Frontier’s $1B Bet on Carbon Removal

Carbon

Dec 9

Hannah Bebbington is the Head of Deployment at Frontier, an advanced market commitment created in 2022, that aims to purchase $1 billion or more of permanent carbon removal by 2030.

Founded by Stripe, Alphabet, Shopify, Meta, and McKinsey, Frontier has quickly become a leading force in the carbon removal space. Its portfolio includes a "who’s who" of innovators pushing the boundaries of what’s possible in carbon removal—many of whom have been guests on this show.

Cody catches up with Hannah to explore how Frontier’s program is structured, what they’ve learned so far, and her perspective on the state of carbon removal today.

Episode recorded on Nov 22, 2024 (Published on Dec 9, 2024)

In this episode, we cover:

[2:03] An overview of Frontier
[7:00] The scale of the carbon removal challenge and future funding needs
[10:42] Gaps in the industry: demand, investment, and measurement
[13:21] Hannah’s background and role as Head of Deployment
[16:10] Frontier’s advanced market commitment model explained
[18:05] How Frontier supports early-stage companies through pre-purchases
[21:32] Tips for startups applying to Frontier’s programs
[27:19] Frontier’s offtake track for scaling larger projects
[30:16] The importance of measurement, reporting, and verification (MRV)
[35:05] Frontier’s criteria for funding: scale, cost, and permanence
[42:14] Microsoft’s role as a leader in carbon removal
[47:24] Key terms in Frontier’s offtake agreements
[55:08] The impact of the data center boom on carbon removal
[57:01] Carbon removal’s bipartisan support and policy outlook

Recommended Listening:

Cody Simms (00:00:00):
Today on Inevitable, our guest is Hannah Bebbington, Head of Deployment at Frontier. Frontier is an advanced market commitment created in 2022 to purchase an initial $1 billion or more of permanent carbon removal by 2030. It was founded by Stripe, Alphabet, Shopify, Meta, and McKinsey. In the last two years, Frontier has emerged as a force in carbon removal buying. The portfolio of companies that they are buying from is a who's who of innovators that are pushing the envelope on what's possible in carbon removal, many of whom have been guests on this show in the past. I was interested to catch up with Hannah to get more details on how they have constructed their program, hear what she and Frontier have learned so far, and to hear her take on the state of carbon removal.
(00:01:02):
But first from MCJ, I'm Cody Simms and this is Inevitable. Climate change is inevitable, it's already here, but so are the solutions shaping our future. Join us every week to learn from experts and entrepreneurs about the transition of energy and industry. Hannah, welcome to the show.
Hannah Bebbington (00:01:32):
Thanks so much for having me.
Cody Simms (00:01:33):
Well, Hannah, I'm really excited to have this conversation because though we've known many of your colleagues at Stripe for many years, I don't think, amazingly, we have had anyone on from Stripe since Frontier launched. And Frontier feels like such a stalwart in the carbon buying space at this point that it's kind of surprising to me. So here you are, welcome to the show.
Hannah Bebbington (00:02:00):
Yes, thank you. We've been busy.
Cody Simms (00:02:03):
Indeed, you have. For those who aren't familiar, and maybe you'd have to be living under an enhanced rock to have not been familiar, but maybe describe what Frontier is.
Hannah Bebbington (00:02:13):
Frontier is an advanced market commitment to buy about a billion dollars of permanent carbon removal to be delivered in this decade. We are a group of very large and now also very small buyers who are interested in using our role as a buyer in this market to actively accelerate carbon removal technology development. We do this by buying from the types of technologies that we would like to see exist in a gigaton scale 2050 future.
(00:02:39):
So we started Frontier really to solve what is commonly known as the chicken and the egg problem in carbon removal. We know the world is going to need permanent gigaton scale carbon removal in order to limit global warming, and yet most carbon removal technology today is still super small scale and really, really expensive. So it's hard for buyers to buy these types of tons or to buy from these types of technologies. It's expensive, it's technical. There aren't clear corporate guidelines for it. And yet, without a clear buyer, a lot of these carbon removal technologies can't get out of the lab and into the field. They can't deploy at any scale and they can't raise the capital needed to fund that deployment.
(00:03:19):
So the chicken and the egg problem is it's small and expensive and yet without buyers, it can't escape being small and expensive. So that's why we launched Frontier, to really be a buyer first resort for the types of carbon removal tech that we would love to see scale.
Cody Simms (00:03:33):
Why is that strategic for the various companies that are members of the Frontier Consortium to do? What's the point of buying something while it's too expensive and can't scale?
Hannah Bebbington (00:03:43):
A lot of the buyers that come to Frontier are really thinking about their corporate climate commitments in a very long-term way. They are saying that, "Our organization wants to have net-zero emissions by 2030 or 2040 or even 2050." And as we look to what that means, that both means radically reducing the emissions that we emit, that's about 80% of climate change mitigation. But also doing some significant portion of that with carbon or removal, that's the net part of the net-zero equation.
(00:04:14):
And yet, when you go to the market, and certainly in 2022 when we launched Frontier, you go to the market, there weren't that many options. So a lot of organizations bounded together, built this coalition that is Frontier to say, "We want to buy from the types of technologies today to ensure that in this decade, we can start to get technologies into the field, learn what works and what doesn't, so that when our net-zero dates come due, there is high quality permanent carbon removal that's at scale and that's cheap, so we can actually use it as part of our corporate climate programs."
Cody Simms (00:04:48):
So these are companies that are taking a long-term view on the problem and are saying, "Hey, if we're going to hit the goals we've set for ourselves 15, 20, 30 years from now, we know there's not enough supply of technology to help us do that available today. And we may be buying stuff that's too expensive today, but it puts us in the front seat to be able to buy it in the future and we're going to help it grow along the way." Is that what I'm hearing you say?
Hannah Bebbington (00:05:17):
That's totally right. And that long-term thinking is not that unique. The mission of Stripe is to grow the GDP of the internet, that is very long-term thinking. Google obviously has played a very important role in the scale up of renewable energy and in writing a lot of the original VPPAs. So we see this type of sort of ambitious forward-looking culture represented in a lot of the companies that end up joining or starting Frontier. So these are the types of organizations who have that forward-looking point of view and can say, "What do we want to do for the carbon removal market in order to ensure that over the next 5, 10, 20, 25 years, we're seeing this market scale in a way that we think will help us ultimately reach our climate goals?"
