Where are the buyers? That’s the question CDR-observer and climate advisor Robert Höglund asked in a much-discussed recent post.
Höglund points out that while significant growth occurred for CDR through voluntary markets in 2022, the number of large buyers is low and growing slowly.
He called the market “upside down”: lots of marketplaces, fewer companies doing removal, even fewer buyers.
Today we’ll look at his post and use it as a jumping-off point to discuss some recent headlines in the business of carbon removal. Including-
· CDR startups announcing new funding from oil and gas companies
· The Guardian’s recent reporting claiming the climate benefit of Verra’s carbon offsets is overstated
· Patch’s new offtake agreement format
· Climeworks’ third-party verification of their DAC process
· Should CO2 credits also include co-benefits?
On This Episode
Susan Su
Na’im Merchant
Radhika Moolgavkar
Resources
Captura & 44.01 new fundraising
Verra’s response to the article
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: All right. Welcome everybody to the January 19th, 2023 Carbon Removal Newsroom Business Edition. As always, we have 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 a board advisor to the Environmental Voter Project. Welcome, Susan.
Susan Su: Hello.
Radhika Moolgavkar: And we have Na’im Merchant, who runs Carbon Curve, a consultancy that works with NGOs and startups on scaling up carbon removal solutions. He also publishes the Carbon Curve newsletter and podcast about the carbon removal industry and the new carbon economy. Welcome, Naeem.
Na’im Merchant: Hey, everyone. Good to be with you.
Radhika Moolgavkar: And as always, I’m Radhika Moolgavkar, Head of Supply and Methodology at NORI. So today we’re going to dive into kind of where are the buyers? That’s the question that the CDR observer and climate advisor Robert Hoagland asked in a much discussed recent post. Hoagland points out that while significant growth occurred for CDR through voluntary markets in 2022, the number of large buyers is low and growing slowly. He called the market upside down, lots of marketplaces, fewer companies doing removal, even fewer buyers. So we’ll use his post as a jumping off point to discuss some of the other recent headlines in the business of carbon removal.
So Robert Hoagland talked about five reasons he believes companies are not buying carbon removal as part of their climate plans. They are fear, lack of incentive, buying tonnes is difficult, standards aren’t agreed on, and prices. So we’re going to start with fear. Susan, as major corporate buyers wait to invest in CDR, several CDR companies like Captura and 44. 01 have made recent announcements about raising funds from oil companies. Is fossil fuel industry investment problematic if it’s not balanced by interest from other industries?
Susan Su: Yeah, so I think there’s a lot to say about this. And I think Hogan specifically points to fear related to, you know, sort of air cover type fear. If the removals that you’re buying turn out to be discredited, then assuming that carbon removal is a really big part of a company’s PR strategy, then, you know, that sort of undermines the entire effort. And what you’ve mentioned Radhika is that some companies have actually maybe given buyers a little bit of reason to have that fear as their cap tables reflect their connections to legacy energy industries, oil and gas.
And, you know, no company wants to be, no Disney wants to be called out for greenwashing by purchasing credits from a company that’s backed by Exxon. I mean, just that sentence, as I say it, it just sounds really bad, right? And it’s very easy to twist these things into such headlines. In reality, there’s always a risk. Whenever strategics jump onto a cap table, it always raises eye And I think founders, especially those that are a little bit more experienced, know this, or they should know that whoever you invite onto your cap table is basically sending a very strong signal out to the market, whether that’s a certain type of investor or whether that’s a certain particular strategic.
And so you have to be able to tell a really good story about that. I think the fear itself is probably... Overblown. I don’t think that these companies, whether it’s Captura or 4401 or others, many others that have oil and gas participation, I don’t think their hearts are in the wrong places. And I don’t think that they’re setting out with the intention to perpetuate legacy in energy industries by giving them this carbon removal escape hatch. I think there are very good practical reasons why you would want folks who understand energy infrastructure, energy project finance, the ability to move things around the world, such as gas, why you’d want folks like that to be part of your company in some way, shape or form.
At the end of the day, I think a little technicality that a lot of folks don’t realize is that companies have a lot of leeway and power in structuring the terms of those investments. While you might see a certain name on a cap table, it doesn’t necessarily mean they have Very much visibility, and it doesn’t necessarily mean that they have really any power at all in how that startup goes, or it could. And so I think what’s worth doing there is just double clicking a little bit further. And I think that’s going to get into some of the other fears that Hoagland, or not fears, other reasons that Hoagland points out.
