In December 2022, the carbon credit platform Puro added a methodology for enhanced rock weathering (ERW) credits. This announcement opens the door for the ERW to be sold into the billion-dollar voluntary carbon marks.
ERW is one of the oldest known forms of carbon removal, long studied by geologists. But it is only recently that a growing number of startups are applying the science of this technique on a larger scale.
Other businesses are taking note. Microsoft is expanding its carbon removal portfolio to include ERW credits purchased from UNDO. They will pay the Scottish company to spread basaltic rock onto farmland, hoping to sequester 5000 tonnes of CO2 over the next few decades.
ERW can potentially deliver massive amounts of CDR if scaled up. Nearly every country has the necessary basaltic rock to spread on its farmland and it doesn’t require any new technological innovations. But an industry large enough to affect global temperatures will need to build lots of new infrastructure, supply chains, and rock crushers.
That’s going to take significant investment, along with MRV, that can grow with the industry.
Is all that possible? Today we’ll discuss this exciting technique's business dimensions with our business panel. Welcome, Susan Su and Na’im Merchant.
On This Episode
Na’im Merchant
Susan Su
Radhika Moolgavkar
Resources
Energy Monitor Article on ERW Business
Climeworks Expansion Announcement
Subscribe to Climate Workers Anonymous
My other show, Reversing Climate Change
Books referenced in the podcasts, at Bookshop
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: Welcome, everybody, to the April 28th episode of Carbon Removal Newsroom. This week, we’re going to be focusing on business with my two co-hosts, Susan Su, who is a partner focused on climate investing at Toa Capital and also serves as a board member at the Carbon Business Council and a board advisor to the Environmental Voter Project. Hello, Susan.
Susan Su: Hello. Hello.
Radhika Moolgavkar: And Na’im Merchant, who is the Executive Director of Carbon Removal Canada, a new climate initiative focused on advancing inclusive policies and innovations to segale up carbon removal in Canada. He is also an Elemental Accelerator Policy Fellow and runs the Carbon Curve podcast, a newsletter on the policies and technologies needed to grow the carbon removal market. Hi, Naeem. Welcome.
Na’im Merchant: Hi, everyone.
Radhika Moolgavkar: And as always, I’m Radek Moolgavkar, Head of Supply and Methodology at NORI. Today, we’re going to do a little bit of a dive into enhanced rock weathering because it’s become a new darling in the carbon removal world. In December of 2022, the carbon removal platform, Puro, added a new methodology for enhanced rock weathering. This announcement opens the door for the ERW to finally be sold into the billion-dollar voluntary carbon markets. Enhanced rock weathering is one of the oldest known forms of carbon removal, long studied by geologists, but it is only recently that a growing number of startups are applying this known science of this technique on a larger scale.
Other businesses are taking note. Microsoft is expanding its carbon removal portfolio to include these types of credits purchased from a company called Undo. They will pay the Scottish company to spread basaltic rock onto farmland with the hope of sequestering 5,000 tonnes of carbon dioxide over the next few decades. Enhanced rock weathering has the potential to deliver massive amounts of CDER if scaled up, even without creating new mines. Nearly every country has the necessary basaltic rock to spread on farmland and it doesn’t require any technological innovations. But an industry large enough to affect global temperatures will need to build lots of new infrastructure supply chains and rock crushers.
So there’s always investment along with the fact that the MRV for this is still a little bit unknown. So let’s talk about the business of ERW or enhanced rock weathering. And I’m going to kick it off with Susan. How much interest, if any, has the climate tech investment community taken so far into enhanced rock weathering?
Susan Su: Yeah, I think that’s a great question. And there’s been a bit of interest over the years. There’s everybody probably has heard of Project Vesta, which has a number of investors on board. There’s Lithose, which I believe lower carbon was part of their last round. Undo, I believe, has Venture investors as well. So it’s part of the suite of carbon removal companies out there, the carbon removal technologies, I should say, some of which is getting investor attention, some companies are not. I think a lot of it kind of comes down to the specific company and probably the details of the team.
But I would say it’s maybe been a little bit more in the background Then maybe like in 2020 to 2021, there was a whole cohort of sort of interesting direct air capture flavored technologies that was capturing investor interest. And now we’re starting to see a little bit more on the ocean carbon capture front, which we’re going to talk a little bit more about later. But I think EWR is, yeah, it’s been a little bit in the background, but it’s always been there. And it’ll probably start to pick up pace.
