This week's panelists are Nori's Director of Corporate Development Alexsandra Guerra, Director of Carbon Economics Aldyen Donnelly, and Carbon180's Chief Scientist Dr. Jane Zelikova.
Here are the articles we discussed:
"Rising sea levels could wipe out mangroves by 2050" by Justine Calma in The Verge
"The Energy 202: Two GOP senators join with Democrats to back bill to help cut emissions from farms" by Dino Grandoni in The Washington Post
"Inside Microsoft's Mission to Go Carbon Negative" by Dina Bass in Bloomberg Green
"Swiss Re Sees Opportunities for Insurers in Carbon-Capture Push" by Alastair Marsh & Marion Halftermeyer in Bloomberg Green
Full Transcript
Ross Kenyon: Brief note before the show starts. There’s a sinking problem. It sounds like people are being very rude and speaking over one another, but I assure you it’s just the playback. I wish I could fix it. I cannot. I hope you can live with it. I think the content is still good. The part that kills me is there was a really good joke that I had to cut and that will haunt me. But I think the show is good enough to keep. I hope you enjoy it and will tolerate this brief technical difficulty that we will solve for future episodes.
And thank you for listening. Hello and welcome to Carbon Removal Newsroom. I’m Ross Kenyon. I’m lead strategist with the Nori Carbon Removal Marketplace. Today I have with me two Nori knots and one carbon 180-er. I don’t know. Do you have a demonym, Jane?
Jane Zelikova: Oh man, that’s really good. I don’t. Carbon 180-um sounds terrible. Let’s not say that again. All right.
Ross Kenyon: Sorry for that. That’s Dr. Jane Zelikova, Chief Scientist at Carbon 180. Hey, Jane.
Jane Zelikova: Hi.
Ross Kenyon: Hi. Getting some crinkly sounds coming through. I’m not sure who that might be.
Jane Zelikova: Are they done? Not me.
Ross Kenyon: They’re done.
Jane Zelikova: Okay.
Ross Kenyon: Is that a bag of chips here?
Jane Zelikova: That was me walking inside because I realized that being outside might be too noisy.
Ross Kenyon: Yeah. The cable jostling does it. But okay, cool. I’ll just keep going. And we have with us again, Alexsandra Guerra, Director of Corporate Development at Nori.
Unknown speaker: Yeah.
Ross Kenyon: Hey, Alexsandra.
Alexsandra Guerra: Hello. I feel like I mess this up every time. Like, I don’t know what you want me to do when you introduce me, bro.
Ross Kenyon: We’re going to keep hitting the flow. We’re going to figure out how to do this because, yeah, it’s a new format and fully remote. So that’s a bit. We’ll get it. And then also Aldyen Donnelly, Director of Carbon Economics at Nori. Hey, Aldyen.
Aldyen Donnelly: Hi, happy to be here.
Ross Kenyon: Yeah, happy to have you back. Well... Bunch of different things going on in the world of carbon removal we wanted to talk about today. I saw an article called Rising Sea Levels Could Wipe Out Mangroves by 2050 by Justine Kalma in The Verge. So we want to talk about mangroves. Saw another one in Bloomberg Green by Dina Bass called Inside Microsoft’s Mission to Go Carbon Negative. There’s another one we saw about, I don’t even know if this is the article to do it. What’s the bill called exactly, James?
Jane Zelikova: Oh, it’s the Growing Climate Solutions Act of 2020. It was a bill that was introduced, I think, last week or the week before. Honestly, what is time anyway at this point? But it was introduced by Senators Braun Stabenbao Great House.
Ross Kenyon: Great. Yeah, I didn’t have that written in front of me, but definitely want to talk about the Growing Climate Solutions Act. And then last of all, there was an article I saw in Bloomberg Green as well about Swiss Re, Seize opportunities for insurers and carbon capture push. So wanted to talk about insurance and reinsurance and how that interacts with carbon removal, et cetera. But starting at the top, I know people have strong feelings about this. I had a conversation recently with someone who feels very strongly that as ecosystems continue to degrade, their ability to store carbon will be impeded.
They will become more fragile. In fact, he thinks we should give up on natural solutions and bet big on industrial ones. This will be a fight I imagine will be more and more present inside carbon removal and climate change spaces. And everyone here wants to argue about it. So why don’t you all dig into that?