It’s not very easy to do that double clicking. And so how do we make it easier for companies and for buyers and lower friction? I think right now the fear is just a point of friction and resolving the fear is itself too high friction. And so that’s keeping folks on the sidelines, but I’ll let Naeem weigh in on this.
Radhika Moolgavkar: Yeah, Naeem, so kind of curious, what do you think about CDR companies accepting fossil fuel industry investment?
Na’im Merchant: You know, I mostly, you know, agree with Susan on this. I think it’s a problematic look for CDR in a lot of ways, but there’s a little more nuance to this than I think... You know, folks really, really give attention to. You know, I think we’re kind of fooling ourselves if we don’t think that the fossil fuel industry doesn’t have, you know, technical expertise or infrastructure or experience building, you know, massive scale projects that can benefit CDR companies that they’re partnering with or investing with. So I think there’s a potential value add there, but I also think it doesn’t mean that we should set aside our skepticism about the interests and intentions or the agenda of fossil fuel interests being involved in carbon removal.
And I think Susan’s point around the need to really double click on this is exactly right. I personally rather see industries that have fewer scalable and cost effective alternatives to decarbonization. So unlike the fossil fuel industry, so I’m thinking You know, cement and steel production and aviation fuel sectors playing a larger role in investing in partnering with CDR companies. I think they’re more mission and purpose aligned for, you know, what we think CDR can be valuable for in the near medium term. But I think that, you know, we have to take a more nuanced view on what the role of fossil fuel interests are going to be in CDR over the long term, especially as companies start to scale.
Radhika Moolgavkar: Yeah. So just curious, Naeem, since you’re a little more maybe skeptical, I don’t want to speak for Susan, but since you said you’re a little skeptical, do you buy the argument that you have to bring along oil and gas to be successful in any way in true long term emission reduction avoidance because of their massive scale?
Na’im Merchant: Not necessarily, right? And I think that there’s a lot of industries that know how to do things at massive scale. I think that when we think about carbon removal methods that depend on geologic storage, I think there’s a very clear value add for the expertise that you get from folks out of the fossil fuel industry, for example. But there are other elements of building out CDR projects that would benefit from You know, other more heavy industry type sectors or the chemical sector or there might be obvious partnerships around kind of folks involved in aviation fuel.
So I think that when we think about CDR scaling to megatonne and gigatonne scale, it’s going to look very different than what it looks like right now. It’s going to be less, you know, tech bro and VC investment and it’s going to be more like It’s going to be more industrial. And that’s what it’s probably going to look like in the years and decades ahead. And so that, I think, includes actors in the fossil fuel industry. But I don’t think it should be exclusive to the fossil fuel industry. But there’s a lot of sectors that are going to be able to add value to scaling up CDR, many of which I’d like to see more involved in the fossil fuel industry right now.
But I think they’re going to be a part of it. And so now we have to think about, okay, well, what is the value that can be derived from the involvement of these different industries and scaling up CDR without entangling the wrong interests or agendas that we don’t want to see associated with CDR.
Radhika Moolgavkar: All right. Well, we’ll move on to number two, though. I think there’s a lot more we could talk about in that section. But for... Because of time reasons, we’ll go on to number two, which is lack of incentives. So Naeem Hoagland says companies don’t have good reasons to buy CDR, which kind of dovetails into some rather controversial or hard reporting from The Guardian about Vera this week. And so how do you think this reporting might affect companies buying offsets? And can you just give a quick overview, though I’m sure everybody on this call or who’s listening to this podcast has heard about it, what the reporters found?
Na’im Merchant: Yeah, I mean, this kind of stuff drives me crazy. Actually, the first article I published on the carbon curve was about the fatal design flaw of carbon offsets. And I think this is a situation where I think everything... Everything kind of hit here. So the Guardian did some reporting into various carbon standards and the rainforest protection projects that are issued under the verified carbon standard. And this group of investigators found that, you know, only a handful of the projects evaluated these rainforest projects showed any evidence of deforestation reductions. I think of something like 94% of the credits had no benefit to the climate whatsoever.