Radhika Moolgavkar: So Naeem, a recent Energy Monitor article about this company, Undo, found that there are 10 to 15 ERW startups globally right now. When you think about the challenges these companies face, what do you think are the biggest ones? I mean, they obviously are startups, they have technology to develop, they have to fund their operations. So how do you think about their challenges in comparison to the rest of the CDR universe?
Na’im Merchant: Yeah, I mean, outside of the kind of normal risks that are associated with a new company and a new technology, these enhanced rock weathering companies are going to need to be able to explain clearly to potential buyers how their process really works. There are many stages to the process of enhanced rock weathering, and I think it’s important that companies find a way to explain in clear and understandable terms to potential buyers, like, how does this work and how does this actually remove carbon dioxide from the atmosphere? And I think that’s going to be important in order to attract buyers that are going to look at this and think, wow, this is a really, really early stage technology.
And do we want to take the risk? And so that kind of brings me to a point you raised earlier, Radhika, which is they’re going to need to figure out challenges around measurement reporting and verification, because I still think that there’s a lot of work to be done around developing what You know, using a framework that Carbon 180 actually kind of put out some time ago, high accountability carbon removal. That’s going to be, I think, a really important step for these companies to take is to find out how they can move up each of the stages of that framework because it is still very new and there are some of the unknowns that still exist around MRV.
And that’s going to be, I think, a big challenge in order for companies to attract the level of investment and sustain corporate interest from potential corporate buyers longer term.
Radhika Moolgavkar: Yeah, I was watching a webinar this morning with Zeke and Freya on Open Air, and they were talking about their MRV, the readiness. And I think that ERW kind of comes... In the lower to mid area for confidence in both their uncertainties and their technological like MRV capabilities. But that didn’t stop Microsoft from buying and I don’t think it stopped Frontier and others from considering and buying from these technologies. So Susan, what did you make of Microsoft’s purchase from Undo and do you think this is the opening or beginning of a signal to other buyers?
Susan Su: I believe Microsoft works with Carbon Direct on as kind of the scientific or as at least an adjunct to their probably own in-house team on the science evaluation side. So I would presume that any purchases that make headlines like the one from Undo have gone through at least a couple of filters on the rigor and evaluation side. So I think that’s really positive. I think Microsoft is a company that a lot of others look towards, probably even more so than a private company like Stripe or a company like Shopify. Microsoft is really kind of a gold standard that gives others permission to explore a technology.
Now, even if they’re wrong, they, I think, have a credible Line of reasoning, which is it’s really important to push the envelope on experimentation and it’s really important to try new things, even if we aren’t 100% sure. And I think people give them a lot of probably some credit for that. So that plus the fact that their presence and their brand gives others permission to participate in the market. In the EWR market will be very positive for that subcategory. However, I’ll say that maybe this is a little bit of a bigger picture question, but it’s one thing to evaluate the science behind a particular technology, which is critical to do and to be able to measure it in the short to medium term.
And it’s another thing, and I don’t know that it is a scientist’s job, To think about the second and third order effects of a technology should it become very, very successful. So I’ll just cite something from the mobility industry, which I think is a well understood stat. But back in the day, if you all remember many years ago when the first hybrid came on the market, everybody thought this is going to be great. It’s going to save so much gasoline from being used because hybrids get way more mileage. And people won’t have to use as much gas to get around.
But according to Jevin’s paradox, which is a paradox that says that the more efficient things get, the more we use them, it actually resulted in even more gasoline being used because, wow, people realized they could get so much further on the same amount of resources and therefore ended up driving further, which gets really embedded in the culture We won’t go down all the way down that road, but I think that’s a good illustration of how If you evaluate something kind of the first rung out in terms of its impacts, it may work or not work.
There’s sort of a binary there. But we really have to think about what is the longer term ripple effect? Should something be very successful? We spend so much time, and I think scientists in particular spend so much time thinking about if something does not work and why it would not work. And really trying to, coming from an academic background, trying to do a healthy, strong critique of something that’s emerging. But as an investor, my thought process is both that on the risk side, but also on the upside. Where I asked myself, what happens if this becomes wildly successful beyond our craziest imagination?
