Understanding Stripe Frontier As the New Generation of Climate Funds
Globally, we need to capture 10 Gt of CO2 by 2050 to keep global temperatures below a 1.5°C rise. Currently, we are only capturing 0.0002% of that goal with our current carbon capture methods.
We need more ways to capture carbon, and we need them fast.
Our current methods of capital allocation aren’t working to bring us the carbon capture systems that we need. There lacks an incentive for carbon to be captured as it’s essentially a public good. When looking for alternative funding mechanisms, I came across Stripe Frontier, who’s building something truly innovative + necessary in the space.
In a world of “buy now, pay later,” Stripe Frontier is accelerating carbon removal R&D with its “pay now, buy later,” approach to funding.
With advanced market commitments (AMCs), Frontier is able to guarantee a market for risky innovations by essentially promising to purchase carbon once it is captured. This promise made by Stripe guarantees demand for captured carbon and immensely de-risks carbon removal projects.
“The AMC is saying, ‘We’ll guarantee that you will have a large market, and therefore it’s worth you making the investment to produce at a very large scale.’” — Rachel Glennerster
Without Frontier, carbon removal projects are extremely risky are there aren’t many economic incentives to build them. If governments don’t introduce carbon taxes, there is literally no incentive to capture carbon and store it underground to be net-negative. Even with carbon taxes, carbon removal companies have to compete with each other for buyers of their captured carbon; currently, we’re playing a zero-sum game.
With Frontier, we can begin to play a positive sum game where everyone wins (including emitters). Carbon removal companies don’t have to compete, there’s less CO2 in the atmosphere, and emitters have new suppliers to buy carbon credits from.
Personally, I am incredibly bullish on this method of capital allocation and I think it’s far better than previous attempts to fund carbon removal. For example, XPRIZE’s $100M prize for carbon removal (in my opinion) is the wrong way to go about funding these types of projects:
- You’re creating artificial scarcity by competing for a portion of the $100M prize purse
- The opportunity cost is extremely high for teams not already building in carbon removal — must be in the competition for a minimum of 1 year to have a chance of getting a $1M milestone prize, then another 3 years for either the $50M or $30M prizes.
Frontier’s approach just makes sense as it creates new demand for carbon removal projects (without increasing scarcity) and openly shares the exciting work being done; embracing the spirit of collaboration rather than competition.
In some ways, Frontier is reminiscent of what the climate x web3 space is trying to be, but in web2. They’re helping people solve extremely hard problems with efficient capital allocation.
According to Our World In Data, we emitted 37.1 billion tonnes of carbon in 2021.
Since the industrial age, humanity has been taking carbon from the lithosphere as oil, and then emitting it into the atmosphere as carbon dioxide.
While we need to stop emitting carbon (we have plenty of ways to do this), we also need to take the carbon that’s already in the atmosphere and put it back in the lithosphere (we do not have plenty of ways to do this).
For humanity to get to net zero carbon emissions, carbon removal is vital. The issue is that nobody really knows how to capture carbon efficiently.
Why is carbon removal so hard?
There are several issues that carbon removal has to overcome in physics and in economics. To name some of the most prominent challenges:
- CO2 is a stable molecule, making it energy-intensive to break down
- CO2 isn’t highly concentrated in the atmosphere making it difficult to capture.
- There are few inherent economic incentives to capture carbon
Getting carbon removal right is like building a boat: if there’s a single hole, the whole boat goes under. Frontier does a great job of listing all boxes to check so that our boat stays afloat.
This is what it takes to bring carbon back into the lithosphere without destroying our global economy or our environment in the process.
Nobody said it was going to be easy. But there are still some companies who are building carbon removal tech that fits all of these criteria and was funded by Frontier.
How Captura is capturing carbon AND cleaning up the ocean
Captura is by far the coolest carbon removal company that I’ve seen. Captura leverages three facts for its system:
- The ocean absorbs the most carbon in the world (~30% of all CO2).
- The carbon in the ocean naturally flows up to the surface.