Cody Simms (00:06:01):
The idea there is if you believe the pie is going to get a whole lot bigger, invest in helping to grow the pie right now and the slice you have just becomes a bigger slice by default, as opposed to trying to sit back and assume that the pie will someday magically appear.
Hannah Bebbington (00:06:16):
A lot of the organizations, the buyers that originally founded Frontier are really thinking proactively, how do we make sure the type of carbon removal technology that we would like to see at gigaton scale in the future exists today? And we have to be a buyer of first resort for those types of technologies. So we Stripe, we Google, we Shopify, we need to buy carbon removal today, even if it's hundreds or thousands of dollars a ton because otherwise, this carbon removal technology will not be able to come to market, will not be able to scale, and we will ultimately not have the portfolio of solutions that we need in order to stabilize global temperatures in the future. And these are the types of organizations that are happy to do that.
Cody Simms (00:07:00):
Frontier is a billion-dollar commitment between now and 2030, if I understand correctly. And we're talking about a potential removal shortfall of something like five gigatons a year, which if you do the math on $100 a ton, aspirationally, we're talking hundreds of billions of dollars annually that needs to eventually flow into this space. It is very much a spark, I think, in terms of the conflagration that the world may need in this area.
Hannah Bebbington (00:07:30):
That's right. We like to say that a billion dollars is at once a very large and very small amount of money. So when we launched Frontier in April of 2022, fewer than 10,000 tons of permanent carbon removal had been done anywhere. So a billion dollars was a massive scale up of the market, hundreds of X. And yet, you're right, as you look to 2050, we're going to need hundreds of billions of dollars spent every single year in procurement. Even if you look to 2030, we're going to need tens of billions of dollars spent every year in procurement.
(00:08:01):
So for us, we think about a couple of things. One, how do we best spend what we see as quite a precious and limited resource, this billion dollars to be spent pre-2030? How do we best spend these committed funds to most accelerate a diversity of carbon removal solutions? We see this decade as the decade where we can learn what works and what doesn't. We are very comfortable with failure now, as we think that will allow us to learn where do we need to double down post-2030? So that billion dollars needs to be spent very judiciously.
(00:08:34):
Now, additionally, we need to be thinking about who are we going to pass the baton to? It's unlikely that the voluntary carbon market is going to scale to the size of hundreds of billions of dollars a year. So, really, we're looking to what are the government policies and infrastructure that we need in place to ensure we have a carbon removal market operating at gigaton scale? And actually, we're starting to see inklings of that. Yesterday, a new tax credit bill was introduced into the Senate by Senator Murkowski and Senator Bennett, which would be a $250 credit per carbon removal ton from a wide diversity of pathways. That's the type of policy infrastructure that we need if we think this market is going to reach the gigaton scale that we hope it does. So the role of buyers today and the role of our billion dollars today is to say, "Let's get technologies out of the lab, into the field, understand what works so we have something real to pass to the government."
Cody Simms (00:09:27):
Hopefully, it's also incentivizing the picks and shovels that need to emerge around the ecosystem as well, so things like measurement reporting and verification technologies, credit offering technologies. I'm sure you have a whole list of these types of things that need to emerge around the industry that may not be direct removal methodologies themselves, but are necessary for the ecosystem to evolve.
Hannah Bebbington (00:09:52):
When we got started, the market was really at the starting line and everything has gone from zero to one. So that's not just technology, that's not just figuring out what direct air capture technology works, what enhanced rock weathering company is going to be most successful, but it's how do we do community engagement? How do we do measurement and reporting at scale? What does delivery look like? How do you buy carbon removal? What's the structure of the contracts and the purchase agreements that we do that? What makes these types of projects bankable or investable? And how do we build an ecosystem of investors and ensure that these companies have the capital they need to build and deliver against the agreements that we write? So you're right when you say there is so much surrounding the technology development that has had to emerge alongside over the last couple of years.
Cody Simms (00:10:42):
Insurance too, I guess is probably one. Where are the big gaps, as you're working with companies today across the lifecycle of identifying opportunities to contracted in development to delivery, where are you seeing those sort of third-party service gaps right now that you're hoping to be filled?
Hannah Bebbington (00:11:01):
So if we think about gaps in the carbon removal industry, the first and primary one that people still continue to talk about is customer demand. That's not third-party services as you asked, but really thinking about where are my next set of customers going to come from? So at least on the Frontier side, we're thinking a lot about how do we continue to build the demand side of the market? So how do we grow the Frontier Fund? How do we make it easier to buy carbon removal?
(00:11:25):
That comes in multiple different forms. You can buy carbon removal through the Frontier website today, you can join as a member. And we also publish all of our contracts and points of view on different types of companies so that organizations can kind of follow suit.
(00:11:39):
We've also launched Fellows, which is our program to help expand the carbon removal policy infrastructure around the world, so these fellows are working on different carbon removal policy initiatives outside of the US. And of course, this tax credit that we just talked about. So what is the portfolio of demand bets that we need to put in place so that as these companies start building and deploying their technologies, they have the customers to buy the tons that they can ultimately deliver?
(00:12:10):
Next from that, the second big gap in this market is really investment. We need to find the investors who can take these technologies from seed stage all the way up to megaton scale. So who are the equity investors, who are the debt investors who are comfortable with carbon removal, who are hard tech investors, understand the timelines required to get this technology developed and to scale who are willing to go the distance alongside the carbon removal technology companies?
(00:12:40):
And then the third is really the infrastructure around measurement, reporting, and verifying the carbon removal that's ultimately delivered. So who are the credit issuers who are going to be the high integrity source of truth for what carbon removal has been done around the world, across pathways? What are the protocols? So what are the underlying documents that detail how we quantify the carbon removal as it's coming off the proverbial line? And then what is the technology, the sensors, et cetera required to provide the data to those people who are putting those protocols into action? So, really, the whole market needs to develop around these technology companies.
Cody Simms (00:13:21):
Let's talk a little bit about your background, Hannah. This is such an emerging field. You're clearly have become one of the experts in this space as it has evolved. How did you get there?