And that’s largely because these threats to these rainforests were overstated by like 400% on average. And they said that if you actually removed the rare kind of three projects in Madagascar, which were positive, that overstatement would have been something like 950%. So what we have here is a situation where the counterfactual was overstated, meaning that the climate benefits Of protecting these forests were also overstated. And companies like, you know, Salesforce and Shell and EasyJet and others have all bought into these carbon offsets. And they’re, of course, I think linking to the point around incentives, they’re incentivized to buy the cheapest thing so long as it’s got a Vera checkmark.
So it’s important. The role that Vera plays in this is important, right? So Vera’s disputing these conclusions and the pushing back on the methodology that the investigators used and so on. I think the key message is we’ve got to stop using these kind of offsets. We’ve got to stop holding trees hostage and financing that. If you can’t make a strong carbon removal claim around additionality, measurability, verifiability, durability, you shouldn’t touch this stuff. And the implications of a situation like this, a story like this are huge. You know, first, these projects failed to protect forests anywhere near the extent advertised.
So that’s obviously not good, but that’s just one thing, right? Second, it’s that while it seemed like the money kind of, at least it went to a good cause to protect these rainforests, even if they didn’t perform maybe as well as advertised, remember that these offsets were purchased to give The company, you know, give companies and individuals who buy these, you know, offset primarily companies a license to pollute, right? They found a cheap way to continue polluting. So the impact of that decision is not neutral. These projects led to more carbon pollution.
And then finally, you know, it’s important to think about the need for companies at this formative stage of carbon removals development We need them to be supporting high integrity carbon removal projects. And stuff like this hurts all carbon removal efforts out there. If you can make a credible claim to carbon removal, but stories like this keep coming out, the nuanced important differences between a DAC project that’s been able to figure out how to get certified and verified and a forest project like this that has a VERA check mark Both of which are issuing carbon credits, they’re just going to be looked at as the same by many buyers.
And I think that there’s an important role that companies play at the early stages of supporting carbon removal. And so I think this is really bad for the carbon removal sector more broadly. And I think this is something that should really concern folks.
Radhika Moolgavkar: So Susan, I feel like my first podcast ever was about the difficulties in the forestry system back with the California Air Resources Board. Yet another bad story about forestry. Do you kind of agree with Naeem about how this impacts broader carbon removal generally? And how do you imagine incentivizing buyers to look for the highest quality offset for carbon removal versus the lowest cost one?
Susan Su: I think Naeem actually said this in an email that we had separately about this, that offsets and credits aren’t the same thing. And they often get kind of this false equivalency drawn between them. I think there’s a lot of problems with offsets. However, one problem with offsets, the one that you cited, Radhika, the California Resource Board one, I think that was Carbon 180, or was it Carbon Plant? I forget which San Francisco-based nonprofit kind of did that. Expose that particular issue, I think, is also still different than this current one with Vera and the Guardian, even though they seem similar.
I actually don’t totally agree with Naeem that this is as cut and dry as the Guardian makes it out to be. If you read Vera’s response, which I find actually reasonably credible. They’re contesting the baselines. And this gets to another one of Hoagland’s points, actually, which another one of the barriers to greater adoption of carbon removals, which is just that it’s so hard to agree on these standards. And baselines are essentially standards. And so they’re saying the two entities that the guardians reporting relied upon used these synthetic baselines, which were sort of drawn up in somewhat of a theoretical space and somewhat of a theoretical vacuum Not taking into account the local conditions on the ground.
And so they’re saying, well, your baselines were awfully high. And so that’s why you’re not seeing all the good work that we did. We calculated our baselines based on what’s actually going on on a very micro region specific basis. And therefore, we’re seeing a lot more benefit than you’re giving us credit for. And you know, like whatever side you fall on in this, I think the most important thing to remember is that the people at Vera are not here to sabotage their own industry. Their goal is not to make carbon removal not work or carbon credits seem incredible or carbon offsets seem incredible.
Of course, that’s their number one business. And they’re also, I think there’s a nonprofit, right? And you have to assume they have good intentions. By the way, everybody that works at Vera, too, and who’s on the board of directors, they all have deep, deep backgrounds, multi-decade backgrounds in this stuff. So there are no fools kind of running around doing this. I think what the whole thing points to is, number one, the gotcha culture of our current media community. That’s a whole separate topic that we don’t have time to get into today.