Alexsandra Guerra: Okay, I’m going to go first. I think that’s a little bit dangerous when we start talking about like, where should we, you know, go all in and ignore other solutions because it has to be a portfolio approach. I just think it’s super dangerous to say, okay, well, only industrial scale is going to get us there. Yeah, it’s important. It can help us get to the scale that we need to really make a huge impact on reversing our carbon emissions. But there’s a lot of land degradation that’s happened as well. And I think that, um, It would behoove us to be a little less reductionist in terms of there’s one or the other.
Jane Zelikova: I agree with you wholeheartedly, Alexsandra. It’s incredibly short sighted and ignorant of the climate math, I would say, not to get too strong a word here, but every carbon molecule that we remove from the air today is it’s sort of like it pays us dividends in the future because it’s less carbon removal we have to do later. The industrial solutions are absolutely necessary. I guess I don’t call them industrial. I call them more engineered solutions that remove carbon from the atmosphere are necessary. And we need a full portfolio of those to be ready to go as quickly as possible.
But in the meantime, we have trees and soils that are already doing this. And yes, landscapes might be becoming more degraded with climate change. But at the same time, if we can focus on harnessing the power of plants And soils, and if we can focus on restoring and maintaining ecosystem function, we not only get the carbon removal and carbon storage benefits, but we get lots of other ecosystem benefits, including potentially staving off some of the major species extinctions and other issues that are coming down the line with climate change.
Alexsandra Guerra: So plus one to that. And there’s also community impacts too, and resiliencies against rising, Rising sea level. So this one’s kind of ironic when it comes to the article that you shared and that we’re talking about here saying, you know, if the rising sea level rate is above six millimeters per year, then we can lose all of our mangroves by, let’s say, as early as 2050. But what’s so ironic about this is the mangrove forest can sequester CO2, provide protection and an ecosystem to wildlife, as you said, Jane, but also Act as a resiliency against rising sea levels on coastal land.
So stopping erosion.
Aldyen Donnelly: I want to double underline a word you said, Alexsandra, which is resilience. Again, from my perspective, it’s got to be all of the above. And to tell you the truth, I’m really not sure where this either or argument is coming from. But investments in natural solutions are investments that do two things coincidentally, which is tend to, if we pick the right ones, make our natural systems more resilient in the event of warming, while coincidentally mitigating the risk of warming. Whereas the engineered solutions are not necessarily delivering the former benefits. So I do think we’ve got a big challenge and the engineered solutions have got to be part of the strategy.
And we hope to have methodologies to issue NRTs to engineered solutions in the Nori marketplace. But to abandon natural system solutions makes absolutely no sense as far as I can see. And they’re less expensive, at least for now in the foreseeable future. I wanted to go on mangroves and point out, you know, there’s something that had never occurred to me before. And I thought, well, this is really interesting because what does this mean? In the middle of the article, it said sea levels have been rising for decades, at least where mangroves are being affected.
But until about 20 years ago, what you saw was the mangroves, the mangrove trees moving inland. So the mangrove areas were surviving by shifting in as sea levels were rising. The reason they can’t shift in anymore is because urban development is blocking them. And I’d never heard that before. And I’m thinking, that’s really interesting. What does that mean? What do we do about that? What do we think about that? And it was a first for me to start thinking down that path.
Alexsandra Guerra: You force people to sell their houses so that the mangroves can start growing.
Jane Zelikova: Or change building codes and change the way that buildings are put into coastal systems so that mangroves can still grow there as well.
Alexsandra Guerra: I was being facetious for the record. I was not serious.
Aldyen Donnelly: That challenge is fundamentally different and more complicated than I really kind of understood it to me before I read that. Yeah.
Ross Kenyon: Okay, wait. Sorry, Aldyen, say that last sentence. Again, there’s some serious crinkling going on.
Aldyen Donnelly: I’m just saying I found it interesting. That article made me realize that whole challenge of retaining or recovering mangrove systems is way more complicated than I understood it to be before. So I’m glad the article was sent my way.
Ross Kenyon: I feel like I need to defend this person’s point of view because y’all came down him. No way, man.
Jane Zelikova: Pile on with us. It’s better if you pile on. Just because someone has an opinion doesn’t mean it needs to be defended. You don’t get a right to have a bad opinion.
Ross Kenyon: Oh, man. I’m going to do my best John Stossel impression here. Aren’t you just a bunch of soil people? Like, aren’t you a little biased?