Hannah Bebbington (00:13:35):
I've always been interested in building, building new markets, building new companies. And I worked in consulting after graduation, I then went to Impossible Foods where I focused mostly on international expansion. I've dabbled in venture. And working on some aspect of the climate change problem has been a thread throughout that journey for me.
(00:13:58):
Climate change is a huge challenge. That is what makes this problem interesting in and of itself. But I also see it as a huge opportunity. Can we fully overhaul all of our infrastructure and transition our economy to something better? Can we do that while still making money? I started to work in carbon removal four years ago when Stripe made its initial million dollar pledge to buy carbon removal. And really, I came to this space because the science was and still is pretty clear that we're going to need gigaton scale permanent carbon removal. And yet we were so far behind compared to that target, so woefully underfunded in the space. We were right at the starting line. So I was interested in both the technology development and the market development that was going to be required to get this solution to scale.
Cody Simms (00:14:47):
And today, your role at Frontier is head of deployment. What does that entail?
Hannah Bebbington (00:14:52):
I like to think that I've had two chapters in my time at Frontier. When I joined four years ago, I worked very closely with Nan Ransohoff on thinking about what is an advanced market commitment for carbon removal? How would we structure this organization? How might we raise a billion dollars? What is this even going to look like? And bring this organization into the world, we get to raise the money. And now I have the privilege of thinking a lot about how do we spend those committed funds?
(00:15:19):
So in my work, my team thinks about who are the carbon removal suppliers who are most likely to be part of that 2050 portfolio? Where do we find them? How do we diligence them? How do we get our buyers on board? What's the structure of the agreement that we write with this portfolio of companies?
(00:15:35):
And we are not investors, we are buyers. Frontier is about buying permanent carbon removal. And yet, given our focus on the future potential of technology, our team looks and feels kind of like an early stage venture firm. So we're always talking and sourcing with new companies.
Cody Simms (00:15:54):
Let's step back to the work you said you first did with Nan as Frontier was getting launched and you said, "Hey, we need to kind of come up with what is an advanced market commitment and how do we get buyers on board?" Did you use anything as your model for that? What was sort of the inspiration to create that structure in the first place?
Hannah Bebbington (00:16:10):
We borrowed the advanced market structure from public health. So AMCs historically have been used to increase the distribution of new vaccines to developing countries. It solves the market problem of who is going to buy my X product or good if I build it? So in the vaccine world, that's really pharmaceutical companies saying, "If I were to develop a slightly less efficacious drug that's much cheaper, who would ultimately buy that product?" So philanthropists and governments step in to say, "We will buy your drug if it meets X target spent and then distribute that equitably to other countries."
(00:16:51):
We are applying this advanced market commitment structure to carbon removal and really to any technology in the climate space for the first time to solve a very similar problem. So the problem with carbon removal technologies and the reason why they hadn't yet been able to scale was the same question, who is going to buy my carbon removal if I deliver it? So the idea behind Frontier is to say we will be a buyer of first resort. We will be the organization that will buy carbon removal if delivered according to a certain set of target criteria between now and 2030.
Cody Simms (00:17:25):
So that was 2022, it's now the end of 2024 and you have, I think, contracted almost $350 million worth of removal for something like 635,000 tons of CDR across 43 different projects. That's an incredible amount of work that you've had to do. Describe a bit what it is like to figure out which of these projects are credible. Buying that amount of removal across 43 different projects, I presume has, in, call it two plus years, while also spinning up the project in the first place is an incredible amount of diligence.
Hannah Bebbington (00:18:05):
So it's worth noting that Frontier has two purchase tracks. We have pre-purchases and we have offtakes, and it looks and feels a little bit different in each of these tracks. So our pre-purchase track, pre-purchases are 500K checks paid up front to early stage suppliers for tons to be delivered in the future. The idea behind pre-purchases is can we get technology out of the lab and into the field for the first time? This we run on an annual batched cycle and we have 33 companies in this portfolio, and you can think of this as the top of funnel for the market, so we want to find-
Cody Simms (00:18:41):
Are these almost like R&D grants, Hannah? Would that be the right way to think about this sort of?
Hannah Bebbington (00:18:45):
They are purchases so they are ton denominated, but they are paid up-
Cody Simms (00:18:49):
Okay.
Hannah Bebbington (00:18:49):
So you can think of this as non-dilutive capital for these early stage companies and a little bit of a customer signal. So these are the organizations who are often raising like a seed or maybe a series A type of funding round. And this helps give a little bit of customer signal that there's some interest in the type of technologies that they are bringing to market.
Cody Simms (00:19:10):
Presumably, these are lab scale kind of technologies. They're not yet running any kind of even true pilot facility yet in terms of their ability to fully deliver on a tonnage mechanism until they go raise more capital to build that, I would guess?
Hannah Bebbington (00:19:27):
Yes, that's exactly right. We are often buying on the order of a few hundred tons from these types of organizations. So to give you a flavor, Charm was one of our first pre-purchase companies back when we were doing this at Stripe before Frontier, and this was their first injection. So we were their first customer for the first piece of work that they were doing out of the lab in the field.
(00:19:51):
That portfolio at Frontier has 33 companies and covers a really wide diversity of approaches. And this is a great way for us to test, in a relatively low stakes, low capital way, what are the types of things that we would like to see continue to learn and grow and scale? So there's often a lot of technical milestones associated with those companies, as we would like to learn more about their technology as they put it in the field for the first time.
Cody Simms (00:20:16):
And is there a call for application to those kind of companies? Like it's People are coming to your website, they're filling out a form, they're going through some kind of online process?
Hannah Bebbington (00:20:24):
Yes. Historically, that has been a batched process, kind of akin to a YC round and has a cohort. So we just announced our most recent cohort back in September of nine new companies joining us.
Cody Simms (00:20:36):
And are you putting out a call for certain technologies that you're looking for there?
Hannah Bebbington (00:20:40):
We typically announce with a targeted set of innovation areas and those innovations areas, as we been doing this for many years now, get increasingly concrete and specific. So an example is in this last round, we've become really interested in what are the carbon removal approaches that we think can best integrate with large industrial processes as a way to get to scale and be cheap much more quickly than you would if you were starting entirely from scratch? Vaulted was an example of a pre-purchase company that we've done recently. One that is taking a known technology, working closely with large industrial waste management organizations to ultimately put a wet organic slurry underground. That is the type of call for a specific innovation area and then match to pre-purchase that we love to see.
