thought it was great though, that there was so much diversity across different types of technologies because it sends a really strong message that carbon removal, it doesn’t just mean Uh, trees or large DAC machines.
It can mean these other things as well. And I think that helps to really stoke the public imagination. So, yeah, I think that those were kind of the, some of the positives that I took away from that and nothing wrong with funding charm. If you think it works, it’s of course great to buy what works. Um, but I tend to think about these, these purchase actions as being more, um, You know, more catalyzing, and I didn’t see it quite as that in all of these cases.
Radhika Moolgavkar: Yeah, I don’t know if there was a theme to the purchases of, and I think that’s where my surprise came from, is that if you’re trying to be catalytic, but you want to avoid controversy, reforestation seemed like something less to me that like a part area where there is a lot of controversy and I would have maybe steered away from it, but your point is well taken like I don’t know I’m not sure that we know can even glean from this what their overall overarching philosophy is towards cdr that being said.
I’m going to move on to the next topic, which is a report was released earlier this month by the New Climate Institute and Carbon Market Watch found that the net zero plans of 25 of the world’s most valuable companies are not specific and don’t explain how they’ll reduce emissions by 2050. So in response to this, Microsoft and Climate Works announced something called Carbon Call, which is a new coalition that is meant to fill the gap in credibility between corporate plans and real action. They have got a partnership between 20 corporates nonprofits and resource organizations to address this net zero issue.
And they are building what is called a carbon ledger or a global dashboard that tells you what exactly is happening in terms of admissions. The intent is that they’ll use their pooled resources and expertise to improve carbon accounting methodologies using corporate emissions reporting with the hope that you’ll have a much better and accurate Perspective on what is happening in the industry in terms of net zero emissions. So the first thing I would note is that from what I could tell, and maybe you guys saw something different, none, nobody from a hard to abate sector has signed on to this pledge.
So I didn’t see airlines, I didn’t see big farms or big ag. So I’m wondering just at a high level, how effective you think a pledge like this is, I didn’t say obviously oil and gas is when Sort of the most difficult industries aren’t part of this conversation. Naeem, I’ll ask you and Susan would also like your perspective.
Na’im Merchant: I think that’s a great observation. It’s interesting that they’re not hard to abate sectors kind of represented here, but I do think this is a step in the right direction to the extent that an effort like this can improve harmonization or interoperability between different You know, greenhouse gas reporting systems and accounting standards. I think the thing we need to avoid is kind of more fragmentation in the creation of GHG accounting standards or target setting standards. So I think something like this could be successful if it can help harmonize these different carbon accounting efforts or reporting efforts and, you know, improve the link between corporate accounting and country level accounting of greenhouse gas emissions.
So I look at it as a positive first step and, you The lower hanging fruit are the kind of types of companies that are involved in this now and hopefully more hard to debate sectors get involved in this over time. But I think the true kind of test of success of something like this is, can it deliver on improving the kind of accuracy that we want to see in accounting for greenhouse gas emissions while kind of not creating more fragmentation that we already see in this space.
Radhika Moolgavkar: Susan, yeah. So in our last episode, you had a great quote that opacity is the enemy of liquidity. So do you think that something like this can play a significant part in reducing opacity and helping the liquidity of the marketplace?
Susan Su: Yeah, so when I said that, it was specifically about marketplace information. You’re right about that. And this, on the other hand, though, is about commitments, about corporate commitments. So I think that’s a second order effect. It can definitely impact something like demand velocity in the marketplace. You know, for example, right now, we can presume that some players, particularly on the financing side, are kind of hanging back on the sidelines because they’re still uncertain whether corporate commitments or so-called voluntary market demand are real enough yet. So if a ledger like this makes it harder to evade such commitments and harder to hide the fact that you aren’t on track, then it might spur greater demand.
It might force greater demand in order to remain consistent with commitments. And that will, of course, impact the demand side of the marketplace. It’ll create an acceleration there and greater competition to snatch up high quality supply, which also, of course, impacts the supply side of the marketplace as more players gain confidence in starting or increasingly, more importantly, funding CDR projects and all of the ancillary services. So I think it absolutely impacts the marketplace. It’s not direct, but it is very closely indirect. And I think it’s going to have probably a positive impact.
But I think going back to something that Naeem said about fragmentation versus critical mass, I mean, there have been a lot of You read this type of news and you’re not like, oh my God, this should be on the front page instead of Ukraine. No, right? It feels very similar to a lot of things that we’ve sort of, it’s an echo or it’s an iteration on something that we’ve heard already before. And that’s where I fear moving in the direction of further fragmentation. It really only works if... It can cover a critical mass of players.