Jane Zelikova: I mean, I’m an ecologist. So the idea that we’re going to leave ecosystems behind and just focus on industrial solutions makes no sense for lots of reasons, including the fact that I care about ecosystems and ecology, but also where like industrial solutions are great. But then we get into a lot of issues of like equity and justice and where these solutions are being deployed. And like what kind of harms they cause even as they’re mitigating climate change, which is a whole other conversation that needs to be had. And I get the sense that this person from air miners hasn’t thought about that.
Aldyen Donnelly: I’m coming at you from a viewer economist perspective. I can guarantee you that hundreds of thousands of acres of cropland and grassland Would almost immediately start to adopt regenerative practices if they had certainty of a $35 to $50 a tonne revenue stream for the carbon they draw down and have the capacity to store in their soils and root systems starting today. And some of the engineering solutions promoters, not all of them, are saying, no, no, no, no, no, no, no, no. Don’t make your soil system more resilient in the event of warming and store all that carbon for $35 to $50 a tonne because we need 300.
Jane Zelikova: So it’s like a financial argument that any money that is going towards nature-based carbon removal solutions is necessarily withdrawing money from what would be going to industrial solutions? Like that’s the argument? Which are more expensive. Right.
Ross Kenyon: OK, so like the best case interpretation of this argument is that if you’re going to invest in mangroves right now and they’re probably going to be gone just from the world warming by 2050, is that money not just evaporating? Are not those efforts just going into nothingness rather than something that is more industrial?
Unknown speaker: No.
Ross Kenyon: You think there is a chance to reverse it?
Unknown speaker: Yeah. By 2050.
Alexsandra Guerra: Yeah. OK, so first of all, the article said the study that it was citing said earliest 2050. And that’s like saying, you know, if it was faster than six millimeters, and right now it’s like three millimeters of rising per year. So like, you know, I think it was a little bit exaggerated in terms of how soon this might be. And so there is plenty of time to continue to invest money into carbon sequestration with mangroves. There’s so many co-benefits, as Jane so aptly put. And you have to think about like the ecosystem and economic impacts, like The fishing economy here in South Florida.
So I’m in Miami, Florida. I walk by mangroves literally every day. I can probably look outside my window and see one. And it has drastically changed the types of fish that people can catch. And there’s like these whole downstream effects that we have to think of the bigger picture. And it’s not just carbon. And even if it was just about carbon, Mangroves themselves can sequester anywhere from 50 tonnes to 222 tonnes per acre, which with Nori, I mean, we’re working with Regen Ag and that’s like half a tonne to 1.
5 tonnes per acre. So as much as I love our farmers and I continue to work at Nori and love the things that we do, like that is a huge difference from 50 to 200 to half a tonne.
Unknown speaker: Could I? Could I?
Alexsandra Guerra: I’m done. I’m gonna get off.
Aldyen Donnelly: Can I say, I kind of read it from a different perspective. Again, I really appreciate that the article has started me down a path of thinking about what the mangrove recovery plan needs to be that I hadn’t been thinking about before. And it’s valuable to come up with a solution. Alexsandra just told you why. The other side of me said, interesting that he chose mangroves as the natural system A comparison to make in the pro-engineering solution argument, because while we’re figuring out how to recover the mangroves, there are so many other solutions, even at a tonne an acre.
That are effective, have huge co-benefits and a lot less costly than the engineering solutions. So I guess I’m really glad to know more now about the mangrove situation because of the article, but he didn’t pick the right comparison for a valid argument.
Ross Kenyon: Okay, I’m preparing for an angry email.
Jane Zelikova: Well, I mean, did he, I mean, I’m assuming it’s a he, did he actually point out mangroves as an example of why we should just Chuck the efforts to restore ecosystems out the window and focus on building giant air-sucking machines.
Ross Kenyon: Mangroves were included. I think croplands were too. I saw a couple articles that he had sent. We had a friendly conversation. It wasn’t something malicious. I think it’s a fair point to discuss, but also fair to push back quite strongly too.
Alexsandra Guerra: I’m glad you bring it up. And I just wanted to say, like, we’re not picking on this one person, like you’re using them as an example for an argument or this is this is definitely an archetype.
Jane Zelikova: And it’s like one that I come across all the time. There seems to be this tension between engineered and nature based carbon removal solutions. It’s a tension that we come across at Carbon 180 all the time, we work on the full portfolio, and we focus on both. But there seems to be this like, Zero sum game or the assumption that just because you’re focusing on one means that necessarily you’re like don’t care about or dismiss the potential of the other one. And people don’t know. I think it’s like it’s not rational.