Cody Simms (00:21:32):
Got it. I want to hear about your second track, which is for your companies that are further along the development cycle. But before we get there, just real quick, because I presume so many startups listening to this, any advice you have for companies that are applying in that first track, that are earlier stage, still, in many cases, validation mode on their methodologies and whatnot, things that you wish you could tell every startup that took a meeting with you, you could tell many of them right now at once?
Hannah Bebbington (00:22:01):
We are super excited to talk to anyone who thinks they have a carbon removal approach that fits our target criteria and specifically our innovation areas. So please, if you're starting a carbon removal company, we would love to talk to you.
(00:22:14):
A few things that really help us get excited about technologies is do we think you can get really big and really cheap? And do we think you can do that sooner rather than later? So giving us a compelling case for why your technology is going to play a meaningful role in the 2050 gigaton scale carbon removal portfolio is really paramount.
(00:22:35):
That said, we have lots of organizations that apply to us who get rejected, who get lots and lots of feedback from our process and come back again and do make it into our portfolio. So I would say we're excited to talk to you today and we're excited for this to be potentially a long relationship where we get to know your organization and can help you develop your technology along the way.
Cody Simms (00:22:56):
Hannah, most of the companies that I see that are working with Frontier look like technology startups. They are not typically academic projects, they're not typically big company sort of side projects. They are independent companies, usually with a handful of founders and are looking to be an independent entity. Is that part of your criteria in a specific way?
Hannah Bebbington (00:23:26):
Not at all. And actually, we are really excited about organizations that either aren't startups themselves or have tie-ins to large industrial partners. So I think this has been a call for innovation. You're right to say that you haven't seen a lot of this, but it's something that we would really love to see a lot more of.
(00:23:46):
That said, we have some examples of this. So we have done an offtake agreement with Stockholm Exergy. That is a large bioenergy facility in Sweden, they provide district heat to most of the residents in Stockholm, so very, very much not a startup. We do on, the other side, do pure play startups. So we've done an offtake agreement with someone like an Heirloom who's building a direct air capture company from the ground up. And everywhere in the between, so we have lots of folks in the middle like Vaulted, like Charm, like Lithos, who all get their feedstocks from large industrial players. Lithos works with lots of quarries around the southeast in the United States, for example.
(00:24:28):
So for us, what we care really deeply about is doing carbon removal at large scale and at affordable prices. Large industrial companies have built lots and lots of infrastructure. They operate at scale, they operate very, very efficiently. And to the extent carbon removal can piggyback on some of those processes, whether it's waste management, whether it's quarrying, whether it's bioenergy, et cetera, we think that's a really compelling path for carbon removal scale.
Cody Simms (00:24:58):
For any listeners who want to double click into any of those companies that Hannah mentioned, each of Charm Industrial, Vaulted, Heirloom, and Lithos Carbon have been on the pod, so you can go back into the archives and listen to those founders talk about their solutions. Great. Super helpful and instructive, particularly hearing that it's not just sort of a venture backed startup. But I did hear you say you're looking for things that can get to high volumes very quickly, which, to some extent, would orient you to organizations that are seeking to find scale to their solutions, which, to some extent, requires a bit of entrepreneurial wiring to maybe look for that as well.
Hannah Bebbington (00:25:38):
Yeah, and just to be very clear what we mean, it's not to say that we prioritize funds delivered at scale in this decade. Rather, we're thinking about organizations that have this ambition, this gigaton scale ambition and are pursuing a technology approach that we think can get to greater than 500 million tons a year in scale. And what we mean by that is you are not limited by your feedstocks, you are not limited by your physical footprint, you are not limited by energy, you are not limited by cost. We think there is a path for you to be at scale in the future, rather that you have to be at scale today.
Yin Lu (00:26:17):
Hey, everyone, I'm Yin, a partner at MCJ, here to take a quick minute to tell you about the MCJ collective membership. Globally, startups are rewriting industries to be cleaner, more profitable, and more secure. And at MCJ, we recognize that a rapidly changing business landscape requires a workforce that can adapt. MCJ Collective is a vetted member network for tech and industry leaders who are building, working for, or advising on solutions that can address the transition of energy and industry.
(00:26:48):
MCJ Collective connects members with one another, with MCJ's portfolio, and our broader network. We do this through a powerful member hub, timely introductions, curated events, and a unique talent matchmaking system and opportunities to learn from peers and podcast guests. We started in 2019 and have grown to thousands of members globally. If you want to learn more, head over to MCJ.VC and click the membership tab at the top. Thanks and enjoy the rest of the show.
Cody Simms (00:27:19):
Okay, let's talk about the second track of companies you work with, so that was mostly focused, I know some of the companies that got named are now larger companies, but you were working with them I think when they were earlier to begin with. Let's talk about now some of the programs you have in place for companies who have nearer term paths, I think, to larger delivery.
Hannah Bebbington (00:27:38):
So our second track is offtakes and that's how the lion's share of the committed funds in Frontier will be spent. And these are meant to support technology companies that are building their first demonstration scale or commercial scale facility. We write large multi-year, multi-million dollar pay on agreement, pay on delivery purchase agreements, and they're modeled after PBAs for those who are familiar with that. And to your point about there was a lot of overlap between pre-purchases and offtakes, five of our eight offtake agreements that we have signed are with companies who were previously pre-purchases. So we love to see organizations that come to us as a pre-purchase, successfully deliver on that pre-purchase or successfully make significant progress on that pre-purchase, and then "graduate" into our offtake program for the next scale up in funding. Sort of a microcosm of what we hope to see in the carbon removal market more broadly. Lots of companies getting started, getting out into the field for the first time, successfully delivering on that small scale project, and then scaling into demonstration scale or even commercial scale thereafter.
(00:28:45):
We've written eight offtakes or we've publicly announced eight offtake agreements so far. And these are across the major pathways of carbon removal. So we've done three direct air capture offtake agreements, all sort of a different approach to direct air capture, so quite unique and distinct. We've done a bunch of different BECCS and BiCRS approaches, we've done enhanced rock weathering and we've done one marine CDR, a river liming deal called Carbon Run.