But number two, and more importantly, just how hard it is for anyone to come up with a right answer on any of this stuff. Is the Guardian and those two, I forget the names of the two entities that they cited, are they right? Or is Vera right? Well, maybe they’re both kind of right. Or maybe some are right about some patches and some are right about other patches. And maybe those patches are really small, like they’re a few acres or a few dozens of acres. They’re not even the size of Madagascar.
And so you can’t really uniformly say, well, Vera was totally perfect across all of the land, across all of the forest land that they certify. And you also can’t say the Guardian was totally right in all of their finger pointing across all the land. So what I’m trying to say is that there’s so much nuance here. And this is what Relates back to Hoagland’s piece, where there is nuance, there is friction. And the enemy to all marketplaces is friction. Marketplaces depend on liquidity. We’ve talked about this on this podcast before.
Liquidity is just matches, matches, matches, matches being made all of the time. Now let’s take a totally different marketplace that none of us have to take sides on from a carbon removal perspective. Let’s take Airbnb. If you had to go and find and verify yourself, every host by hand, make sure they weren’t scamming you. Oh, some of them are, but some of them aren’t. Well, the ones in Madrid are good, but the ones in Barcelona aren’t good. If there was that level of inconsistency in that type of marketplace, where would Airbnb be?
It would not exist. And the reason why it exists is because it flattens all of that nuance into something that can accelerate transactions. And transactional velocity, aka liquidity in the marketplace, is really what Hoagland is saying is missing here. The reason why buyers aren’t coming on board because it is just too hard right now to make these decisions in a way that they can feel totally confident about. And I think that goes back to incentives too. They need to be incentivized with high rewards. So they need to be able to say, well, we did this and that definitively means this.
We bought X and that definitively means Y. And that meaning connection is very hard to make right now. You buy some carbon removal, That’s a DAC thing versus you buy some offsets that are like a really important tropical forest or a mangrove forest. What does it even mean? And then the second question is, what does it mean to whom? Does the general public really understand the difference between a tropical forest or a tonne of CO2 removed via DAC? Probably not. And so I’m not proposing any solutions here, but I’m just saying that part of the lack of incentives is all of this friction that I think this Guardian controversy and Vera controversy really highlights.
And another part of it is that the public just doesn’t really have You know, champagne tastes, call it, yet, for carbon removal. And until we get everybody there, companies, of course, are just going to do the lowest common denominator, or as Naeem called it, like the cheapest thing for them to be able to check a box. And I don’t think companies, necessarily the buyers, because by the way, some of these companies don’t even have to participate in these voluntary markets. I don’t think they necessarily have bad intentions too, but They’re probably really busy.
This is not central to their operations. This is a cost center that they have to just minimally manage, get it out the door, and it can’t be too hard. Right now, it is too, too hard, and so they’re just going to kind of brush over it and do the simplest thing possible, which oftentimes is sitting on the sidelines.
Radhika Moolgavkar: Again, could totally dive more into this, but we’re going to move on to number three for right now because I have lots of thoughts and questions working at a voluntary carbon market myself. So buying tonnes is difficult. That was his third point, Hoagland’s third point. So Susan, Patch recently announced a new framework for selling CDR credits. Curious what you think of their approach.
Susan Su: Buying tonnes is really difficult. And I think the patch offtake launch is brilliant. I was really impressed. I didn’t see it coming. It’s sort of obvious, but I think it’s really, really smart on their part. Part of Patch’s value proposition is in this streamlining and making things one unit the same as the next unit, the same as the next unit. That’s part of it. The second part of it is in saying, you can trust us. We are kind of the system of record here for all of this. And instead of referring to all of these individual projects, I should say, you can now just refer people to Patch.
And so Patch’s work is in really building up their brand equity and building up their standards such that they can be trusted by the general public and by buyers and sellers alike. I think they’ve done a pretty good job in doing that, but hey, There’s always room to trip up. There’s always time in the future to make mistakes, not wishing that they do. I wish those guys the best. And I think they’ve done an excellent job so far, but that’s gonna be their work going forward is really maintaining their own standards, being really transparent about those.