It’s not rational. But I mean, I have some some ideas. One, I think, is that some people inherently have more of a comfort with tech solutions, understand better what it means to put A carbon capture unit on top of a smokestack. Like that’s an understandable engineering solution. And I can like sort of understand how the systems work and just have an inherent comfort with technology. Other people have a more inherent comfort with like Nature-based solutions like forests and agriculture and grasslands and wetlands and mangrove forests. And so like there is inherent bias that then clouds people’s ability to think about the portfolio.
It’s in part because they don’t fully understand the solutions that are in the space they don’t work in. So I see a lot of folks that are coming out of the Bay Area and more of tech and venture capital space inherently just being more comfortable with tech solutions because that’s a space they’re already working in. And to be very honest, the land sector is very complicated. There are a lot of long histories of how these things have played out in the past, including how farmers and ranchers have interacted with carbon markets in the past and climate in the past.
There’s been a lot of like sort of complicated issues around managing forests and some of the abuses that go along with carbon offsetting markets and forests. So I think it’s a more tricky, very like human messy system to think about the land sector. It doesn’t lend itself so easily to very clean solutions and people have less of a comfort with that. That’s my assumption.
Ross Kenyon: I think that maps pretty neatly with what I’ve seen too. I think people like Splitting up into teams and fighting. That’s one of the things we like the most, as I’m fond of saying. So there’s a tendency towards that, but I’m an all of the above person. I think everyone else is here too. It’s got to be all of the above.
Jane Zelikova: Yeah, it’s definitely that.
Alexsandra Guerra: Totally. I have one more thing I wanted to bring up, which is like, this is probably a conversation we’ll have multiple times throughout the season of Carbon Removal Newsroom or just like as the space grows. But like, you know, we brought up Stripe now probably three CRNs in a row. But this is the same thing that we’re seeing with Stripe’s decision. Initially, they said they were going to invest in all types of carbon removal. And then they went all in into industrial. They wanted to see, and the reason for that was they wanted to see over a thousand years of permanence.
And so it’s just something to keep in mind where it’s like, that’s okay if that’s what you want to do. And it makes sense for Stripe because they really wanted to invest in Investing in technologies that would scale carbon removal to larger numbers that we need to see to have bigger impacts makes complete sense. Just so long as the world does not take that as a signal that the other solutions.
Jane Zelikova: Yeah, I literally just had that conversation with Ryan from Stripe last night. Because I was one of the subject matter expert reviewers of the applications that were submitted. And I mostly reviewed the applications that were submitted on the nature-based solution side. And I think part of it is in the process of creating the application and the program, some of those like biases that I mentioned and general tendencies to lean towards more technology solutions came through in how the program was set up. And as much as we tried to like sort of correct for that or point out where those issues were coming up, including the issue of a thousand years of permanence, It’s just something that happened and I think it’s indicative of like kind of where the striped folks are at and what they generally have more of a comfort with.
But it’s also part of their strategy to invest and be the first buyer for things that are really like need a lot of help and aren’t proven yet. And we know that trees have been photosynthesizing for millions of years and we know that soils have been storing carbon for millions of years. The solution space, the space in which we can make a difference for nature-based solutions, it’s different. And it doesn’t sort of lend itself to that first buyer investment that Stripe wanted to make.
Aldyen Donnelly: I think it’s, I’m feeling baited here. And so my recommendation to all of us, but myself in particular, is I’d love us to have another conversation just that’s nothing about, it’s all about permanence because The concept of a thousand years of permanence is very, very, very hypothetical. And I have concerns about people thinking that CO2 could be injected into what is in fact a natural geological system in gaseous or liquid form and that automatically converts into a promise of a thousand years of permanence. If it’s not mineralized immediately, you don’t know what you got.
I think we maybe should move on, but I’d love to have a separate kind of really comprehensive discussion about permanence one day. I think that’d be fun. Yeah.
Ross Kenyon: Yeah, I knew this topic would be spicy. I didn’t know it would be this dominant.