(00:29:14):
And what we're trying to do with our offtake program is build a portfolio of solutions that we think can kind of go the distance, so can get big, can get cheap in the future. But it's risk adjusted, there's a healthy tolerance for failure even at the offtake stage. So while it might seem like our later stage program, which it is, these are certainly technologies that are deploying at a much greater scale than what we see in our pre-purchase portfolio, there is a healthy amount of technology risk still to be explored. And that is the value of doing a larger offtake agreement with these companies today, it is to say we would like you to build your technology at a bigger scale because we would like to continue to learn and refine these technologies to understand what works and what doesn't work.
Cody Simms (00:30:00):
Let me click into that technology risk, not just the principle risk of the company itself and its ability to do the thing it says it's going to do, but we were talking earlier about some of the ecosystem that needs to evolve around these companies. And I want to specifically ask about measurement reporting and verification.
(00:30:16):
So with direct air capture and with BECCS or bioenergy carbon capture and storage, I think in both of these cases, you're kind of directly counting atoms that flow through your system, right? With direct air capture, you're actually pulling CO₂ through your system and putting it somewhere. And with bioenergy capture, bioenergy carbon capture and storage, kind of the same thing, you're actually putting carbon somewhere else underground or whatnot.
(00:30:43):
With some of the other categories like enhanced rock weathering, for example, it strikes me that that is more of a models-based approach to understanding how much CO₂ is captured, akin to forestry where you're actually kind of needing to run complicated math to say, "Based on sampling that we've done, we believe this is the amount of total CO₂ that's been captured." How do you approach that in terms of market confidence in those types of approaches that require you to essentially extrapolate mathematical models to understand impact?
Hannah Bebbington (00:31:17):
So in the instance of enhanced rock weathering, and this is true of many alkalinity-based approaches in the ocean as well, so would apply to our river liming approach, Carbon Run, and many others that are in the oceans, it is actually a combination of measurement and modeling. So for example, with enhanced rock weathering, when you are laying the crushed rock on fields, you can directly measure the amount of weathering that is happening on the field surface and then you do have to additionally model what the storage in the ocean looks like from there.
(00:31:51):
So when you say this is going to be a modeled approach, it will be likely largely modeled at scale in the future and that's what will make these types of approaches very cheap. But today, they actually have quite expensive measurement and verification infrastructure around them because we are taking so many soil samples. So a lot of enhanced rock weathering companies are measuring one acre plots on their fields every six months. So you can imagine the amount of soil sampling that is happening for any given ton of CDR.
(00:32:25):
We, as buyers, like to pay for that expensive MRV, in part because we would like to increase the data sets that exist to inform the models. So ideally, a lot of the enhanced rock weathering or even ocean-based approaches today take lots and lots and lots of measurements so that we can build a high degree of confidence in those measurement models for the long term, and that's how these pathways get cheap. So today, as a first buyer in these types of pathways, we see it as our responsibility to be increasing the overall understanding of how various feedstocks are weathering in various climates, in various fields, at various temperatures, etc, so that we have the best models going forward as we scale these solutions.
(00:33:13):
But it's expensive. You are imagining sort of an army of individuals that are going out, taking soil samples on quite a frequent basis and that costs money.
Cody Simms (00:33:24):
Yeah, it feels like it's a different kind of technology risk. Some of these are can you build the facility? Can you engineer the thing? Can you scale the sorbent you need or whatever? And this is, in many cases, the materials that some of these sort of enhanced rock weathering companies or whatnot that we're talking about use are actually pretty straightforward and the tech risk is more on the measurement side. At least that's how I think about it today.
Hannah Bebbington (00:33:46):
Yeah, it's such a good point. And as we think about what a portfolio of carbon removal solutions look like, there's really sort of comparative advantages and disadvantages across pathways. So exactly as you mentioned, direct air capture and BECCS or bioenergy with carbon capture and storage, these are technologies that are very easy to measure. It is a flow meter. However, they're also, especially on the DAC side, quite energy intensive and quite expensive.
(00:34:11):
So direct air capture today is sort of in the hundreds of dollars a ton. And then on the biomass side, there is this whole world of sustainable biomass sourcing that you have to get right to feel confident in the carbon removal that is ultimately being delivered. So what you get in terms of easy, "easy" measurement, you perhaps trade in terms of costs or energy additionality or sustainable biomass sourcing.
(00:34:36):
On the other hand, with something like enhanced rock weathering or ocean alkalinity enhancement, it is technically quite easy to do. You are spreading rock on fields, you are spreading rock in the ocean. However, the measurement and reporting infrastructure is more nascent. There is more uncertainty in the work that you are doing there. And then there is a broader ecosystem question. So how do we understand what is happening in the broader ecosystem when we put down crushed rock on fields or we put crushed rock in the ocean?
Cody Simms (00:35:05):
On that note, how do you consider things that may not be cutting edge technology, take biochar for example, which has been used for hundreds or thousands of years, but can maybe hit scale sooner but may not need a lot of capital acceleration to kind of prove their models? They're being bought today in traded in the carbon markets. Does something like that a fit for Frontier or not?
Hannah Bebbington (00:35:29):
I would start by saying that just being cutting edge is not a criteria for us. Rather, we think about the technologies that should be a part of Frontier portfolio in a couple of different ways. First and foremost, do you meet the target criteria for the type of product that we want to buy? And for us, that is do you have a 1000-year permanence? Do you have the ability to get to big scales, so greater than 500 million tons per year? Do you have the ability to be cheap? That is less than $100 a ton. And do you have a limited physical footprint? That's basically what we mean when we say we want to buy permanent carbon removal that we think can "go the distance."
(00:36:08):
In addition to that, so once you've sort of made it through that first target criteria screen, we think about diligence for our offtake portfolio on four lenses. First, do you meet our target criteria? Second, do we think you can execute on your strategy? So do you have the team in place that we think is best suited to scaling this technology? Do you have a history of excellent execution? Do we think you have a strategy that will allow you to grow and scale quite quickly? The third is do you fit into our portfolio? So we have a very robust perspective by pathway on what we think good looks like and the types of approaches that we would like to see tried in the field. Are you one of those? So do you "fit our bingo board," we like to say. And then the fourth is can we, Frontier, help accelerate your scale-up? So what does an offtake with Frontier do for you in your moment of scale? And can we meaningfully move the needle for this company's trajectory?