Is that a world that we want to live in? Is that creating the impact that we ultimately are, you know, was our originating force? And I think that’s a really important question to answer. So, sorry, this is a little bit philosophical on your, does Microsoft signal to the market? I think absolutely, yes, it does, but it’s a little bit of a double-edged sword and I, I have my fingers crossed and hope and pray that somebody at Microsoft is thinking about these bigger questions in addition to simply does the science work and can we measure it, which I think those are solvable.
Radhika Moolgavkar: Yeah, I think it’s also a science question, right? Because if you are wildly successful and you lay out all of this basalt rock, we don’t actually know what the impacts will be to the ecosystem, right? Like it’s just like what they talk about in terms of growing kelp and all those, all of those things. If they’re wildly successful, also could have ecosystem impact. So I’m hoping the scientists and the business people are thinking about all that stuff because you don’t really hear it talked about, I think, much since it’s such a nascent industry, but it’s really important.
Speaking of success, though, Puro did launch an ERW methodology. So obviously they are banking on it becoming bigger. Naeem, what do you think of this milestone and the bigger demand for these types of credits? And do you think, I’m curious whether you think there’s any like geographic tendencies, like will this be more popular in the US? Will it be more accepted in Europe? Have you seen anything like that yet?
Na’im Merchant: Well, I think this is an encouraging milestone for Enhance rock weathering companies, and it will create new demand that might have been kind of sitting on the sidelines, so that is exciting. I think that corporate buyers might be able to feel some level of comfort around the creation of this protocol. I still think there’s a lot that we need to figure out around, you know, the measurement reporting and verification of ERW, these ecological risks that we don’t fully understand before it’s ready for kind of larger scale commercialization. So I think it’s great that this opens up the door to more demand.
I think that corporate buyers need to go in with their eyes wide open, that the creation of this protocol does not mean that enhanced rock weathering is a bulletproof, potentially faultless carbon removal method. It’s still very, very nascent. There’s still a lot we need to figure out. I think the companies that are working in this space have the intentions of You know, figuring out how to make this this this particular carbon removal method work that it is done safely and with a high degree of public acceptance. But, you know, I think that there’s still a lot more kind of research that needs to be done around this.
And so and so I think it’s I think it’s going to create more demand. I think that’s a good thing. But I think people should kind of go into this with eyes wide open. That doesn’t mean that this is That this is kind of a new kind of bulletproof carbon removal method. It’s still early, just because there’s a protocol doesn’t mean that there isn’t some potential kind of risk involved. And as long as you’re going in with that kind of understanding the way I think that groups like Microsoft and others are, where they’re like, yep, we understand that there’s potential risks.
This might not work exactly as we hope, but we know that we need to push the envelope on experimenting with new carbon removal methods in order to have a portfolio of carbon removal methods at our disposal. And so they’re doing this smart catalytic thing in terms of supporting it. That doesn’t mean that’s going to make sense for every corporate buyer to follow that lead.
Radhika Moolgavkar: Yeah, Susan, following on what Naeem just said, I am, and it’s a question that I think about a lot from my vantage at Nori also is, you know, who are the buyers out there? They seem very narrow that can take this kind of risk and take the reputational risk you kind of were talking about, like if this fails, right? If it doesn’t meet the carbon removal standards. And so when you are out there as both a finance person, but as just, you know, in the world of businesses, Who are the buyers that can take this kind of risk and have the resources that Microsoft have?
And then how do the smaller buyers like piggyback onto that and who can’t expand resources like Microsoft but still want to participate?
Susan Su: That’s a great question. I tend to think about it in kind of two, at least two buckets. Maybe I’ll come up with more, but here’s two to start. One is your experimental early adopter buyer. And the second is kind of more your bread and butter buyer. So by the way, another big story that came out, we’re not going to have time to cover it in detail this week, but Woodside Energy Group, which is an Australian petrochemical company, is going to have to pay a carbon bill of $42 billion by 2050 because of some In response to some recent regulation in Australia and because of their oil and gas fields, mostly their gas fields.
Okay, so that aside, that is your bread and butter buyer, your compliance buyer. There are mining companies out there. There are traditional extractive industries that have, whether it’s for regulatory compliance or whether it’s for some ESG checkboxes that they have to meet, they are... I don’t want to say they’re dragging their heels, but this is a really important regulatory checkbox for them. They not only are going to be subject to greater reputational risk because of who they already are, but also because they are not sticking their necks out and raising their hands as an experimental buyer.