And that’s what’s gonna make something like offtake successful or not. Offtake, which is a pre-purchase agreement, which sort of allows early stage companies that provide carbon removal To be able to, if not capture the revenue up front, at least be able to say, hey, we have these agreements that are in place for multiple years, we’re In business for the long haul, which is really, really important when those companies are talking to people like me, potential investors who are underwriting their businesses and being able to say, we actually have all of these long-term contracts.
We’re not going to go under. We might not have realized revenue this year in 2023, but we have all of this promised revenue for all of these years out. I think it does huge things for the ecosystem. And I think it potentially makes it easier for buyers to sort of at least plan out, like roadmap out what their purchases are going to be. So this directly addresses the buying tonnes is difficult challenge, but patches also basically raise their hand to volunteer for one of the hardest jobs in this entire space.
And so it’s a lot of pressure on them too. And I really wish those guys well.
Radhika Moolgavkar: So Naeem, CDR companies need reliable funding, as kind of as Susan was alluding to, to grow. So what kinds, will this kind of funding stream help them? And would you like to see it replicated? Or is there other ways you think we should be looking at this?
Na’im Merchant: Yeah, I mean, I think funding streams like this will really help, right? I mean, like Susan said, you know, CDR companies are looking for Long-term predictable revenue in order to scale. And I think something like offtake helps do that for them. And I hope something like this replicates in the sense that I think it’d be great to see more actors take this on and take on this kind of approach as opposed to just kind of ad hoc one-off purchases. Something like patch offtake, I think, is solving an important problem, especially for Especially for emerging novel carbon removal technologies.
So this is good stuff. And generally, I think we just need to see more innovation around how we finance carbon removal scale up. We need to think about new mechanisms and institutions around standards so that we can build up this market and we can get away from thinking about what’s the corporate buyer’s education level or intentions or kind of all of that stuff kind of You know, in my view, is really immaterial. What we need to be doing is building out these sorts of systems and innovating in this way so that we can start getting to a place where we have, you know, a market for For carbon removal that look different than the legacy systems that we have in place today.
And I think that’s not going to happen in one fell swoop, but I think we’re getting there slowly but surely and it comes down to innovating and changing all of these different pillars of what makes or shapes the kind of market we want to see. And that involves how we pay for CDR as well as standards, as well as governance, as well as all these other things.
Susan Su: One thing that I think that Patch is doing really well and will continue to do really well with offtake is the way that they’re bundling different types of credits. Bundling is de-risking in this case. And so there’s delivery risk. There’s also this kind of reputational risk. When a buyer goes to patch and they buy a tonne or they buy a portfolio from patch it really is a portfolio as opposed to sort of having all of their eggs in one basket and I think that’s. Really smart and should actually give buyers more confidence and should increase that sort of marketplace velocity that we were talking about.
But again, I think that it really puts a lot of trust as well as expectation and pressure to patch, which I think leads well into Hoagland’s fourth point around standards.
Radhika Moolgavkar: You could have done it for me, Susan. Standards are not agreed upon as we have been for sure been talking about on this show and other shows in the past. So I’ll start with you, Naeem, but this question is for both of you. The need for well-defined standards makes it difficult to differentiate between CDR suppliers. Already in 2023, Climeworks has announced its successful delivery of CDR credits for their DAC facility in Ireland, verified by a third party. But one, is that even a significant development? And two, is what has been announced by Climeworks or other CDR companies who maybe go outside of the registries Or even work within the registries, does it help ensure confidence in this new technology, or should we just have a completely new approach?
Na’im Merchant: So, you know, to answer your first part of your question, yes, this is a significant development, and congrats to the Climeworks team for delivering verified CDR credits, right? Generally speaking, we need more deliveries in CDR, fewer fancy renderings and outlandish announcements and claims and more delivery. So this is good. So kudos to them. I think it’s the first step in building confidence in CDR. We all have kind of what we want ideal to look like, and I think we can get there, but we’re going to get there in a staged fashion.
Where we want to be is a situation where the CDR Industry has financially disinterested third parties involved in setting standards to avoid any potential conflicts of interest. And then we need separate parties altogether involved in kind of verifying or auditing that the specific project met those standards. And I don’t know if that is exactly what happened here, but I think it’s progress in that direction. And we’re still early in the CDR field, so it’s okay that we’re not quite there yet. But we need to move towards industry-wide standards regime that avoids the pitfalls of today’s carbon offset market.