I don’t think we need, to your earlier question, Roderick, I don’t think we need to have mining folks on there right now, but if they can be daisy chained in via, I don’t know, Glaxo or some of these big five accounting firms, if they’re a couple of degrees out, then I think that’s what really matters. And that’s still very much to be seen right now, because if you look at the signatories, The vast majority of them are actually science and research foundations. Yet again, science and research foundations leading the way, no surprise there.
They’re always leading the way and doing great work, but it can’t just be them. And I think it’s also great to see Microsoft, Deloitte, et cetera, et cetera on there. But again, if you kind of look at those companies, they are... If you’re really cynical about it, you could say these large corporates are well positioned to benefit from a clear emissions ledger, either as a way to showcase and validate their existing leadership on climate, or because their services, their large services businesses will directly benefit from a greater emphasis on carbon accounting.
And so it’s kind of like, oh, of course you guys are going to be behind a carbon ledger. It’s just more about now, can that sphere of influence actually grow in order to really impact marketplace velocity?
Radhika Moolgavkar: Yeah, I had some of the same cynical thoughts you did, Susan, when I read the list, which was, I just found it really interesting that they couldn’t get one like Delta or something on board to sign that’s already made a commitment, you know, so you would think that it wouldn’t have been too difficult to get them on board, but Time will tell if they’re just next in line. But Naeem, I’m wondering, Microsoft obviously has been a leader in investing in this carbon removal space, and now they’re kind of wading into corporate climate commitment accounting.
Do you kind of agree with Susan that the connection between these two might be their business profitability as much as their environmental stewardship, or do you see another connection potentially?
Na’im Merchant: Yeah, I think the view around kind of this is a strategic move by Microsoft, I think is right. I think Microsoft’s climate commitment It was probably kind of more quantifiable than many others. They had this kind of target around not just getting to net zero, but removing historical emissions. And so, you know, taking on an effort like this, I think, makes sense and not doing it alone, but trying to bring other people, you know, other companies, sorry, into this. Effort, I think, makes it potentially more impactful and higher visibility. So it’s something I’m sure the Microsoft team cares about and acknowledges as a challenge.
And I think it just connects very kind of naturally to their broader kind of net zero and also removing historical emissions kind of approach to addressing this challenge. So I think it all makes sense. I don’t know that there’s another angle there. I think it’s kind of interesting and funny to think about the fact that the accounting firms are really excited about a carbon accounting ledger that completely checks out if someone I used to work for an accounting firm myself. But I think we’re hopefully going to see more companies and other non-state actors engage on something like this.
But I think the key is that it does so in a way that complements existing efforts as opposed to further fragmenting these efforts that already exist right now.
Radhika Moolgavkar: Susan, I’m curious if you think that the need for this, or at least Microsoft’s identification of a need for this, is really more indicative of a lack of leadership, either at the national, federal level, or the international level, like Glasgow, to come up with standards, and that they’re essentially filling a vacuum that could be filled by potentially a government organization.
Susan Su: Yes, 100%. Yes. I mean, on the other hand, you know, when you look at what’s going on in the world, I do think that there’s, it’s sort of like, for those of us who work in the broader climate solutions world or industry, however you want to think about it, it, it’s our world, right? It’s everything that we see. It’s what we think about day to day. And it feels like such a big And pressing challenge and so fascinating. I mean, it eats up everything, but there’s If you put yourself in the shoes of the Secretary of State of the United States right now, or the Foreign Minister of Germany, and by the way, I don’t know if you guys saw, but I’m going to totally botch this, but there was the American ex-head of Greenpeace that was elected to become Germany’s Environment Minister.
I believe it’s Environment Minister, but it might be like a different ministry, but something similar to that. It’s a big deal because it’s actually going under the foreign ministry, not under any sort of like climate or internal program. So these countries really view it as a diplomatic area of work, which I think is great and really important and absolutely right because countries are going to need to interface and negotiate with one another. But if you look at the scope of other things that they’re having to interface and negotiate around with each other, Then you suddenly zoom out and see, wow, okay, climate change can seem kind of small in the eyes of some of those people that are the state actors.
And so there’s a vacuum. I think there will probably continue to be a vacuum for a really long time until climate is as pressing as troops on a border. And that’s where these corporations that are as large as companies, I should say, companies that are as large as countries can step in. And honestly... As cynical as I am about corporatism, I’m thankful that they’re there, and this is one of the benefits of the aggregation that we’ve seen across the 20th century in the private sector. There are pros and cons to it, and this is definitely one of the pros, is that at least we have entities that are And powerful enough to take actions like this.