They’re just trying to get it done and go home at the end of the day and go back to their core business. Whereas some of the software companies in particular, all the companies that participate in Frontier and the companies that are sort of like very vocal about carbon removal or have like big climate teams or have hired specialists that are climate experts as as part of their core teams, even though they have they’re not climate companies per se. Those companies have done. Some great PR work, first of all, because they thought way ahead and they already realized, wow, if we frame ourselves as early adopters, we can do a lot of stuff that gives them a lot of leeway to experiment, to make mistakes because early adopters make mistakes and to be forgiven for those mistakes.
Whereas your bread and butter buyers don’t have any of that legal room. And so I think that it’s going to be, you know, we’ll continue to see these headlines like Microsoft or Shopify or Stripe or whoever is like buying credits from yet another really experimental, whether that’s an individual company or a technology. I predict we will continue to see those for the next many years and that’s fine. But it is all about now, how does that move? From early adopter to your kind of like your massive middle and then even eventually to the laggards.
I’m not certain that all of those technologies are going to be able to do that, but I am certain that in order to do that, any of them in order to even have a shot at that, they have to have impeccable MRV. And not only does the MRB really have to pencil out in a precise way, but it has to be transparent. So just going back to the company we were talking about earlier, Undo, they’ve talked about some of the potential impacts of their technology. They’ve talked about, well, we’ve gotten measurement down to within 5% margin of error.
That’s all great. Now show me the math. So I think they have to be very public about that. And what’s challenging there is that for some of these companies, they may see that as their IP. And so it’s a tension between sharing enough to give buyers, especially the bulk of the buyers that have a $42 billion US fine That they’re staring at those kind of buyers, giving them the confidence, but also, you know, holding back enough that startups are notoriously paranoid about who’s looking over their, you know, looking over their shoulder, trying to copy the work probably more, more than is necessary.
Or maybe sometimes it’s warranted. I shouldn’t say that, but there’s going to be a tension to balance that because I think transparency is the only thing that is going to make this wheel turn and Transparency isn’t always in the best interest of private companies trying to scale.
Radhika Moolgavkar: Yeah, something Freya said, again, quoting from this morning, is like, she hopes the startups win on the logistics and the business pieces of it, but are transparent enough that their academic work, which is what I would call MRV, Translates to the broader market. But I agree with you, Susan. I think you’re definitely seeing a lot of these companies building it into their IP because it’s a valuable thing, as you just pointed out. So before we leave ERW, I have one last question for you, Naeem. So as we were talking about, there’s what, like 15-ish or so ERW startups.
Essentially, they’re doing the same thing, right? They’re spreading rock on soil to capture carbon. So When you talk to them, if you’ve been talking to them, what are their unique pitches and how do they differentiate themselves, do you think, in the marketplace?
Na’im Merchant: Well, I think that the companies that are going to be able to stand apart from the pack are going to be ones that can demonstrate that they are taking advantage The MRV component of their work seriously and that they are, you know, taking into consideration potential risks that might exist as well as as how they’re dealing with the potential uncertainty associated with actual carbon removal of their specific projects. And at the same time, I think there’s going to be groups that are going to, you know, differentiate themselves based on their scalability.
If you’re looking for long duration carbon removal right now, and you’re looking at direct air capture projects, you’re pre-purchasing supply that’s going to take a long time to come online. And I think for enhanced rock weathering companies, they’re going to be able to make the case that we can bring supply on a lot faster than direct air capture. Now, in terms of how long the actual carbon removal process takes is a different story, but they can kind of Demonstrate a level of shovel readiness that other long duration carbon removal methods might not be quite there because they’re more capital intensive.
And so I think that there’s going to be a few ways that they can kind of make a unique pitch to buyers. I think it’s going to ultimately they’ll come down to how well have they thought through the measurement reporting and verification and then how compelling of a case can they make around available supply. And I think that’s how they’re gonna differentiate themselves.
Radhika Moolgavkar: All right, well, let’s just move on to some broader CDR news for the last part of our show. So let again, we will talk about forestry. South Pole, as I think most listeners of this podcast know, is one of the oldest seller of various types of carbon credits. Investigation found it was greatly over-crediting a forestry program in Zimbabwe, their largest project. So what does this mean for forestry-based carbon markets? I’m curious to hear from both of you, because I know you have had slightly different perspectives in the past about what this could mean.