Jane Zelikova: I mean, yeah, I think like, I take your point. I’ll just say for me that the permanence of geologic storage is less of a concern. It’s something that I don’t worry as much about, especially if the wells that are being injected into are, you know, properly capped and monitored, which in the US, there are some rules about that are on the books and more are coming down the line. So I’m less worried about that, although I think we also have geologic formations and the kinds of geologies where that mineralization happens much more quickly.
And so being cognizant of that and injecting into those geologies and those mineralizable rocks would be really smart. And I think folks that work on this Know those issues and take them into consideration. But I think the issue of permanence when it’s applied to the natural carbon removal sort of nature-based solution space, it’s like always problematic because we’re dealing with living systems and biological systems that cycle carbon and some of that carbon will always be released. So just like the idea of permanence just doesn’t lend itself to photosynthesis and microbial activity in the same way that it would to a geological storage.
Aldyen Donnelly: I just want to remind all of us that we do have a long history of legally binding rules about capping and monitoring potential leaks from geological reservoirs and one of the results of that is something we know as orphaned wells. So I’m just saying we’ve already done that for many years and We are pretending that the same contracts for geological storage are going to end up operating differently than they did for capping and cleaning up after oil wells that are no longer in production. You said I’m just saying that when there’s no more revenue coming in and you’re looking at 100 years or even 10 years of monitoring and management costs, all of a sudden an entity with no capital happens to own the company.
Land or the site in question and declares bankruptcy. We’ve watched this going on for 100 years. Why are we expecting that not to happen in this case?
Jane Zelikova: I agree that there are many orphaned wells having lived in Colorado and Wyoming over the last many years. It’s a really big issue, especially in Wyoming, where a lot of the There’s only like a couple of people whose job it is to check the wells and how well they’re being capped. And so it’s a major problem. But that’s not to say like it’s a solvable problem. You can build the cost of monitoring into the operation. The EPA has under its greenhouse gas reporting program, Subpart RR, which is a rule that applies to geologic storage of carbon dioxide and has requirements about monitoring for 100 years.
It’s robust enough of a rule that a lot of oil and gas companies have been trying to push back against it because they don’t want to be on the hook for this level of monitoring for 100 years. But basically, Things like the 45Q tax credit that incentivizes geologic sequestration and the use of CO2 for EOR, it includes this requirement that if you want to get the tax credit, you have to report under subpart RR, which means that you are on the hook to monitor for 100 years using fairly robust EPA protocols.
Whether this is going to stay standing or if it’s going to be something that’s removed is a broader political question.
Ross Kenyon: I got to keep it moving or we’re not going to cover everything. Assuming Aldyen, you’re able to hold. Can you hold it inside?
Aldyen Donnelly: I’m trying really hard.
Ross Kenyon: Okay. I’m going to skip the part where I try to make an Orson Welles, Orphan Welles kind of joke. And we’re just going to keep moving here as fast as possible. Jane, I wanted to ask you if you could introduce the Growing Climate Solutions Act and tell our audience what exactly is happening.
Jane Zelikova: Yeah, so the Growing Climate Solution Act, Act was introduced, as I said, at the top of the hour in the last couple of weeks. I can’t really tell time anymore. But basically, the bill is creating a certification program within the USDA to help address some of the technical challenges and barriers to entry for farmers and forest landowners to participate in carbon credit markets. And basically, the act creates opportunities for the USDA to provide reliable information about markets, as well as some requirements about technical assistance. And if credits are being issued, then some guidance around protocol verifiers.
Essentially, I think the goal is to make it easier for landowners, farmers, ranchers, foresters to participate In carbon markets and adopt the kind of practices that help sequester carbon and actually generate carbon credits. That’s the summary of the bill. There are lots of details in it that I think are interesting. I think there are also lots of areas of improvement where the bill leaves a lot of room for interpretation and can be easily manipulated or hijacked by People that might not have the best intentions. So there are areas where the bill language can be tightened.
There’d be more specific to reduce those issues. But generally, it’s interesting that this bill was introduced recently. I think it signals a broader interest from policymakers in supporting agricultural producers and foresters in addressing climate change and also paying them for the Climate mitigation services they provide. And they’re in this particular bill setting out a payment for carbon instead of like a payment for services as a way to incentivize farmers, ranchers and foresters to participate.
Aldyen Donnelly: I actually it’s interesting. I love what an opportunity this bill presents to not just Nori, but others out there who have different ideas about how to build vibrant and robust carbon markets with true price discovery who are competing with Nori. When I look at this bill, I really, really appreciate the drafters and the obvious intent underlying the bill. Personally, I think they have not a lot of their ideas about what they need to address. The barriers they think government needs to address to release these markets, including Nori, are based on some misunderstandings, I think.
