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Carbon removal gets its billion-dollar moment

Apr 13, 2022
Illustration of an upside-down wallet pouring out carbon dioxide molecules

Illustration: Annelise Capossela/Axios

Frontier Fund, a new $925 million fund owned by payments giant Stripe, created a customer market overnight for a growing cohort of carbon removal startups.

Why it matters: Entrepreneurs won't build companies without knowing whether customers will pay for its products, and investors won't back companies without knowing what the market share could be worth. Frontier Fund just put a reasonably large number to both of those.

State of play: Carbon removal technology is often cited as a necessary investment for companies with net-zero pledges or those subject to regulations.

  • But most of the investment has gone to carbon-offset markets, which has driven up prices amid competition among firms looking to buy up credits to balance their emissions calculation on paper.
  • Stripe head of climate Nan Ransohoff tells Axios Frontier Fund will stay away from the carbon offsets market entirely to avoid further aggravating the competitive pricing and inaccessibility to smaller organizations.
  • Scientists and industry experts say that carbon removal is still in nascent stages, partly due to lack of outside investment and partly due to lack of market for large-scale commercialized products.

Between the lines: Frontier Fund wants to throw money at both obstacles by becoming a customer to early-, mid- and later-stage startups working on carbon removal.

  • Investing directly would require the fund to place its bets on technology that may be too early to tell whether it can scale rapidly and eventually become less expensive, Ransohoff says.

Details: Frontier Fund has a $925 million tranche of funds from Stripe, e-commerce giant Shopify, Facebook parent company Meta, Google parent Alphabet, McKinsey, and Stripe climate customers.

  • It will fund customer agreements, primarily through pre-purchases for early-stage companies and offtake agreements for later-stage companies, to help drive down overall costs for emerging carbon removal technology.
  • It will invest with a nine-year horizon, through 2030, and is a not-for-profit fund.
  • It will not make equity investments in carbon removal startups at the outset, but Ransohoff tells Axios that the door is open for Frontier Fund to work with Stripe's own corporate investment arm in the future.
  • "We want to send a strong signal today to folks working on carbon removal that there's a market for what they're building and they have somewhere to sell it," Meta head of energy strategy Peter Freed tells Axios.

The bottom line: This is a spray-and-pray approach to carbon removal that created a billion-dollar market overnight, so expect entrepreneurs and investors to pay attention.

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