So Susan, I’ll start with you, and then Naeem, please.
Susan Su: I think this is just, in many ways, people It’s unsurprising and it also, I don’t know if you guys found this, but it wasn’t even, it was like buried. This news was buried on page 20 type of thing. Like I had to dig and dig and then I found it eventually in, I don’t know, the Japan Times or something that was not even a US-based publication. And I think that it’s to the point where the expose has lost a little bit of its heat. And I think also, These companies will be forgiven.
I think it’s okay. I think it points to the fact that we are starting to become more sophisticated as an industry. And we are looking at, you know, kind of the mistakes of our fathers, so to speak, and that there’s really Becoming a more stark divide between first generation and next generation carbon removal. And that’s not even necessarily between nature-based and technology-based. That’s really sort of like a timeline distinction. And I think that forestry-based carbon removal will be okay. I think it’ll survive this. And I think there is a really good opportunity actually to say, hey, look, this is a great chance for us to have the conversation about what’s changed.
And I think that people, whether that’s in our industry or the broader public are getting more nuanced. I can’t remember where I saw this, but I was reading something about this and it was an interview and the person being interviewed, the founder was like, oh, we’ll force you, you know, and we’ll just keep getting better at it. And this happened, but we’ll retire those credits. And it wasn’t even a forestry founder, but it was almost sort of like this understood thing that there are There’s a large bank of legacy credits out there.
We know they’re all probably bad. They’re just going to keep surfacing kind of like some toxins underneath that just need to keep, they just need to like burn themselves off, but it’ll eventually burn off and then we get to restart. And there was a very clear understanding, at least in this interview, that, well, you know, forestry is really great for, has a lot of other ecosystem benefits and we need to start valuing it for some of those benefits as well and Overall, to me, it indicated that our sophistication has come so far in the last even just two, three years.
And I think we’ll probably have a couple more of these like, oh, this was another ghost credits thing. And then eventually they will taper off and we’ll be kind of on a new, on a fresh foot. But what do you think, Naeem?
Na’im Merchant: I agree with you that these exposés are kind of a good forcing function for pushing the industry to think about these problems and take them on and try to invest in the tools and technologies to improve how we do kind of forestry projects. But I also think it’s really important we don’t lose sight of the other side of the equation, which is these forestry-based carbon offsets were purchased To compensate for very real emissions that happened. So it’s not just like, you know, some philanthropic money went towards a project and it didn’t really work out and that’s too bad it didn’t work out.
It’s that the idea was that a company decided to continue polluting and bought these credits as a way to offset that. And so for me, I think the problem with this isn’t that This, these projects are imperfect or they, you know, there’s some of the, you know, outcomes are a little exaggerated. That in a vacuum is not the end of the world. The problem is, is that companies are making decisions about their carbon emissions based on this idea that these projects actually work. And so in fact, things like this actually make the overall problem of carbon pollution even worse.
And so we need to, I think this is a black eye for carbon removal. I think that there’s a lot of like that massive middle of corporate buyers looking at stuff like this. And I think that more high integrity, high accountability carbon removal methods get hurt by this because I don’t think that people really grasp the nuances as well. And so I overall, I mean, you’re right, compared to some of the other investigations that have been done, this one was pretty kind of buried, relatively speaking. But this is just not a good look.
And we have to remember that these are projects that are funded by actual decisions to continue polluting. And so that means that we have to get this right. And I think we just need to get to a place where, and this is idealistic, I get it, but we need to get to a place where we are not using forestry-based projects to compensate for fossil emissions. I think there are so many good reasons to support a lot of these projects, and a lot of these projects are not going to be perfect, but they are good on balance, but when we are Paying for them to compensate for real emissions and they don’t work, that’s a real problem.
And I don’t think we’re anywhere near where we need to be to start thinking about forestry based projects as a realistic offset for real fossil carbon emissions.