(00:37:07):
So none of those things require being cutting edge or not. Rather, it's about ensuring that the types of technology that we think should exist does exist and we can help pull them into being. And I'll give you an example. We've talked a bit about Vaulted in this conversation and Vaulted does not have a cutting edge technology. Vaulted is a spin out from Advantek. They are using a technology that has been used by oil field services companies for many decades. And it is that foundation, the fact that this is known, quite mature technology that allows Vaulted to scale and actually start delivering extremely quickly, which we're super excited about.
Cody Simms (00:37:45):
On that note, and one of the things that is interesting about Vaulted is that they have this long industrial history to the company, not specific to Vaulted. But I'm curious how you see the shifting winds around offsetting relative to insetting? Meaning right now, I think Frontier, you could very clearly say it's an offtake agreement and it's offsetting, the things you're buying aren't necessarily core to Stripe or Google's individual businesses, right? It's purely, "Hey, this is a ton of CO2 that we believe to be high quality and it's going to offset the emissions that our own company has." Increasingly, it seems like there hopefully is appetite for companies that are purchasing things that make up for the direct impact their companies have in the world. So they're buying tonnage that is related somehow to their existing business lines. Do you see that trend starting to happen?
Hannah Bebbington (00:38:42):
Honestly, if we think about the carbon removal math that we talked about, so the world is going to need to get to hundreds of billions of tons a year of procurement in order to have gigaton scale carbon removal, it's likely going to be a patchwork quilt of policies and markets that get us to that place. So you can imagine a world where you have some voluntary market, you have some compliance carbon markets, you have some policies that require that for wastewater treatment facilities, you have to add limestone instead of a different chemical in order to do your process, which allows you to do carbon removal. Or you might imagine that certain waste management programs require that you inject waste underground if it's PFAS contaminated. You could use Vaulted's technology for that, that would give you carbon removal. But the policy incentive varies around PFAS contamination not around carbon removal.
(00:39:32):
So you can kind of play out this world where you have a bunch of industrial processes. Another one would be how you manage mine tailings. So you can manage mine tailings today to do carbon removal. Do we write that into some kind of regulation or policy or so on that's not about carbon removal, but it's more about "waste management," but gives you carbon removal at scale? In between those two things, the voluntary carbon market that we have today, which is just buying a ton of DAC to offset your emissions or having industrial policy that has certain stipulations that deliver carbon removal but aren't about carbon removal, your question on insetting is somewhere in between. So do you have organizations that themselves are going to do carbon removal either because they would like to neutralize their emissions or because they have to neutralize their emissions based on some type of policy regime in their industry?
(00:40:26):
I think would love to see a lot more of that, so we would love to see a lot more agricultural partners doing enhanced rock weathering on their fields or mining partners doing a lot more mine tailing carbon removal, or we mentioned wastewater treatment facilities. However, today, carbon removal is super expensive and there is a healthy amount of technology risk. And those types of industrial partners that could technically inset are often quite low margin businesses with very, very low risk appetites. So part of the reason why we have this voluntary carbon market infrastructure as we do today is because the types of companies that are buying permanent carbon removal have the margins to support it.
Cody Simms (00:41:08):
Super great framing and really interesting to think about potentially carbon removal being a feature of other environmental compliance that a company may need to do, as opposed to necessarily just buying carbon removal as a thing. In which case, I guess additionality starts to become a question of can you charge for the carbon removal ton if you are already needing to bury this PFAS contaminated slurry underground anyway? But those are, I guess, good problems that the industry will face in the future hopefully.
Hannah Bebbington (00:41:39):
Yes. We actually ask ourselves this question a lot. Is additionality a good thing? That actually as we are thinking about gigaton scale carbon removal, the amount of mass and infrastructure that you are building to do that, you want it to be done in a way that doesn't rely on the voluntary carbon market. So either has other co-benefits that are valuable, so other revenue streams, or have other policy mechanisms that enable that amount of carbon removal to be done at scale. I think ideally, in a 2050 gigaton world, the concept of additionality fades away.
Cody Simms (00:42:14):
You mentioned industrial companies are kind of historically low margin businesses and one of the advantages of Frontier is that it's mostly made up of a consortium of technology companies that do operate at higher margins and thus can maybe take a bit more of a longer-term approach to fomenting the market here. What's been the impact of Microsoft in this space? They feel like they've become the 800 pound gorilla in this world. I'm sure you're buying alongside them often. Curious just to hear your thoughts of them as a buyer in the space.
Hannah Bebbington (00:42:44):
Microsoft is an incredible peer to have in the carbon removal market. Can take so much credit for so much of the scale that we are seeing, especially in DAC and in BECCS where they are writing contracts that each individual one is hundreds of millions of dollars. And I think the internal carbon price that Microsoft has set up is what is fueling or powering a lot of these large agreements being written. And that is such a powerful tool that many, many organizations have not implemented. So we look to Microsoft as really best in class, in many ways, how they've structured their corporate climate program and certainly in the way that they are writing these long, airtight, very robust, very catalytic offtake agreements that are meaningfully getting projects built.
(00:43:33):
And one of the things that we really love, we Frontier, we write agreements through 2030 and we write with an extremely diverse portfolio. We love when we get to write an offtake agreement with one company that we hope exists and then Microsoft picks up for the 2030 and beyond. Exergy is a great example of that where we have purchased tons in their pre-2030 time period and then Microsoft takes it the distance there after. And in fact, we would love to see a lot of Frontier buyers start to graduate into that long-term buying that Microsoft is really modeling.
Cody Simms (00:44:07):
How often do the Frontier Consortium members end up doing direct buying from Frontier companies at the offtake level? You've sold eight of them to date. Is that a regular occurrence you're starting to see happen?
Hannah Bebbington (00:44:18):
The way Frontier is structured today is Frontier is really the technical advisory team, so we're doing all of the sourcing and the diligence thing and we pre-negotiate the offtake agreements. But it's very important to note that all of our Frontier buyers are entering into bilateral agreements with our suppliers. They're all identical, but Google signs, Shopify signs, JP Morgan signs directly with these suppliers, and we do this to set up that direct relationship that will hopefully extend much beyond 2030. So as those suppliers are starting to build their next facilities and issue right of first offers and deliver all of their performance reports to these companies, and as Google and JP Morgan and Stripe and everyone is starting to think about their post-2030 strategy, those supplier relationships are in place and can be continued.