That’s really, really important. The story that we’re reading about Vera, and it’s not just this story, but it’s been talked about by Bloomberg and ProPublica, and we’ve seen a lot of different pieces of work around this. That’s the kind of story we need to avoid as we build out the CDR industry. And unfortunately, there’s this gravitational pull to keep these systems in place. And I think these systems need to change. And so I think that’s a really big risk. It represents a big risk for the CDR industry. And so the sooner that we get to a system where we have a really comprehensive standards regime with financially disinterested parties involved, That’s going to be important for the space and we really need folks to be pushing for something like that.
Radhika Moolgavkar: Susan, what do you think?
Susan Su: I think there’s a big opportunity for tooling. I think more people should be starting companies around tools because part of the problem that we saw with the Vera Guardian thing in this case and in previous cases too is that a lot of these measurements are based on frameworks. That are not hard measurements. They’re sort of based on, you know, consultant driven analysis and, you know, not to reduce that to opinion or anything like that. It’s not an opinion, but there are probably, there are different methodologies, right? And so then people can arrive at different numbers that way.
I think one thing that makes other types of specifically technology driven CDR different is that it can be a little bit easier to measure and the ways that it can be measured will rely, hopefully will rely less on humans and analysis and will rely more on tooling. We need sources of truth. And if we wait around for there to be international bodies to agree on what the truth is, we’ll be waiting a really long time. I like that phrasing that Naeem used, which is financially disinterested third parties. However, I think that it’s similar, and this is my only critique of Hoagland’s post, is that it’s kind of got a little bit of a whiff of wishful thinking in it.
Hoagland’s piece at the very end, he basically says, here are the three things that we need to do instead to make this work, which are get more companies to buy high quality removals, just do it. Number two, which is get a good standard setter to incentivize carbon removal. And number three is to speed up development. And get pre-purchases on registries. And I think a lot of these things, and this is not his job, I’m sure he’s not setting out with his single Substack post to solve all of these questions to solve the how, but the how is really where, you know, the shit hits the fan, pardon my French, but that’s really the stuff that we, none of us have been able to figure out.
The disinterested third party That’s like the unicorn that we haven’t found yet. And so it’s absolutely right. And we should be aiming for a disinterested third party to come and do a verification. But I haven’t been able to figure out how that should be designed. And I don’t think any of us on this podcast have, and I don’t think anybody out there has really quite cracked that nut. Um, because it’s not easy. And so my answer comes down to tools. Let’s improve the tools that we have. Um, and let’s, let’s make their, let’s make less room for human error and for human judgment, um, and then see how far that gets us.
Na’im Merchant: I think that’s right. But I think it’s also important that if this is not an either or, right, like there’s absolutely a lot of room for, um, You know, improvement in tools so that we are doing measurements based on, you know, direct measurement as opposed to modeling because of advancements in the types of tools we’re using or whatever the case is. That’s great. But what we have right now is a system that gives you a checkmark in the absence of these things. And so how do we build demand for these sorts of tools if we’re willing to accept, you know, a level of uncertainty around this?
It kind of tells people that are interested in building these tools, like, maybe it doesn’t make sense to do it. They’re still willing to give this project a Vera checkmark because of the claims they made without any of these technologies that improve, you know, Our measurement precision or whatever the case is. So I think what it’s going to come down to is just iterations over time, right? Like we want to build towards something where we have financially disinterested parties involved in setting standards. I don’t know how the verification or audit piece needs to necessarily work that way.
And there’s probably a lot of analogies across other industries that can be applied here. But I think it’s going to be, you know, a both and situation where we are Improving on an incremental basis so that we can continue to innovate around standard setting and introducing better tools. But I think we need to have a North Star. And the North Star needs to be that we have a market that looks different than the ultimate market does today. And I think there’s just too much of a pull to keep it the same way.
And I don’t think without the change in kind of how we think about this institutionally, the kind of technical fixes are not going to go far enough.