Susan Su: Well, it’s a conversation for a different day. I don’t think we’re going to have time today, but I don’t think forestry based offsets are going to go away ever. Ever. You can quote me on that. I will have that on my gravestone. I do think it’s very idealistic. And I also think that the forestry based offsets are okay. There are a lot of things that we’ve been learning. And just because we’ve made a bunch of mistakes doesn’t mean that we can’t address those mistakes. But I also happen to know that for buyers, it’s just We actually, it would be great to talk about this in a different episode, but all the co-benefits and also the way that it’s getting utilized at the corporate level, the kind of storytelling, the visuals, everything that you get from something that is in the rainforest, for example, versus some unrelatable DAC machine or DAC hub.
There’s a whole tangle of stuff around it that I think is going to keep us Here, which Naeem is right about this. That means that we actually just need to do a much better job and need to concentrate more. But yeah, I’m surprised. And I think we’ve almost become like numb to these types of news, which actually is probably a bad thing overall, because we should be paying attention so that it can drive improvements in MRV and crediting for this particular subset.
Radhika Moolgavkar: Or how the crediting is used, which is something Naeem and I have talked about offline. Forestry may exist, but maybe forestry should exist in a very narrow use case, right? Because there are a host of co-benefits, but it’s not.
Na’im Merchant: I’ll also chime in, though. I think we need to be careful about those co-benefit claims as well. Anyone making a co-benefit claim, I mean, Some of the co-benefits that are associated with these force projects, how do we actually attribute success? How do we measure that? I mean, there are whole industries designed around measuring the primary benefits, let alone co-benefits of different social and environmental projects. If we’re having a hard time making a case about the carbon benefits of these projects, then let’s be careful about the co-benefit claims that are made as well.
And I agree, Radhika. I think that there’s a place for these projects. My idealistic view is that it’s not in a world where we are compensating for fossil carbon emissions with supporting forestry projects. There are other things that we can think about, other ways that we can approach this problem where Then we’re not reducing the many benefits that forestry projects can bring down to their carbon benefit, which is difficult to measure, and we continuously see problems in this space.
Radhika Moolgavkar: Yes, so this is definitely obviously a topic for another day, but I do want to move on to a couple other pieces of news. Susan, Climeworks announced last week that it’s expanding in the U. S. and will be adding over 100 jobs With thousands more hoped for by 2030, like this seems like a politician’s dream, right? Like we’re bringing investment and money. But what did you make of this ambitious announcement?
Susan Su: I think it’s a huge deal. And it of course makes sense. The US is the biggest market in the world. Any company, especially that’s doing something in a cutting edge market like our removal absolutely needs to be looking at the US. The policy and kind of regulatory environment, the timing is right. And so I am not, it’s sort of like I could have predicted this without a crystal ball. Will be really interesting to see actually though, because I believe they said California, Louisiana, wait, was it Louisiana was one of the states?
Oh, Louisiana, California and the Northern Great Plains. Okay, so that’s across a number of different states. I think what we really need to think about is what does the energy, what does the grid mix look like in each of those locations? California is about half produced by non-fossil sources. Louisiana is not good. We’re like talking sub 20%, 10% to 20% from non-fossil sources. Sources, the northern Great Plains. It depends on what state you’re talking about. South Dakota is pretty good. North Dakota is really not good. Nebraska is not good. And by good, I mean producing clean energy.
And so we just want to make sure that we’re not actually having a net negative impact on the climate equation because, as everybody knows, DAC is energy intensive. And while it’s very important to invest in these early DAC facilities, even if they may not be a net positive in the short run, maybe in the long run they can be, but I still think we have to, kind of similar to what we were saying about forestry, we have to really take into consideration all of the impacts, and especially if this is going to be enabling It’s counterpart in pollution, but then also it’s not actually a net positive on carbon drawdown because of the way the grid works in the particular place where it’s located.
So there’s just a lot of factors to consider, but I’m not inside Climeworks. They seem like a fabulous company run by great leadership. I’m sure they’ve been thinking about these things and they have a plan for it. And so I’ll just be excited to see what that plan yields beyond these first three Regions that they’re starting off with.
Radhika Moolgavkar: Yeah, maybe it’ll be a way to drive changes to the clean energy grid to win their business, you know, much like union investing happens in the South with the auto industry. Final question for you, Naeem, is Eb Carbon just announced a new funding round of $20 million, which is the biggest ever for an Ocean CDR company. What do you think? Think of this news, I’m sure Susan also has thoughts, so I’ll let her jump in, given the investment conditions around the world.