But I’m not even worried about that. The bill establishes a division and leadership who are first supposed to be assessing existing markets, existing ways of doing things, and preparing and filing a report by October 2022. I am so excited because that means between now and October 2022, Nori is just going to show we know the best way. So it’s such a huge show by doing opportunity for us. I couldn’t be more excited.
Jane Zelikova: I mean, I’m happy that Nori is excited. I think there are a lot of issues about what Showing expertise and knowing what you’re doing actually means, especially if the roadblocks that are identified and being solved for aren’t the right roadblocks or aren’t representative of the realities that farmers and ranchers and foresters are facing and what keeps them from implementing carbon sequestering practices. So it’s I think that the intention is good. The follow through could use some work.
Aldyen Donnelly: We’ve got lots of time in that schedule to demonstrate both why some of the roadblocks they’re focused on right now aren’t maybe necessarily the ones they need to focus on and why there might be other roadblocks that are better suited for government attention. One of the questions ends up being, what part of this do you ask government to do and what do you leave to the market And how do you make sure in anything you do as government is spending taxpayers’ dollars in a way that is most likely to lever maximum private investment into the outcomes you’re trying to achieve.
And I think if we focus on that, we can We can take this, the prescriptions we see initially outlined in this bill from where they are to where they need to be. I don’t agree they’re in the right place now, but I’m really excited about the opportunity that exists to fix that.
Jane Zelikova: Okay. I mean, I can’t really argue with that. I can only say the areas of improvement in the bill are plenty and there seems to be like a lot of time to continue improving it. So some of the stuff that I’m worried about, well, some of the stuff that I’m excited about is that this is providing additional support or additional kind of Signaling for the USDA to get more involved in supporting farmers and ranchers and foresters in doing this. We already have talked in the past in other podcasts about the fact that the USDA has many programs that are aimed to support farmers and ranchers as they work to implement conservation practices that can deliver the benefit of carbon sequestration along with others.
Adding, I guess, more capacity to the USDA to work in this space, I think, is a really positive development. I think the reliance on carbon markets as the solution that the USDA is going to help implement feels a little bit weird to me because the things that the USDA can provide and does a really good job at today are technical assistance and Grants and cost share support for farmers and sort of like adding extra administrative layers and extra without adding a lot of capacity to the USDA to do this well worries me.
So adding a whole other kind of program that’s going to certify technical assistance providers to provide assistance on markets specifically, that feels like an extra administrative burden. I don’t know if you’ve all talked in the past about how hard it is to get Certified to provide technical assistance to farmers. It’s a really challenging administratively burdensome process. A lot of people’s don’t, a lot of people just skip it entirely because it’s such a pain. And so creating like that requirement within this program just creates administrative, additional administrative burden that the USDA then has to figure out how to meet without growing the USDA as an agency’s capacity to deal with this.
Aldyen Donnelly: Yeah, I agree with everything, everything you just said. And, and, um, You know, again, I’m really, really glad that this bill starts with a review and figure out what’s going on in the assessment period between when the bill gets passed and October 22nd, because I think we need that time to get these things straight. You know, the strange thing of the bill is it sort of reads like this. It reads like, the market doesn’t know how to make markets, so the USDA is going to have to do it for you.
And I think we need to use the time available to us to maybe say, wait a second, what are the key investments the USDA can make? And there are many that are giving the signals to the market that the market needs to be motivated to respond as efficiently as markets can when properly managed. Motivated. And the other thing that concerns me is if you go back and look at the 2002 Farm Bill and other initiatives since then, I can point to many, many precedents. When laws were signed or amendments to legislation were signed into law, that actually, in my view anyway, prescribed all of the correct activities and nine times out of 10, The delivery was different from the prescription in the law.
And just because there was a prescription in the law did not mean that over time, the appropriations required to deliver on the intent of the law were put in place. So the question is, when we finally sort of all reach agreement as to what the USDA should be investing their time and resources in over the next three to five years, I think let’s make the assumption that the USDA’s funding is not So how do we make sure that if they only have five years, how are they spending that money in a way that is going to increase the likelihood that the market’s going to be rolling without them in starting in year six?
Jane Zelikova: I mean, that’s, I guess the assumption is that without them, the market wouldn’t be rolling, which is a big assumption to make.