Cody Simms (00:45:07):
So they already have individual legals and contracts in place with each of those companies. Presumably, Frontier is helping with the upfront negotiations so that the startups or the offtake sellers aren't having to do separate legal negotiations with five or more parties at once, at least for the first round. And then, again, as you said, as you grow a relationship, you can start to go bespoke an individual to each individual buyer. That's what I'm hearing you say, is that correct?
Hannah Bebbington (00:45:32):
Yes, that's right. And getting that offtake agreement has been a huge part of the work that we have done over the last couple of years. So learning how to write long-term off-take agreements for carbon removal companies, so building something that works for carbon removal technology, for carbon removal buyers, and for carbon removal investors. And then you're exactly right, we pre-negotiate a standard offtake agreement, so we actually work from the same template across all of our suppliers, pre-negotiate that and prepare that for all of our buyers who then sign an identical agreement.
(00:46:05):
That offtake agreement has been hundreds of hours of blood, sweat, and tears. And we actually posted it on our website, along with all of our notes and annotations because it is our hope that other parties in the carbon removal market, the buyers or suppliers can use that as a decent starting point for their own purchases, or even that it can apply to other emerging climate technology categories. So one thing that we found was a lot of the standard offtake agreements that we were looking at before made a lot of sense in commodity markets or in markets where you had a mature technology and a mature market and a mature buyer. That's not yet true of carbon removal, though we would like it to be as soon as possible. So we kind of had to take those agreements as an inspiration, so read PPAs, but then write our own document that we think made sense for our industry.
Cody Simms (00:46:56):
And do you see it evolving to be bespoke across each of the core methodologies that you're starting to invest in? You mentioned, for example, with BECCS, sustainable biomaterial sort of sourcing is one of the key areas, but clearly, that's basically irrelevant for DAC. As you start to think about expanding agreements, do you have essentially a different appendices for different methodologies or do you just redline out certain sections that don't matter?
Hannah Bebbington (00:47:24):
So we work from a standard template for all of our suppliers and it has been some amount of real work to figure out what is an robust, airtight, bankable offtake agreement that works for DAC, a facility, a box that you turn the lights on for and then it generates carbon removal, versus something more modular, a more open system like enhanced rock weathering where you are continuously spreading rocks on many, many different fields around a large geographic region. We feel pretty comfortable that we have gotten to a place where you can write a carbon removal offtake agreement for a really wide range of suppliers. And to your point on appendices, thinking about how do you use the protocol, how do you use milestones, how do you use conditions precedent, how do you use the project description as places where you can capture what might be unique to one project versus another?
(00:48:17):
I think even within BECCS and BiCRS, for example, the biomass sourcing constraints that you would have on Stockholm Exergy, where you are thinking about forestry sourcing across all of Europe, is very different than what you would think about for the biomass sourcing of Charm that is taking agricultural residues like corn stover or even forestry residues from the Sierra Nevada region where we're doing forest fire prevention work. So the types of things that you want to protect for and control for are often very bespoke to the project, so we found places where we can customize very distinctly and sort of individually while also maintaining a very standard and consistent agreement.
Cody Simms (00:48:58):
What are some of the kind of key provisions in the offtake agreement? In particular, things that jump to mind to me would be the technology takes longer to mature than you'd hoped, so you have, unfortunately, an under-delivery scenario. Another one would be the company can't raise this next round of funding and eventually has to shut down. So essentially, a not even under-delivery, but non-delivery type of scenario. I assume you're paying on delivery, so to some extent, you're insulated from that, though it obviously impacts your own forecasts and the forecast that your partners have in terms of the amount of removals they can take credit for. Curious to hear your feedback on some of those areas and anything else that you think is highly material in the agreements that your offtake partners need to be aware of as they're working with you.
Hannah Bebbington (00:49:47):
You hit on a bunch of major topics. So first and foremost, with an offtake agreement, you want to define what type of offtake agreement it is that you are writing. So our offtake agreements are what we would call like a vanilla take and pay or fixed price and fixed volume pay on delivery. So we spec out in our agreement how much we're going to pay per ton, how many tons we expect over a schedule, and then we pay on delivery. So you're right, we are somewhat insulated financially from a company not being able to deliver. If you don't deliver, we don't pay. We do just have to go and find that carbon removal elsewhere if we want to fill out our forecast.
(00:50:27):
So because of the nature of that agreement, defining delivery is really important and a lot of people don't think about that. But in carbon removal, does delivery happen at the time of doing the carbon removal or does it happen at the time that the carbon removal has been done and measured and verified and issued by your credit issuer?
Cody Simms (00:50:47):
And stored, right?
Hannah Bebbington (00:50:48):
Well, and stored. Right, exactly. But once it's been put down the well, then you have to measure it, then you have to have your verifier confirm it, then you have to issue the credits and that's when we consider it delivered.
(00:50:58):
The second big piece that you brought up that's super important is delivery shortfall and delays. So we are working often with startups or even if they're not startups, this is first of a kind technology. These organizations are doing something really hard. They're putting something out into the field for the first time, and so we do think delivery delays are inevitable. So we have structured our contracts to be quite flexible and generous to the idea that it's probably going to have a slower ramp than you think and what happens when you get delayed? So we give six-month grace periods on delays, and there's the ability to sort of renegotiate your delivery schedule over the course of our offtake agreement.
(00:51:36):
The last thing that matters is what happens in the worst case scenario? And this is what a lot of time is spent on in legal agreements. But basically when can a buyer terminate or what are the other remedies or ways of managing issues in this contract that may or may not be punitive? And our general stance at Frontier is we are a group of philanthropic buyers. Our hope is that these carbon removal suppliers are successful, we want the field to be successful, and we have the privilege of buying carbon removal pre-2030 when, in reality, there is not a huge amount of damages that a buyer suffers if carbon removal is not delivered on time or not delivered at all. We are before any corporate climate net-zero dates, we are pre-2030, and even those climate commitments are voluntary in nature.
