Can tech giants shrink costs of carbon removal technologies?

A group of the world’s leading technology companies have joined forces to form a ground-breaking multi-billion-dollar fund targeted at scaling up carbon removal start-ups and lowering the costs of removing CO2 from the atmosphere by using technology.

The Frontier Fund, created by financial services company Stripe, Google owner Alphabet, Shopify, McKinsey, and Facebook owner Meta, aims to invest $925 million in startups focusing on developing technical solutions to remove carbon from the environment over the next nine years.

The fund will use an Advance Market Commitment (AMC) mechanism.  An AMC is a binding contract used to guarantee a viable market for a product once it is successfully developed.  Generally, AMCs are used in circumstances where the cost of developing a new product is too high to be worthwhile for the private sector without a guarantee of a certain quantity of purchases in advance.  These AMCs will allow participating companies to enter into offtake agreements with the fund for future tons of high-quality carbon removal.

According to Kate Brandt, Google’s chief sustainability officer, “..delivering demand signals to the growing carbon removal market is crucial to reduce the cost of removing carbon from the atmosphere. At Alphabet, we know first-hand from our long-standing history of working to advance new climate solutions that signaling early demand can spur innovation and lower the price for everyone. That’s why we are joining this exciting coalition of climate leaders, who jointly see the promise of new carbon removal technologies and the power of sending a clear demand signal to the market.”

Early-stage carbon capture enterprises will be able to seek funding from Frontier. Frontier will assess their negative emissions solutions, taking into consideration a variety of parameters. The fund’s specialists will then negotiate a per-ton fee with the selected firms and commit to investing millions of dollars in AMCs to purchase tons of carbon removal as offsets.

The market for carbon capture and storage is still in its infancy. Direct air capture (DAC) technologies are currently limited to a few expensive trial projects around the world. The world’s largest DAC facility, Climeworks’ $10m-15m Orca plant in Iceland is due to capture 4,000 tons of carbon dioxide from the air every year — the equivalent to the emissions from about 870 cars. The captured CO2 is then mixed with water and injected into basalt rock 1km underground, where it slowly turns into a solid carbonate mineral over a two-year period.

Frontier said it will likely pay higher initial prices per ton for technologies that meet certain criteria related to cost, physical footprint, capacity, permanence and commitment to environmental justice.

Carbon capture technologies are needed to offset emissions generated in sectors most resistant to decarbonization, such as aviation, shipping, and chemicals. The technologies from CDR have long argued that the policy framework needs to be put in place now to scale the market in time to mitigate a global carbon budget overshoot in the coming decades. There are concerns that nature-based solutions such as tree planting can have negative impacts on biodiversity, food and water security, and indigenous livelihoods.

“With Frontier, we want to send a loud demand signal to entrepreneurs, researchers, and investors that there is a market for permanent carbon removal: build and we will buy”- head of climate at Stripe, Nan Ransohoff.