Aldyen Donnelly: You know what, I’m not stating I agree with that assumption, but I think that’s the underlying assumption. It reads like that’s the underlying assumption in the bill. And so, again, my choice would be rather than to challenge that assumption, okay, if we accept that assumption, and given what history tells us, which is not to rely on there being appropriations for long enough, For this to be something that government runs, how do we make sure that every dollar they get to invest in the goals they outline for this legislation? Is money well spent assuming there isn’t a buck for them to spend on this stuff in year six?
Then where does that take us? If we constrain ourselves with that assumption, I think it takes us to a different prescription for USDA actions.
Unknown speaker: Any last words there?
Jane Zelikova: Well, I mean, I think there’s a lot more to say here about this particular bill. If you go to the website for the bill, you can see who the sort of supporters and sign-ons are, which include really large, like McDonald’s, Microsoft, Lando Lakes, and then big NGOs like the Nature Conservancy and EDF and Cargill and Danone and all of these major companies. And so It’s an interesting combination of people that have, I think, weighed in and support this particular legislation. But then when you look at the specifics of the legislation where it requires the Secretary of Agriculture to create a sort of like advisory council to advise and lead this work, the membership of that is pretty like it’s pretty open to private sector influence.
And including like requiring no fewer than 10 representatives from the agricultural industry to be appointed into this particular advisory council. And so I think there is a real concern that ag industry representatives and other private sector kind of voluntary market members should. Could bias the process or reduce the credibility of the standards that are being applied because having to contend with higher tighter standards is more costly. So I think there’s just like issues like that need to be considered. It’s not the end of the world. It’s just something that we have to be aware of.
Ross Kenyon: Fair enough. I think that’s a fine addendum to add. We only have a couple minutes for each of these two remaining topics. Alexsandra, are you still live over there?
Alexsandra Guerra: I only try to pitch in when I really feel strongly about something.
Ross Kenyon: Yeah, same. That’s fine. Can you briefly catch us up with what’s going on with Microsoft?
Alexsandra Guerra: I don’t think that there was anything particularly new other than this article came out. It talked to Within the framework of what Microsoft is trying to do, we’ve talked about this back, what was it, January or February, when they had their initial announcement that Microsoft wants to go carbon negative by 2030. They want to remove all their historical emissions by 2050, since 1975. And this article did say something that was new information, which was how much they’re wanting to pay and how many tonnes they’re wanting to pay for. So they’re thinking to buy, you know, 2 million tonnes in the next year, 6 million tonnes, you know, in the next following years to get to 2030.
And what was really interesting, I’m sure Aldyen has lots to say to this, was that they wanted to, they’re aiming to pay $20 a tonne. That’s part of the goal now, new information, that they want to lower the price of Carbon Immobil to $20 a tonne. And they haven’t made a statement on... You know, which methodology that they want to support. It sounds like it’s still very much, you know, a broad array of carbon removal methodologies from industrial to nature-based solutions. But they did say that they want to like lower the price to $20, which I find interesting.
Ross Kenyon: Do you know why they’re wasting their money?
Jane Zelikova: Oh, wait, can I ask a question about that? So... I didn’t quite understand if it’s that they want to bring the cost down to $20 and that they’re willing to pay more as they start or if they’re just going to be paying $20 a tonne, which I will say in the carbon offsets market, it’s really a race to the bottom for most carbon offsets that are being generated in the voluntary market. They’re cheap and their quality is questionable. So I guess it could be considered radical to say $20 a tonne is what you’re going to pay, but I’m wondering if that’s an aspirational goal to bring the cost down to that and pay more now as carbon removal costs more.
It’s a lot more expensive. It shouldn’t be $5 or $10 or $20 a tonne.
Aldyen Donnelly: I don’t think we know the answer to that question, and it’s worth asking, but just a couple of facts. In the U. S. in 2018 and 19 each year, more offset credits were bought from through traditional registries and brokers. Each of those years then had been acquired for over almost 10 years prior to those two years. And that sounds like a big number. And Microsoft was actually not insignificant part of that. But for that supply of offset credits that were sold in 2018 and 19, the average price paid by the buyers was $3 a tonne.