- The amount of dissolved CO2 in the surface water must be in equilibrium with the partial pressure of the CO2 in the air ( Henry’s Law). Therefore if there’s a decrease of CO2 in the surface water, more CO2 from the air will dissolve into the water.
Using this knowledge, the team at Captura was able to build a low-cost carbon removal system with no absorbents or by-products, using only renewable electricity and ocean water as inputs.
Captura starts by pulling in a stream of seawater into their system. 0.5% of the intake is then separated from the rest to be treated
The treated water passes through an electrodialysis unit (can be thought of as a system that sorts the seawater into salt and water) and undergoes dissociation where the salt is turned into an acid, and the water turns into an alkaline base.
The acid is applied to the original 99.5% of ocean water intake which initiates a chemical reaction that releases the carbon in the ocean water. The carbon is then immediately captured as a gas stream.
The base is then applied to the now-acidified water, which neutralizes the solution and clears the water to be released back into the ocean.
As this ocean water now has had its CO2 removed, Henry’s Law dictates that the atmospheric CO2 must dissolve into the ocean to maintain its equilibrium, which enables a drawdown of atmospheric CO2.
Crazy, right?
It took a minute for their process to click in my head, it’s breathtaking, yet straightforward.
The founding team is filled with carbon capture veterans, Caltech professors, and ex-CERNers. While all of these people deserve individual profiles, I want to shine a spotlight on Steve Oldham, their CEO.
What’s even more impressive is the team behind Captura.
Steve used to be the CEO of Carbon Engineering, another major carbon capture company! Not only did these guys capture carbon from atmospheric air, they used that carbon to create carbon-neutral synthetic fuel. Steve is a top player in the carbon capture space, making me even more bullish on this company than I originally was.
As a bonus, these guys were some of the first people to create a Direct Air Capture facility in Canada. I actually wrote an article on Carbon Engineering a while ago, so it’s funny to see these guys pop up again after 3 years.
Captura’s goal is to remove its first ton of carbon by June 2024.
As Frontier backed Captura, they’re spending the next two years heads-down trying to get their plant operational, and the cost per ton of CO2 down to something reasonable (in the range of $20).
Currently, Frontier is giving Captura $333,333 for 339 tons of CO2 (comes up to $984/ton). While the cost/ton is extremely high, the purchase agreement from Frontier clarifies:
This represents higher initial costs associated with: higher capex per ton due to not having large scale production for initial pilot plants, initial use of commercially available membranes rather than Captura’s proprietary membrane design, and electricity supplied from the electricity grid.
Over time, we anticipate the price to reduce significantly due to membrane performance improvements, capex reductions, and availability of lower cost and lower carbon intensity electricity. — Stripe Frontier on the price per ton for Captura.
Captura is great, but is carbon capture really what we need to be focusing on?
Frontier is a great carbon capture fund, but there are plenty of well-reasoned critics of the technology.
The largest criticism is that carbon capture is a misallocation of resources, as we spend lots of renewable energy on carbon capture when we could use that energy to replace fossil fuels. According to this paper, to remove 1 billion tons of CO2 through Direct Air Capture (DAC), it would require the same amount of energy to power all of USA. The core of the argument is that if we spend all of our resources to get to net-zero, then the Earth’s natural carbon sinks will take care of the rest of the carbon in the atmosphere as long as we don’t add to it.
I believe that’s just untrue, if the Earth was able to keep up with our carbon emissions, then we wouldn’t be having this problem in the first place. But, that is the argument. In short, we need studies on this and more public discourse.
Another criticism is that DAC is used by oil companies to pump up oil in reservoirs that were previously unreachable. It’s ironic, DAC plants would capture carbon to be injected into the ground which would cause pressure so that additional oil could be recovered. However, oil companies market their use of carbon capture to greenwash the public making matters even worse.
Carbon capture is still an unproven technology, it’s still up in the air (haha) if this is the direction that we should go. The journey seems to net zero seems to go on forever, but hopefully with smart people like the ones at Frontier, it’ll all be over soon.
Originally published on my old blog https://exploringclimate.substack.com. This post is old and I have likely changed some of my opinions since writing this article. I imported the post here for transparency and to show growth.