Now, it’s very scary, of course, as well. And we don’t have time to get into all of the reasons why that’s the case. But I think we’ll continue to see this. And there’s also always a little bit of one-upsmanship, healthy one-upsmanship that’ll happen. So here’s Microsoft. Next month, it might be a different company doing something else. And hopefully that will drive the whole space forward.
Radhika Moolgavkar: So final question of this episode, and I’m going to pitch it to you Naeem. One of the things that I think that links these two topics together is the either creation of quality supply, permanent durable supply, that kind of the 2. 5 million that Zuckerberg-Chen initiative were funding, and this accounting, which ostensibly will probably lead to Lead to needing more quality supply, or at least making it more visible to the public. Where does this quality supply come from? Because from what I can tell, there’s very little of it. It’s being swept up in both these RFPs by these companies like Shop, Stripe, Microsoft, and also the type of legislation that the Open Air Collective is putting forth for the state of New York.
It’s very limited. So does this actually in some ways choke off a nascent industry because supply won’t be there to meet the need and then the market kind of dies? Susan, if you also have a thought after Naeem, I’d love to hear it.
Na’im Merchant: That’s a really great question. I think this supply constraint we’re seeing and this kind of difference between pent up demand and growing potential demand and supply could really blow a hole in the CDR market. I think that’s a risk for the CDR market. And I think we start maybe addressing that by Shifting away from, you know, traditional spot carbon removal purchases and towards other kind of ways of financing carbon removal that help build a long term market for it. Right. And that’s why I talked about advanced market commitments before. Or other kind of innovative financing approaches that have been used in different social sectors where they’re trying to scale up a public good and have to kind of crowd in resources.
I think that they’re not all kind of going to work for carbon removal, but I think it’s worth exploring and seeing where they make sense and where they can be adapted in order to provide the appropriate kind of market signals and demand signals to investors and innovators in the carbon removal space without kind of Choking off supply and then potentially creating a disruption in the marketplace or frustrating potential buyers or that sort of thing. So I think if we can try to start exploring different ways of generating the long-term demand that we know we’ll need in the face of the short-term supply crunch that we’re seeing, that would be a very useful exercise to undertake and something that I’ll be actually writing about and publishing in the next week or so.
Just trying to get around that challenge because I think it’s an important one and I’m glad you brought it up.
Radhika Moolgavkar: Susan, anything you want to add real quickly?
Susan Su: I’ll just say that I think those are really smart ideas. And anytime we see a lot of a surplus of demand in a marketplace, we can expect to start seeing kind of the financialization of that marketplace. And that can mean everything from futures, kind of what Naeem is hinting at, to secondaries, to options trading, To, you know, you name it, right? There’s a plethora of different kind of technical instruments that are out there, just for example, in our financial markets today. But I do think it’s important to remember that some things, some of those instruments actually contribute to the solution of removing emissions from the atmosphere.
And some of those, and I saw this great tweet on this the other day, you know, trading doesn’t necessarily actually mean removal. Futures are a great way to create a market, but maybe options wouldn’t necessarily be, just as a comparison, I think most of us can understand. So I think it’s just really important to take a nuanced approach when we think about all of these things.
Radhika Moolgavkar: Yeah, Susan, actually, that’s exactly what I was going to say. One, Naeem, can’t wait to read the blog post or however you’re going to be publishing it. Really curious to see your suggestions. But two, That’s one of the things that Nori talks about a lot is that every time there is something happening in terms of a financial trade, it should result in more carbon removal. So just to your point, Susan, you can’t have financial solutions that don’t result in more carbon removal to support a carbon removal marketplace, to state the obvious.
All right, to end this segment, I am going to do good news this week and listeners, I am going to go a little bit outside of the sustainability world and Because in honor of my middle daughter, who is a fierce feminist and soccer player, I am just super excited to see that the US women’s team settled their lawsuit and got the equity and payments that they deserved. They’ll be receiving $24 million from the Soccer Federation. They’re going to be in the collective bargaining process with the male soccer players. As they deserve as the greatest soccer team this country has ever seen and the greatest soccer legacy this country has ever seen.
So just a shout out. And of course, Megan Rapinoe is a local and part of a superstar couple in Seattle. So just a shout out to the women’s soccer team for a huge win and a shout out to my daughter for seeing the result that she wanted. So Thank you for indulging me and doing something non-environmental this week. And Naeem and Susan, as always, wonderful to have you on. And to everybody listening, we will see you next week. Thanks.
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