I would argue they might want to pay a little more attention to the actual underlying environmental value of the certificates they bought because it’s really $3 an offset credit. I don’t think the underlying value of the average One of those certificates is anywhere nearly one tonne, but that’s another conversation for another day. But if you’re coming from that place where it seemed that there was a lot of offset supply available for $3 a tonne, throwing a price of $20 out there might well represent an attempt to drive the price up, which I appreciate.
Alexsandra Guerra: I think there’s a distinction to be made here in terms of like, Carbon offsets versus carbon removal offsets or credits. I mean, it’s crazy to me that we still don’t have like a distinct term to differentiate between what is an avoidance offset for carbon versus a sequestration. Hopefully, you know, us and the podcast and the group and air miners and the people in the space will eventually make that. But, um, I think that they have the prices for non-carbon removal offsets are lower, as you said, but they’re trying to aim, they’re trying to redo their whole program.
So they’re not even going to be procuring offsets the way they had before, at least as to my knowledge, they’re completely rewriting their structure of their carbon program to meet these new goals with a high focus on carbon removal. And like you said, Jane, like they’re just a higher cost per tonne of carbon removal. And my guess personally would be that they’re not even thinking about some of the previous offset options that might not necessarily represent carbon.
Aldyen Donnelly: Well, what you just said, Alexsandra, was consistent with the impression I got, which again, my impression without clarification is that They very clearly know that when they throw the number 20 out there, they’re talking about a much higher price than has been realized in the traditional asset markets even very recently. So I got to give them I got to give them a lot of credit for that. I had another reaction, though, to the article. It was interesting. In a couple of places, the author seemed to be trying to make the point that Microsoft’s leader of this initiative has the horrible task of trying to do the impossible.
And then it’s interesting. And then listed... A number of carbon drawdown and retention opportunities and then suggested they were all very, very expensive. And at least two of the opportunities listed in the article are totally profitable at $15 to $20 a tonne. So I kind of didn’t want the world to think that this is so far out of reach as is implied in that article.
Ross Kenyon: All right, we should do this last article here so we can get out of here on time. Aldyen, maybe you want to introduce this Swiss Re article. Why do insurers care about carbon capture?
Aldyen Donnelly: They say we will and I’m going to go old lady nasty on you. It is up. Yeah. It’s absolutely true as the article suggests that there is probably no industry that has greater financial risk and exposure to climate change risk than the insurance industry. And the first time I was invited in to sit down with three major reinsurers where they were declaring that they were going to invest to address climate change risk using the very same words I see in today’s press release was in 1997. And you know what? The reality is that there are two things true about the insurance industry.
One, they probably, as corporate entities, Are most at risk due to climate change. And they also sit on the biggest piles of cash and pool of investment capital. So I really, really, really hope that this is the beginning of an era where they as significant direct shareholders and equity investors all through our economy, as they sit on so much cash when they’re collecting our insurance premiums and pay them out, that they actually start managing their asset portfolios in a manner that’s consistent. With their ideas, because I haven’t seen that happen yet.
And does this mean they’re actually going to invest the capital they’re controlling in direct air capture? That would be great. Or are they just positioning themselves one more time to start a dialogue with government to negotiate the tax credits that will cover off their risk that does not involve them actually changing their investment profile at all?
Ross Kenyon: Wow, that’s interesting and also deserving of a much longer conversation. We wanted to do a reversing climate change with Someone from the insurance industry. So maybe that’s a nice nudge. But we should wrap this up here then. Anything y’all want to plug? [Twitter plug cut from the transcript. It’s still in the audio.] [Nori promotion cut from the transcript. It’s still in the audio, but it no longer applies.] From either of you two, is there anything else that you want to plug?
Unknown speaker: This is good.
Jane Zelikova: Yeah, I’m excited to keep the conversation going about tech and business. I would be excited to keep the conversation going about harnessing the carbon removal potential of both tech and nature based solutions because we need both. And I think this the dichotomy between them is false and harmful. So I hope we can move beyond that.
Aldyen Donnelly: Yeah, absolutely.
Ross Kenyon: Well, I didn’t expect the episode to hinge so much on that relative to what’s happening in D. C. So that was fun. Links are in the show notes to all the articles we discussed, to the various panelists that were on the show, their organizations, etc. Yeah, thanks so much.
Unknown speaker: Thanks so much for being here, everyone.
Ross Kenyon: Yeah, and thanks for listening. If you like the show, please tell your friends, rate and review us on iTunes, Apple Podcasts, Stitcher, and so on. And thank you so much for listening.