Radhika Moolgavkar: You could just ask chat GPT. I’m sure it’ll give you spit out a perfect answer. All right, we got to move on to prices because the clock is telling me that. So Susan, some of the sellers of credits are including the promise of co-benefits through their process along with CO2 removed. Is this a promising pathway to attract funding, this idea of co-benefits?
Susan Su: You know, I think things need to be measurable. And I don’t think co-benefits, now as we talk about co-benefits, we’re getting even further away, but it’s even deeper into the, deeper in the woods of, you know, things that are very hard to model and hard to measure. And so I don’t think that those things can really be priced in. I think they have to just be sort of a bonus on the top. And, you know, oftentimes when people, you know, maybe not corporations, but let’s say individuals or foundations, depending on the type of buyer, Oftentimes there is an emotional component to the buying as well.
And I think that’s fine. And I think that’s where co-benefits can really be part of the storytelling and speak to the emotional buyer within the more rational buyer. But I don’t think that we can really count on that to drive pricing in any way right now. And I think what Hoagland is saying too in the post is that folks are kind of holding out for the fire sale to happen. CDR looks good, but it’s really expensive. Meanwhile, we have some other cheaper stuff elsewhere. And this is just how consumers behave in every single category that there is.
You know, oftentimes, this is a little bit funny because you guys know, you probably all saw the mill launch this week from the co-founder of Nest. And a lot of folks are commenting on how it’s like the new Deuce Arrow and how it’s a $33 a month composting subscription, which, you know, some cities, not all, but some cities do offer composting already for free. And it’s sure a little bit yucky, but certainly not that bad. And so I think there are oftentimes we think that there’s demand at a very high end of the market because there’s some very public signaling of that demand, say like a frontier or a Microsoft is coming to buy a small amount of very high priced credits, but the vast majority of buyers, whether those are consumers or corporations are interested in getting a deal.
And so that is just human nature. I mean, I think that’s just what it’s going to be. And rather than be moaning that and saying, well, we should all be altruistic and buy fewer nicer things, at the end of the day, we should probably actually figure out how to drive those prices down so that high quality can be gotten for prices that people are willing to pay at volume.
Radhika Moolgavkar: Naeem, last question for you. So as Susan alluded to, co-benefits are tricky. They’re tricky to value, tricky to measure. Do you think sellers or suppliers should endeavor to include them as part of their carbon removal credits?
Na’im Merchant: I think Susan’s absolutely right about how difficult it is to verify the claims around co-benefits. And so that can get really tricky. I think that’s exactly right. I think what the Vera investigation tells us is, you know, in similar investigations by Bloomberg and ProPublica and others, is that we’re still struggling to get project developers selling carbon offsets to make valid claims about the carbon benefits of their projects, let alone these co-benefits. And so I think sellers should endeavor to get as precise as possible on the quality of their carbon offsets or carbon removal credits.
On the quantity, additionality, durability, all of those things before they start thinking about co-benefits. I think it’s really hard to verify those claims as Susan said. And so that just means that there’s going to be an entire additional category of claims that carbon project developers, Make that could be totally discounted right I mean if you think about the false claims associated with the climate benefits from these very projects are bad I can’t even imagine what will happen when people start looking at the claims made about the co benefits of some of those projects.
So, you know, not to bring up there again, but I think people should be mad about this. Like, I think, I think we need to start thinking carefully about the claims we’re making about carbon removal projects or carbon offset projects or whatever the case is. And the need for well designed, well governed institutions around standards for the carbon removal industry and If we can’t even get there right now for just the specific carbon-related benefits of these projects, then we shouldn’t be making any claims about co-benefits.
Radhika Moolgavkar: Well, I will leave it there for today because you guys do agree that co-benefits should not be part of the equation right now, but would love to dive into that deeper at some point as well. I’m going to move on to the good news of the week. We just talked about a lot of challenges, but there were some good news. The EPA awarded $100 million to boost environmental justice programs. It was funded by the 2022 climate bill, and it’s the largest funding for EJ ever. It’ll go to groups and governments fighting for clean air and water.
It’s nice to see that the environmental justice movement is continuing to gain traction and They’re a key constituency to helping carbon removal scale. So I look forward to hearing their voices more and learning more about their concerns. And with that, we are at the end of our half hour plus. And I thank you both, Susan and Naeem, for joining as always. And we will see you next time.
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