(00:52:24):
So with that, we like our termination rights to be very few in nature and very clear. So only in the instance, to your point of they can't turn on their facility, they can't meet a certain minimum quantity or they become insolvent, are basically the main ones when we would terminate. And then our remedies, so we don't like to have really punitive damages. We don't like to have lots and lots of liquidated damages in our agreements. Rather, we would rather just terminate. So the only instances when we do have a punitive remedy is in the instance of kind of what we would call bad behavior. So we tried to buy carbon removal from you and you sold it to someone else instead of delivering to us would be a major one.
(00:53:05):
So that's kind of roughly how we think about our carbon removal agreements, which is how do we buy in a very clear way, so fixed price, fixed delivery, fixed quantity, fixed delivery schedule with few termination rights, very limited remedies, and a grace for the fact that they're building something really hard in market the first time and it's likely not going to go according to plan.
Cody Simms (00:53:28):
You used the word philanthropic buyers. So are all of the partners currently in Frontier doing this as a corporate social responsibility activity right now as opposed to a carbon accounting activity on your balance sheet per se?
Hannah Bebbington (00:53:43):
I use philanthropic somewhat loosely. Even if you are doing this as a carbon accounting activity, today in 2024, this is a voluntary activity. This is a program that you have put in place largely because your organization has decided that this is a good thing to do for the world. And maybe it's a good thing to do today, and you have your eyes on compliance and regulation in the future, but that compliance and regulation does not exist. So complying today with something that you think could happen in the future is still voluntary. So the people who are buying carbon removal and certainly the people who are buying carbon removal that costs more than $500 a ton are largely civic oriented. This is largely because we want this market to be successful.
Cody Simms (00:54:27):
Catalytic, I guess would be the word, right?
Hannah Bebbington (00:54:29):
Catalytic is better than civic. Yes, catalytic in nature. We want carbon removal to exist at scale in the future, and we are going to buy it today because we think that is the highest return on our climate dollars. So if you're going to have a corporate climate program, because your organization has decided that that's the good you want to do in the world, you want to make sure you're spending those dollars on the things that you think actually moves the needle from a global warming perspective. Buying permanent carbon removal today is a path to stabilizing global temperatures forever. So we think of this as a very high climate return on CSR spend.
Cody Simms (00:55:08):
We talked about the potential evolution of the markets to bring in more industrial buyers and buyers who are viewing this in their supply chains. You talked about how you might see that lining up with compliance markets in the future that may not be carbon compliance markets, that may be compliance markets in other areas where carbon can be a feature of the solution. Let's go the opposite path with that, which is the data center boom is ginormous and it seems like all of our estimates are underestimating how big it might be. What impact do you see that having on the carbon removal space in the years to come?
Hannah Bebbington (00:55:47):
The data center boom for carbon removal is a bit of a challenge and opportunity. So on the challenge side, we've talked very briefly about the idea that direct air capture is very energy intensive. One of the things that we care a lot about is where is the energy coming from to power your direct air capture facility? And we have lots of energy sourcing requirements for our organizations. As clean firm energy becomes much more competitive because of the AI boom, it's much harder for our early stage startup direct air capture companies to get access to the type of renewable or clean firm energy that they would like to run their facilities.
(00:56:23):
However, this also creates a huge opportunity where the tech companies that have historically been most interested in carbon removal or buying carbon removal or most able to buy carbon removal are also the ones who are seeing their carbon footprints blowing up because of the data center boom. So if those organizations remain serious about their net-zero goals, this could lead to a lot more purchases of carbon removal down the line. You imagine Microsoft, for example, with their internal carbon price, this could radically increase their buying power, and the same could be true at places like Meta and Google as well.
Cody Simms (00:56:57):
Hannah, what else should we cover today that we haven't talked about?
Hannah Bebbington (00:57:01):
We are getting asked a lot about how the change in administration can impact the carbon removal market. And today, we've talked a lot about what various types of policy regimes could look like to support carbon removal. And one of the things that we have been very intentional about and grateful for is that carbon removal itself has been quite a bipartisan coalition. So the types of policies that we see and the types of deployments that we see are widely supported by both Republicans and Democrats. So it is just worth noting out the gate that with the recent administration change, we are hopeful that we will continue to see bipartisan support for carbon removal deployment, and especially that that is happening in many red states in the United States, like Louisiana is a big hub for carbon removal.
(00:57:47):
The second thing I would add is that as we look more broadly or sort of more long-term at the policy regime that could support carbon removal, I think it is unlikely that we will see something like a carbon tax or a compliance market for carbon removal specifically. Rather, more likely, especially in light of this administration change, we will start to see carbon removal as part of that patchwork quilt of industrial policy.
Cody Simms (00:58:10):
And what's next for Frontier?
Hannah Bebbington (00:58:12):
Well, as we think about Frontier, so our goal, as you now know, is to accelerate the technology development and the market development for carbon removal. So we think a lot about both the supply bets that we are making and the demand bets. On the supply side, we hope to end the year at about 500 million deployed, so we'll cross about 50% of our committed funds already being inked into contracts. It is paramount that we spend the remaining 500 million of this fund as effectively as possible. So continuing to write long-term offtake agreements with really great, really compelling carbon removal companies across a variety of pathways.
(00:58:47):
It is also going to be become increasingly important that on the demand side, we also continue to build a portfolio of demand bets that ensures that while we wait for those policy regimes to be written into law and for all of that infrastructure to exist, that we continue to be able to support the carbon market as our carbon removal companies are developing. So our Fellows is one great examples of that. So we are starting to think about putting people all around the world to think about carbon removal policy internationally. We will also continue to think about how we get more corporates to buy carbon removal, especially in the next couple of years.
Cody Simms (00:59:25):
Hannah, this has been awesome. We waited too long between our last conversation with Stripe and where you are today on Frontier, so we'll have to make sure we get an update in the nearer term in the next time. But congrats on all the progress you've made, congrats on all of the impact you've had in our space. You all have been real leaders and it's been inspiring to see. So thanks for taking the time to come on here and give us an update.
Hannah Bebbington (00:59:47):
Thank you so much, Cody. Thanks for having us.
Cody Simms (00:59:50):
Inevitable is an MCJ podcast. At MCJ, we back founders driving the transition of energy and industry and solving the inevitable impacts of climate change. If you'd like to learn more about MCJ, visit us at mcj.vc and subscribe to our weekly newsletter at newsletter.mcj.vc. Thanks and see you next episode.