To achieve global net zero emissions by 2050, we need not only to reduce emissions but also remove huge amounts of carbon from the atmosphere and oceans. Learn more about Stripe Climate’s work to build the world’s largest carbon removal coalition and invest in the most promising early-stage solutions.
Watch this session to learn about:
- Why we started Stripe Climate
- New innovations in carbon dioxide removal
- Frontier, a billion-dollar advance market commitment from Stripe, Alphabet, Shopify, Meta, and McKinsey
- How Frontier works to fund the most promising carbon removal technologies
Nan Ransohoff: Hi, I’m Nan Ransohoff, Head of Climate at Stripe. If you forecast far enough out, climate change is probably the single biggest threat to Stripe’s mission of economic enablement.
Our journey into climate began in 2019 with a small corporate commitment to spend a million dollars buying permanent carbon removal. This pledge was grounded in climate science. To avoid the worst effects of climate change, we need to get global emissions to net zero by 2050, and that means doing two things. First, dramatically reducing emissions, and second, permanently removing huge amounts of carbon dioxide already in the atmosphere and ocean. Both present an enormous challenge, but we are particularly far behind on the second: carbon removal. While some of the solutions needed exist today, like planting trees or soil carbon sequestration, it’s highly unlikely that these solutions, by themselves, will get us all of the way there.
We need to develop a portfolio of solutions that we don’t yet have. The thing is, new technologies like solar panels, hard drives, and DNA sequencing tend to be expensive at the start, but costs come down over time as they scale. Carbon removal is at the beginning of a similar trajectory. And, because it’s expensive today, most companies would rather buy lower-cost alternatives. The problem is, without customers, these technologies can’t scale to reduce their costs. Not only that, but investors don’t want to invest in companies if it’s unclear that anybody will buy what they’re selling. So, without customers and investment, the carbon removal ecosystem has been stuck.
The thinking behind Stripe’s initial $1 million carbon removal commitment was to see if we could help break this cycle. It was an experiment. We wanted to see if spending a relatively small amount of our own money buying carbon removal from promising, new solutions at high prices would help move the needle. One of the first things we did was work with climate experts to come up with a set of criteria to define the kinds of solutions that we’re looking for. First, we want solutions that will store carbon removal permanently—for more than 1,000 years. A ton of emissions is permanent, so we need to take it out permanently, as well.
Second, we’re looking for solutions that aren’t constrained by arable land, which we know is limited and has other important uses—like growing food. Third, we’re looking for solutions that have the potential to be really low cost and high volume in the future, even if they’re not there today. In May 2020, we made our first purchases, buying $1 million of permanent carbon removal from four companies, spending up to $775 a ton. After making our own purchases, two things happened.
First, the carbon removal community had almost a weirdly positive reaction, which, to us, was mostly a testament to how starved this field had been for customers; $1 million isn’t all that much. Second, we started hearing from Stripe users, many of whom had wanted to do something in climate for a while but hadn’t because it’s hard to figure out what to do. Essentially, they asked us: If we send you some money, could you figure out what to do with it? These two things ultimately formed the genesis of what’s now called Stripe Climate, which makes it easy for any business to direct a fraction of their revenue to carbon removal. We then pool these funds together with our own to further accelerate promising new approaches down the cost curve. To date, tens of thousands of businesses from 40 countries have enrolled in Stripe Climate, choosing to give nearly 1% of their revenue to carbon removal. More than 8% of businesses that onboard to Stripe sign up. So far, Stripe Climate has purchased carbon removal from 14 companies. For 11 of these companies, Stripe was their first-ever customer.
The kinds of carbon removal approaches that we’re seeing are all over the map, from using giant fans to pull CO₂ out of the air to growing kelp in the open ocean and then sinking it to turning agricultural waste into bio oil and putting it back underground. And the diversity of approaches that we’re seeing continues to grow. Stripe Climate purchases have helped change the trajectory of these companies. Having a customer enables them to open up new facilities, attract new investment, and grow their teams. More broadly, the collective action of the tens of thousands of businesses contributing to Stripe Climate has helped change how the world is even thinking about carbon removal.
Governments are starting to fund research and procurement, and leading companies are now asking how they can purchase carbon removal to meet their net zero goals. Stripe Climate users have catalyzed real momentum. This field is genuinely in a very different place than it was in 2019. And, at the same time, carbon removal is still nowhere near on track to get to the scale needed. For starters, there is currently a huge supply shortage. There are too few companies even attempting permanent carbon removal, and the companies that do exist haven’t yet scaled. Part of the reason is that there has still been legitimate uncertainty around whether there will even be a large market for customers to buy carbon removal. If you’re an entrepreneur, why would you build a company if you’re not sure that there are going to be enough customers to buy your product? If you’re an investor, why invest in a company that you’re not sure will have revenue?
One option is to let this market mature on its own. But, with climate, we don’t have that luxury of time. If we want carbon removal to have a meaningful effect in mitigating climate change, we have to compress 10 to 15 years of development into the next 3 to 5. This is exactly what we hope to help make happen with Frontier—a new initiative from Stripe, Alphabet, Shopify, Meta, and McKinsey—in planning to spend $925 million buying permanent carbon removal over the next nine years. It’s a simple idea. By guaranteeing future demand for these technologies now, we hope to help them scale up supply and get cheaper, faster. This model, guaranteeing demand to accelerate the development of a new product, is called an advance market commitment or an AMC. The idea is to send a signal to researchers, entrepreneurs, and investors that there will be a big market for their technologies. In other words, start building.
AMCs are a concept we borrowed from vaccine development. In the early 2000s, low-income countries lacked access to the pneumococcal vaccine. Pharmaceutical companies weren’t motivated to spend resources developing a low-cost vaccine because they were unsure there’d be enough demand to recoup their costs. So governments and philanthropists came together and pooled $1.5 billion in subsidies. Their promise? If the pharmaceutical companies could produce the vaccine at a low cost, they’d have customers to pay for them. The program delivered hundreds of millions of doses and, by some estimates, saved almost a million lives. AMCs worked for vaccines, and we think they can work for carbon removal, too.
Here’s how Frontier works: Buyers decide how much they want to spend on carbon removal and pool their commitments through Frontier. Frontier’s team of technical and commercial experts finds and vets suppliers to identify the most promising technologies. Then they facilitate purchases between buyers and suppliers, either up front or through offtake agreements. With guaranteed customers, suppliers can secure the financing needed to build their next plant and, more generally, to scale up.
Finally, as carbon removal is delivered, suppliers are paid and tons are passed back to buyers. Frontier is a subsidiary of Stripe and will be run by the Stripe Climate team. For Stripe Climate users, nothing changes. We’ll still spend every cent of contributions buying carbon removal. We don’t charge fees, and we don’t make money on your contributions.
The only difference is that, now, Stripe Climate funds will be part of an even bigger pool of capital, which means greater impact. We estimate that about a quarter of Frontier’s total funding could come from businesses using Stripe Climate, and hopefully more if more users join us. Over the next nine years, Frontier’s members will spend nearly a billion dollars buying permanent carbon removal. On the one hand, a billion dollars is a lot of money—around 30 times what’s been spent to date. On the other hand, it’s less than 1% of what we need to spend every year by 2050. So there’s a long way to go. Our hope is that more companies will join Frontier in the months and years to come.
Ultimately, Stripe’s goal in all of this is to do what we can to combat climate change by getting carbon removal on its best possible trajectory. Our message to the carbon removal world today is loud and clear: Build and we will buy. We hope you’ll join us.