Na’im Merchant: Yeah, I agree. I think Susan would have a way better perspective on this than I would. I mean, it signals to me that there’s maybe more resilience from funders around climate tech investments than maybe other areas, or that there was kind of a built-in understanding that investing in climate tech Uh, is going to be, uh, is a long game. And so we’ll, we’ll need to find a way to weather these, these ups and downs, but that is a big funding round in a really difficult investment climate. So it’s impressive. Uh, and it suggests to me that there is a little more, um, resilience around, um, investment in, in, in, in clean tech than, um, than maybe other sectors.
And that’s what made this possible. But I think we have an actual expert on how venture funding is faring in this climate as it relates to clean tech. So Susan, do you have anything to add?
Susan Su: The only thing I would point out is the power of mafias. In investing. This company has a founding team that comes from Tesla, Google X, SolarCity, which is fantastic. And I think it’s so exciting when people that have great operator or founder, previous founder experience are getting into climate, but that just makes investors just mouths and eyes start watering. And so that’s You know, probably part of it. I think also I’m pretty surprised because ocean-based carbon removal using alkalization is not very, you know, it’s kind of been emerging and I think it’s gotten a lot of skepticism from investors because of some of the regulatory second-order effects and various just like implementation hurdles that it faces.
But it has really smart investors on its cap table. I’m sure they’ve thought about those things. They are weighing risk and upside. I think part of that upside is probably also reputational upside because here’s the reality. Some investors will invest in companies because even if you don’t think that company is going to entirely, you’re not 100%, you might think this is a great team. For me to build a relationship with, and while $20 million might seem like a lot, if it’s spread out across enough smaller checks, $500K or $1 million, or depending on the fund size, even a little bit more than that, may not be too high a price to pay in order to build a relationship.
I’m not saying that’s what’s going on here, but those are some of the factors to consider. Whenever you see funding news, it does not It’s not the end-all be-all. In fact, it is really just the commencement of something, and there’s always more under the surface. So don’t take Funny News 2 too much by its headline, but it’s very interesting nonetheless.
Radhika Moolgavkar: All right. Well, we will end with good news, which I think, Susan, this is yours because you alluded to it earlier about Australia and Woodside. Did Asa put that in?
Susan Su: I don’t even know. I think our producer Asa actually put this in, but we were probably just reading each other’s minds as often happens. And yeah, I think this is really good news because I think Asa was pointing this out earlier, but it’ll create an incentive for the company to actually focus on decarbonization. Nobody wants to pay those fines, even if maybe it’s small compared to, and this is not a small one, $42 billion US, it’s quite a lot. But even if it were small, it’s still just annoying and painful.
And it’s not something that investors in the company like to see. And I would hope, kind of tying this all to everything we’ve been talking about today, I would hope that not only, despite this being the carbon removal newsroom, not only would it drive carbon removal forward, but really just emissions mitigation. These companies need to stop doing what they’re doing that’s creating so many emissions in the first place before we start really stretching our imaginations on carbon removal. And I say that as a proponent, a proponent, a strong proponent of carbon removal, but we absolutely need to be reducing emissions as step zero.
And so I think fines like this are really great for that because They quantify the cost of doing business as it is, which is always good because then you can quantify the cost of doing carbon removal and you can say, well, it’s not going to cost us $42 billion to do carbon removal. Maybe that starts to make more sense. But also it puts a number on, well, what if we change? Now, if you’re Woodside, it’s hard to change your entire business, but there are probably some things you can change. What if we change this or what if we change that requires capital outlay?
Well, maybe- Now it makes that a little bit more sensible because it has sort of a spreadsheet around it. So I think that’s the silver lining. And I think overall it’ll be a very positive thing. And I hope that there are more of these because it really needs to be one in a line of dominoes.
Radhika Moolgavkar: I would also add, even though this is the business episode, this is an interesting take on how regulation Which is lacking in the US is going to drive changes in the private marketplace. And so if you want to get to net zero or no reducing emissions, you’ve got to figure out the incentives and the carrots and sticks to make that happen. So with that, I will thank Naeem and Susan for joining me this week. As always, a really interesting conversation. We got to get back to forestry again, I think at some point, but we seem to touch it every few months.
So I’m sure it’ll come back. And to all our listeners, thanks. And we will talk to you next week.
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