Big Tech Betting on Nature-Based Carbon Removals
Julia Strong is the Executive Director of Symbiosis Coalition. Announced in early 2024, Symbiosis Coalition is an advanced market commitment from Google, Meta, Microsoft, and Salesforce to purchase up to 20 million tons of nature-based carbon removals.
The forestry credit space has faced challenges over the last couple of years, prompting interest in how Julia and these large tech companies collaborated to stimulate activity in the sector. Conversations about forestry should be relatively straightforward, considering forests, along with oceans and soil, are natural carbon sinks. Preserving and restoring forests is crucial, yet the complexity surrounding forestry credits always brings new insights. We’re grateful to Julia for sharing more about the formation of Symbiosis Coalition, criteria for high-quality credits, barriers to bankability, and more.
Episode recorded on July 9, 2024 (Published on Aug 12, 2024)
In this episode, we cover:
An overview of Symbiosis Coalition
The formation of the coalition
Julia's background in nature-based solutions
Criteria for high-quality forestry carbon removal projects
Counterfactuals in forest protection vs restoration
Regions for reforestation efforts
Motivations for landowners
The role of project developers
Barriers to bankability and how Symbiosis is approaching them
Potential financing and perceived risk
Symbiosis' quality criteria: conservative accounting, durability, social and community benefits, ecological integrity, and transparency
Symbiosis' mangrove restoration
Working with local and indigenous communities
Goals for Symbiosis' transparency
Julia's podcast Solving Climate Naturally
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Cody Simms:
Today on My Climate Journey, our guest is Julia Strong, executive director of Symbiosis Coalition. Symbiosis Coalition was announced earlier this year and is an advanced market commitment from Google, Meta, Microsoft, and Salesforce to purchase up to 20 million tons of nature-based carbon removals. When I saw the Symbiosis Coalition announcement, I was curious to hear from Julia about what types of nature-based removals they include in their scope. The forestry credit space in particular has had a tough go of it for the last couple of years, and I wanted to learn how she and these large tech companies came together to spur activity in the space. I find that conversations about forestry should be relatively simple. After all, forests along with oceans and soil are our natural carbon sinks. We need to preserve forests, and we need to restore forests that have been damaged, but there's always so much nuance around forestry credits, and I learn a ton every time I dig into them. So let's dig in. But before we start, I'm Cody Simms.Yin Lu:
I'm Yin Lu.Jason Jacobs:
And I'm Jason Jacobs, and welcome to My Climate Journey.Yin Lu:
This show is a growing body of knowledge focused on climate change and potential solutions.Cody Simms:
In this podcast, we traverse disciplines, industries, and opinions to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help. Julia, welcome to the show.Julia Strong:
Thanks so much, Cody. Great to be here.Cody Simms:
Julia, this is really exciting because everything you're working on was pretty much just announced. It's like a whole new thing. Maybe let's start with what is Symbiosis Coalition and what did you all just share with the world?Julia Strong:
Symbiosis Coalition is an advanced market commitment, a commitment by Microsoft, Meta, Salesforce, and Google to purchase or contract for up to 20 million tons of high-integrity nature-based carbon removal by 2030. Essentially, it's a demand signal to spur the development and catalyze the development of high-quality nature-based carbon removals to help the world meet its ambitious and critical carbon goals.Cody Simms:
So many different directions we're obviously going to go with this, but let's start out just by hearing from you how this came about. What was the pathway to pulling this together and getting this announcement out the door?Julia Strong:
We know that nature is critical to meeting our climate goals, both conservation or preservation of nature and restoration, and one of the best financial mechanisms to drive protection restoration of nature is the carbon market or the voluntary carbon market. And these ambitious and leading companies have committed to ambitious climate goals that include investing in high-integrity carbon removal, but the supply of carbon removal is really constrained. We know that we need to be increasing investment in carbon removal in order to meet the world's climate goals, but a number of barriers block investment today. There's uncertainty about demand and uncertainty about the willingness to pay the real costs that these projects can take to make them happen. In light of that uncertainty, that leads to a lack of investment and really high cost of investment for project developers, which means that the market is severely constrained and that in order for us to get the supply that we need, we need a big signal, demand signal to clearly state that yes, companies want these projects, they're willing to pay for these projects, and hence Symbiosis was born, and we took inspiration from Frontier, from LEAF Coalition, other advanced market commitments that have come before it, and the idea had been around, others had tried it, but it took about nine months to go from idea to reality, and part of that was bringing the right people together in the room and being at the right moment in the market to launch this.Cody Simms:
It strikes me that Frontier when it was created, obviously there are multiple corporations involved, but I think of Nan at Stripe as really being a spearheader and a driver of that from inside Stripe, which already had a large buying program at the time, a nascent one at the time, but a growing one. But you are coming in as an outside executive director, what was the process of wrangling these large corporations together and making this thing happen in the first place?Julia Strong:
I come from a background in conservation and nature-based solutions, worked across all three sectors, the public, private, nonprofit sectors. My most recent role was philanthropy. We had hosted a workshop that was focused on what are the barriers to scaling financing for nature through the voluntary carbon market today, and what are some transformative ideas that could help to address those barriers. One of the ideas that came up was, or was mentioned was an advanced market commitment or demand signal for nature-based carbon removal to help catalyze investment and unlock lower cost financing. My role, I was hired by that philanthropy to make sure that those ideas that were mentioned at the workshop wasn't just talk, that they actually resulted in action. Given my previous experience, I knew some of the players already at these companies from having worked as a project developer, a nature-based solution product developer previously. I think this demonstrates the power of philanthropy to convene different actors together as a neutral third party to scope this idea and figure out, okay, how would this actually work? Is this something that could be useful for solving the problem? And so my role was to facilitate that process going from idea into reality, working with these companies to figure out what would this look like and go make it happen.Cody Simms:
This was ZOMALAB, is that correct?Julia Strong:
Yes.Cody Simms:
So they were essentially helping to fund the initial idea of the project and even fund your role in helping to pull it together?Julia Strong:
They funded my time so that I could spend time working on it every day, figuring out, okay, what would this look like? How would we structure it? How would it be sustainable over time and facilitate the conversations. And so that's an example of philanthropy playing a catalytic role where one particular market actor may not be the best position to bring an idea forward to fruition. So it's a different approach than what Stripe and Frontier took, but I think an example of where a neutral third party who is impact-oriented can bring together disparate actors to address gaps in the market.Cody Simms:
It's cool to hear of a philanthropic organization ultimately standing up an industry coalition of potential buyers, hopefully others listening in similar roles to the ZOMALAB team that you were working with might have their gears turning here about ways that they could help catalyze the priorities that they care about.Julia Strong:
Climate change is a challenge that requires us working together across industries, across sectors with unusual actors coming together, and I think philanthropy is well-positioned to help drive that collaboration for the greater good.Cody Simms:
In the nature-based space, and in particular forestry, I suppose, you've got a fairly long background there, you've worked at the Nature Conservancy, you worked at New Forests, you worked at NCX. Prior to your work in ZOMALABs, maybe share a little bit about your own path to where you are now.Julia Strong:
So I've always been driven by this north star of how can we make the biggest impact at the intersection of nature and climate on the two biggest challenges of our generation, climate change and biodiversity loss. One of the biggest barriers to protecting nature and restoring nature is finance. There's a massive finance gap to fund both nature protection and restoration. I started my career, as you mentioned at the Nature Conservancy, working with executives there on global strategy. I then went to spend a little bit of time in policy. I was a fellow at the California Governor's Office of Planning and Research and then spent some time in sustainable forestry investing my time at New Forests, actually trading offsets on the California cap and trade market on the compliance side, and then moved to NCX where I was working for a startup project developer, so I was employee number 11, first business development hire there, grew the team, signed optic agreements with Fortune 100 companies and then left to join ZOMALAB and then now leading Symbiosis Coalition. And so bringing together lessons learned from these different sectors and how they can work together and speak the same language to advance solutions in this critical decade for our climate.Cody Simms:
And for listeners, we actually have an archived episode now from maybe 2021 with NCX on the pod. Jason spoke to one of the founders there back in the day, so if anyone wants to dive into the work at NCX and what they're doing in forestry, it's maybe a little dated now, but there's some resource there for you.Julia Strong:
Like any startup, they've pivoted and changed what they're doing and given the change in the carbon market and developing carbon market, but it's definitely worth a listen.Cody Simms:
That's where I want to go next actually with this topic overall, which is when I think nature-based solutions, the big one that jumps out to me obviously are various types of initiatives in forestry. You said that Symbiosis was really set up to spur market interest and to spur demand side dollars coming into this space, I tend to think of forestry as being frankly the most mature current carbon removal "product" out there for corporate buyers, but one that's been plagued by some controversy, some challenges around quality, et cetera. I'm curious how you think about that because from where I sit, it's like, oh, when I think of big companies and the carbon credits they're buying mostly they are buying forestry credits today and a lot of the conversation in the "climate tech space" is about should they be shifting dollars from that into forms of engineered carbon removal, et cetera. But it sounds like you're coming at it from a different perspective, and I really am curious to hear all of this.Julia Strong:
I would say that we are not driving nearly enough finance into forests. Nature-based carbon removal, forest restoration alone has the potential to provide three gigatons of carbon removal annually by 2030. Right now, if we look at the Symbiosis quality criteria, which sets a really high bar for what good looks like and a really conservative bar based on the latest science and technology, we can get into that, and it relies on innovations and carbon crediting, the supply is maybe around 500,000 tons. So the commitment of 20 million tons that these companies are making, that's 40 times the volume of the credits that exist in the market today. The particular projects that we're focused on in the niche that we're focused on within the market for nature-based carbon removal are projects that represent the latest and greatest methodologies, more conservative approaches that can come at a significant cost relative to the projects that have existed on the market today and that don't exist at the scale that we're going to need to any degree at the moment. This is a newer approach, so when I say this, for 500,000, that's an estimate and very rough based on bottoms up analysis of what exists on the market today of what could potentially qualify for this new updated approach through these dynamic baselines, through the new principles that we're adopting, there are depending on the project type, depending on the latest methodology, the latest data and science, different ways of evaluating what does good look like in that particular project type.Cody Simms:
Okay. So of that, you said existing 500,000 tons that meet the quality bar today, and obviously your desire to grow that to 20 million tons by 2030 through the existing commitment that your partners have made into Symbiosis, how does that existing 500,000 tons compare roughly to the total amount of forestry credits that are out there and what's the difference between the mass amount of projects relative to this sweet spot bullseye, high quality 500,000 tons that are out there? Help me understand. I'm so grateful that you're here to help drive awareness of this whole space because I don't understand what a high-quality project is, and from where I sit, it feels like there's lots of forestry project developers out there and how should someone tell the difference between projects that are good and projects that aren't?Julia Strong:
Efforts like the ICVCM or the Integrity Council for Voluntary Carbon Markets and Symbiosis and others are setting out to clarify, what does good look like? There's a lot of confusion in the market around what does a good forest project or other carbon credit project look like? We are focused on a niche of projects that have struggled to access financing to date. So those are reforestation or restoration projects that have a high proportion of native species. They are focused on dynamic baselines, so more conservative approaches and more innovative approaches or latest approaches to measuring additionality or ensuring additionality. So for listeners who don't know what additionality is, it's essentially making sure that the dollars that you're paying for to go to a carbon project aren't just going to something that would've happened anyway, that it's something that's additional. And that integrate from the beginning, indigenous peoples and local communities, their needs, their concerns ensure that they're equitably compensated and benefited throughout the duration of the project, and that's monitored over time. And that's what makes this so tricky. There's not one blanket criteria to say, "Well, this is a good carbon credit and this is not." It really is project type dependent, pathway dependent. That's why you'll see folks like Frontier and others who are going very deep on these particular pathways and particular project types and why we as Symbiosis decided to release quality criteria first for reforestation of terrestrial forests to begin with, but we intend to expand to other project types and pathways over time. The ICVCM and others have set out principles of, generally carbon credit should have the following things, and then when you dig deeper into the project level, that's where you sort of have to get to, okay, for this particular pathway is this high quality and for this particular project, does it adhere to the methodology and is it taking the conservative approaches and best practices? Each challenge is layered, which makes it hard to scale these projects.Cody Simms:
I was just talking to someone working at a family office the other day who was saying, the principal of my family office, "We have a private jet and this, that and the other, and we'd like to offset their footprint as a family. But gosh, I look at all these lists of projects and I have no idea where to start. I have no idea how to judge the quality of this stuff. It all feels like people just throwing stuff at me." I'm hearing from you that you want to be essentially a signal of where people might want to start. Here's a checklist of criteria and/or here's even a set of projects that we believe are good ones and they have now the backing of Meta and of Google and of Microsoft and of Salesforce to say, "Yes, we also believe these are "good" ones.Julia Strong:
Absolutely, and working with leading independent experts, scientists, academics, NGOs to help evaluate the quality of those projects and ensure that that quality of criteria reflects evolution in science and data over time. We know that we're going to learn and that science and data and technology evolve. Legacy carbon projects were based on the best available data and science at the time, and generally we're done by well-intentioned NGOs or project developers or others, but science and data have evolved since then. We have better ways of evaluating additionality, better ways of measuring and quantifying impact, and so we expect to transparently share lessons learned and as we learn what works and what doesn't to share that over time.Cody Simms:
You mentioned that these criteria have changed over time. A couple of years ago there was a big controversy in The Guardian I think wrote a big expose on a lot of these carbon credits that are out there are not high quality. Many of them, for example, actually are not really at risk of being deforested. It was more about preserving existing forests. And so it strikes me where I sit, not being super deep on the forestry space myself, there are a couple of challenges with a number of existing forestry credits. One is, are you actually preserving a forest that was at risk or not? Two is the act of measuring the carbon intensity of an existing forest and what you're measuring in terms of what you're preserving is challenged because it's all based on counterfactuals. If this forest didn't exist, here's how much emissions would be released from its roots and here's how much emissions wouldn't be absorbed in the future by its future non-existence. And so you're kind of measuring these two counterfactuals to get to a ton of emissions metric, which is all math-based as opposed to the ability to actually count atoms. I heard you say a minute ago that a big focus for you now is in reforestation, which feels like it has fewer of those counterfactual problems. There used to be a forest here, it's not here anymore. We're going to put one back and we know what this should look like at maturity. Am I following the thread correctly here?Julia Strong:
You are. I mean, we need both nature protection and restoration. Most of the projects, the majority of the projects of existing supply represents avoided deforestation or IFM projects which have that challenge with the counterfactual of would that forest have been cut down in the absence of this project or not? If there's a baseline, are we assuming more deforestation than what would've happened? And there are counterfactuals in all carbon removal projects. The baseline is that this project wouldn't have drawn down carbon from the atmosphere, and now we are measuring how much has actually been drawn down. So I think that that is one of the attractions of removals versus avoid emissions projects is that the counterfactuals can appear less complicated. In the case of reforestation and restoration, you're measuring the carbon that is then being manifested in the growing trees themselves. We know that trees are amazing at sucking down carbon. They're nature's original climate tech. There's ways that we can measure and understand how much carbon is being drawn down in those trees that we can visibly see that and protecting a forest has elements of both. You're avoiding emissions, but you're also ensuring the increased growth of those forests. And so the distinction between removals and avoid emissions is not as clear cut, but I do think that is one of the attractions of investing in removals and nature-based carbon removal is the counterfactual is not as challenging as in the case of avoided deforestation, but both are critical and both are needed, so we need to figure out how to resolve that.Cody Simms:
Do you consider reforestation to be specifically a carbon removal credit for the most part as opposed to an avoided emissions credit?Julia Strong:
Yes, although sometimes there's assisted revegetation or regeneration, if you want to get totally nerdy about it, there are young forests that would generally be cut down within five to 10 years and by actually reducing the drivers of degradation or addressing the drivers of deforestation or degradation, you're allowing those forests to grow back more than they otherwise would. And that's actually really cost-effective. Those forests are already there, they're already growing, but you're not going from sort of zero to a hundred, you're going from 22 to 100 there, and that's still a valuable service for the climate because those young forests would statistically have been cut down. So there can have elements of both in reforestation and those are called assisted regeneration projects. We'll have to deal with how do you address the counterfactual in those various different project types.Cody Simms:
That gray area, notwithstanding, it's a really interesting distinction in my mind to think of preserving existing forests as being more of an avoided emissions project and reforesting a previously degraded forest as being a removals project because you are adding to the earth's capacity to remove and absorb carbon and you're increasing its capacity to do that.Julia Strong:
Exactly, you're increasing the sink of the earth.Cody Simms:
And I suppose in that regard, one of the big things you have to then prove is A, that that forest wouldn't have just naturally grown back on its own and you presumably have to prove that it's not at risk of being cut down again somehow.Julia Strong:
Exactly. We want to invest in durable projects, projects that are long-lasting and making sure that you are reducing the risk or mitigating the risks of other natural perturbations or hazards like fires or other hazards as well. There are tools in the toolkit now to address those. For example, as I mentioned earlier, dynamic baselines are a great way to evaluate what would have happened in the absence of the carbon project. Essentially what you're doing is saying, "Okay, I want to take a plot of land that looks exactly like my project area," looking for all these different factors to make sure that it's as close a match as possible, and then each year saying, "Okay, what's happening in that exact match for my project?" You can also look at historical data, et cetera, so there's increasing ways to use AI, algorithms, machine learning to identify those matches and to track and monitor these projects on a much more frequent basis to have greater confidence in that counterfactual.Yin Lu:
Hey everyone, I'm Yin a partner at MCJ Collective here to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning and doing that goes beyond just listening to the podcast. We started in 2019 and have grown to thousands of members globally. Each week we're inspired by people who join with different backgrounds and points of view. What we all share is a deep curiosity to learn and a bias to action around ways to accelerate solutions to climate change. Some awesome initiatives have come out of the community. A number of founding teams have met, several nonprofits have been established, and a bunch of hiring has been done. Many early-stage investments have been made as well as ongoing events and programming like monthly women and climate meetups, idea jam sessions for early-stage founders, climate book club, art workshops, and more. Whether you've been in the climate space for a while or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to mcjcollective.com and click on the members tab at the top. Thanks and enjoy the rest of the show.Cody Simms:
It strikes me we could do a whole hour-plus conversation purely on how do we fix the ability to finance preserving forests and keeping those avoided emissions projects healthy and running and going. Let's not, let's push that to the side and say, hey, that's a different episode for a different time, and let's focus really on the areas... I think the distinction you've drawn is really helpful. Where Symbiosis is focused, which are these carbon removal projects that are heavily focused on reforestation, where in the world are we most ripe for these types of projects right now?Julia Strong:
The tropics are really great areas to do that. They're fast-growing, carbon dense. There's a lot of degraded land in those areas. Actually, Brazil is a particularly ripe area for this, and you'll have seen recent transactions and deals in Brazil. For example, Microsoft recently did a deal with BTG Pactual in Brazil. There's also Mombak, other developers who are working in the area. So Latin America is a particular area of interest. Africa has a big potential, as well as Southeast Asia. And one of the amazing potential impacts of investing in nature-based carbon removal and carbon removal in general, but particularly nature, is that these are communities, local communities who rely on income from these projects who depend on the ecosystem services that these projects provide, so water provisioning, biodiversity, by investing in nature-based carbon removal projects, often that means direct benefits to local communities in the global south who otherwise aren't able to access that climate finance. So it's a matter of not just we need carbon removal to meet our climate goals from just the carbon math of it, but in terms of the environmental justice aspect of it, how do we get financial flows from the global north to the global south and ensuring that we're protecting and restoring nature that people depend on.Cody Simms:
Let's take Brazil as an example. My understanding is a lot of the tropical forests in Brazil have been deforested historically for either cattle or for soybean, essentially to grow food for cattle. What motivates a landowner who at some point did deforest their land for these other purposes to decide, "Hey, now it's time for me to move it back to a more natural non-agrarian purpose." Why would they go from A to B back to A?Julia Strong:
They wouldn't unless they're financially motivated generally to do that. That's the power of carbon markets. There's a value to the carbon that nature sequesters, but without finance, then why would I as a landowner be motivated to grow forests on my land versus do something else with it? And so that's part of the importance of ensuring that these projects are actually paying. The real cost that it takes to make these projects happen is that if you're not actually paying enough to cover the opportunity cost or for the use of that land or ensuring that these farmers or landowners are equitably compensated for the use of their land, then they're not incentivized to participate in these projects or to keep those projects going for the longer term, and that's why actually investing in the equitable outcomes and compensation for landowners, local communities is an integral part of driving durability. So if we care about these projects lasting for a long time to have durable long-lasting climate impact, then we need to make sure that these companies and that investors are paying the real cost that it takes to make these projects happen.Cody Simms:
Are you finding that in many cases there is ownership change happening on the land itself where some new owner has some new motivation on how they want to manage the land, or are we really truly talking about people who 20 years ago made the mental calculation that I'm going to make more money cutting down forests and growing cattle and now 20 years later I'm going to make more money removing the cattle from my land and growing forests again?Julia Strong:
It really depends, and that's again why it's so important to look at the project-specific context and the local region and the local economic drivers and the particular landowner and the history of that land and the financial additionality. Is this something that is financially additional for them? Are they getting other revenue streams that actually carbon isn't a motivating factor financially for this? But it's a combination of those things. Some project developers' models are to acquire land and then to plant forests on that land and they're compensated for that through the carbon credits. Another model is leasing land from landowners who have done the calculus or who are educated to understand, okay, here's my economic trade-offs of keeping my land in production for cattle, or what happens if I integrate into an agroforestry system? That's actually another really exciting type of project that we expect to support through Symbiosis is the integration of production for crops or for cattle with forestry systems, their benefits of syllable pasture for example, that's the technical term for it, to the cattle to other things as well as to the climate.Cody Simms:
And that's a good reminder that there's usually a project developer intermediary in here, someone who's showing up and actually doing the work of the reforestation, planting the trees, and sourcing the land for it. It's usually not the landlord themselves who is going from essentially one crop to another here. There's someone who is an expert in reforestation in the middle of this, helping to push these transactions along.Julia Strong:
Think of it as like an infrastructure project. We want to be able to access lower-cost infrastructure, project finance to be able to do more of these projects at a lower cost. In those projects, you have a project developer, someone who has the expertise in developing these projects, understands how to do that in the proper way, mitigate risks, work with investors to bring in financing. So yes, that's the idea of how these usually work.Cody Simms:
And I suppose there's also land that is degraded for reasons not just related to agricultural practice, there's wildfire-degraded lands, et cetera, to where land may have faced an issue that was not "anthropogenic," it was not caused by the direct hand of humans, it was caused by some other reason, but it still had the same impact where there used to be a forest there and there no longer is.Julia Strong:
That's right. You're looking at the very specific drivers of that degradation. If that was the result of wildfire, how do we ensure that if you reforest that area, it won't be at the same risk for wildfire again, how do you mitigate that? It's why these are such specific contexts for each project, which makes it challenging in terms of scaling these projects, but also shows the benefit of working together collaboratively in a buyer's coalition because not every buyer can have a massive team with internal experts and diligence to be able to go through these really deep details and understand the nuance of what makes a good project in this context versus that context and understand those trade-offs, which is one of the reasons I really enjoy working in this space is just that it is complex. There are all these interdisciplinary factors that contribute to what makes a good project and what drives real and meaningful climate and biodiversity and people impact.Cody Simms:
If we're so supply-constrained right now, you said ballpark, 500,000 tons of quality projects today with the goal of just your coalition wanting to buy 20 million tons over the next six years, will there be any residual supply for anyone outside of your coalition who is interested in the kinds of projects that you're doing or is your coalition essentially going to be trying to buy up as much as you can?Julia Strong:
The idea of sparking this coalition is so that we can incentivize more development and more investment, and so we won't be focused just on current supply and that's why we very intentionally set the commitment as under contract by 2030 because we expect that most of the delivery of these projects would happen post-2030 and actually the nature of reforestation and restoration projects are that it takes about five to seven years until they start producing any credits at meaningful scale, which also makes it really challenging to finance because the cash flows don't come until five to seven years into the project.Cody Simms:
The trees actually have to grow, basically, right?Julia Strong:
Exactly. And they have to start sequestering that carbon. And so there already are projects under development today that we think can meet our quality criteria. The hope is, and the intention is that this spurs the development of much more of that supply. And so for project developers who are considering whether or not to pursue particular project types or investors who were considering whether or not to invest in funds that would invest in those projects or to invest in those projects directly, we're hopeful that this demand signal can have a much bigger impact than any one company acting alone.Cody Simms:
I'm hearing you say ideally what you will do is by being a signal on these projects that you can help them have a bankable buyer that they can use to go raise additional capital to fully fund out even more projects like the one that they're proposing to Symbiosis. Is that the right way to think about it?Julia Strong:
That's the right way to think about it. And I think success for Symbiosis would look like other buyers coming in, other project developers coming in, expanding the market way beyond the buying capacity of any one of these companies.Cody Simms:
What are some of the other barriers to bankability that project developers have today when seeking capital for their projects, assuming they are these incredibly high-quality projects that you are talking about wanting to support?Julia Strong:
That is one of the biggest that you've hit the nail on the head there, and one of the things that we're trying to address is how can we help these projects get a bankable offtake agreement that can enable them to access follow-on financing, and ideally, lower-cost follow-on financing. The cost of financing today can contribute as much as 30 to 40% of the cost of a credit. That means that much more money is going to the investors, and those are investors who are looking for 20% returns or more, versus we hope for debt financing and other lower-cost financing options in the future, which are much less expensive. But those debt financiers and investors and broader range of investors beyond just the equity investors that exist today who are seeking those 15 to 20% or more returns, they are more risk-averse. And this is a challenge, I've heard you talked on this podcast before and other climate podcasts about how do you bridge to that lower-cost project finance when there's some lessons to likely draw from renewable energy and others who have been able to bridge that gap, but it's really the perceived risk of these projects. So one, the risk and uncertainty of revenue, so that's what we're trying to solve with a signed offtake agreement and a long-term agreement to say, here's a set price that will be paid upon delivery of these credits so that there's certainty on the revenue stream for the investor. There's uncertainty around political risk or geopolitical risk, and if you're working in particular markets, so emerging markets versus more mature markets and the nature of nature-based carbon removal is that most of these projects are happening in emerging markets and in markets where there's not as much capital available and it's perceived to be a higher risk, but that's why we're looking at are there solutions like working with development finance institutions. The World Bank recently did an outcomes bond with Mombak in Brazil. Are there more opportunities to work with development finance institutions or other institutions that will provide political risk insurance, et cetera to help reduce the risk of these projects and who are investors who are used to working in these kinds of contexts? I can go on on the other challenges on bankability, but those are two big ones.Cody Simms:
It strikes me that in the renewables space, part of what happened is technology advancement to where the cost of renewables got to be where it was actually lower than the cost of traditional fossil fuels. And so you hit this tipping point moment where market rate dollars could come into renewable projects and actually know that they would outperform a fossil fuel project because renewables were moving down the cost curve due to technology advancement. It strikes me in forestry projects, you're not necessarily talking about per se driving technology advancements on a tree's ability to capture carbon. There are some companies doing cool stuff like Living Carbon and others that are trying to make that happen, but for the most part, a tree is a tree and it's going to capture what it captures. Do you see this space moving beyond catalytic finance to where there's going to be a tipping point moment for more market-based capital moving into it?Julia Strong:
Maybe renewable energy isn't the perfect analogy, there are differences among that, but the ability for project finance to come in at scale and debt finance, again, in particular. The green bond market is massive. It's much less expensive. It's capital that the time to returns is longer than other types of capital, and so the ideal would be being able to access that bond and debt financing. And again, the challenge here is that there's the perceived risk with these projects and that there just haven't been as many of these projects financed with that kind of capital before. So there's a lot of unknowns for those investors. And so there's education that's needed for those investors. There's more project developers with a track record of actually delivering on these projects and more certainty on both revenue on how will these projects count, what's the political environment for these projects? So there are various dimensions that if you were to address, and there are ways today to address and mitigate some of those, you could get these projects to the point where the risk profile is something that's more attractive to debt investors and other lower cost forms of capital.Cody Simms:
Let's shift into a little bit on some of the work that you've been doing to drive these quality criteria. I saw on your website there's a very specific, I don't know if MRV is the right phrase, but it sounds like Verra has a whole new standard called, is it ABACUS, that is trying to encapsulate all of these new high-quality criteria. Can you maybe describe a little bit more about what that entails?Julia Strong:
In order to come up with our quality criteria for ARR in particular, we looked at what are existing standards on the market, what are the newest standards that incorporate the latest and greatest data and science, and then what are the gaps? Where are areas that we want to build on that to go above and beyond what's already out there? We're guided by our quality pillars that we established, so one which is conservative accounting, the second is durability, the third is social and community benefits, the fourth is ecological integrity, and the fifth is transparency. We wanted to build on the principles of the ICVCM, the Integrity Council of Voluntary Carbon Market, other guidance out there. And so when we looked across the market, the upcoming ABACUS label from Verra does incorporate a lot of the latest innovations and most conservative approaches on the market. First, with dynamic baselining, which I described a bit before, it does require the integration use of MRV or DMRV approaches to more frequently monitor and to better understand baselines and have higher competence in the baseline and the counterfactual, more conservative approaches to leakage, so actually trying to mitigate completely the effects of leakage. Traditionally in carbon markets, they've been based on research that's sort of a, "Oh, it's about 20%." So in this case, we're taking instead of just sort of a blanket approach to leakage saying, okay, each project has to specifically justify what leakage rate that they're assuming and from a viable plan to mitigate that, there are some other criteria as well.Cody Simms:
Leakage just for those of us who aren't deep in the weeds, is just the idea that you did this project here, but it actually had a negative impact over there. So yeah, you might've forested something here, but because you did this, the landowner just went down the street and cut down a different forest.Julia Strong:
Exactly. And then the other approaches to durability, so in integrating approaches to durability within the project itself, and then there's some other criteria as well that you can read through on our website. And so the idea was let's look at what exists on the market, but let's not just hitch our wagon to Verra or to the ABACUS label. We were very intentional saying, "Align with the principles, align with this particular methodology, VM47," because we want to encourage innovation and see other protocols on the market that can help to bring forward high-quality credits and allow for if there are other projects under other protocols that can demonstrate that they meet those quality criteria, we can evaluate that on a case by case basis.Cody Simms:
And it sounds like for project developers who've been listening to you and are interested in what you're doing and think, "Hey, I've got a project that might qualify for this. And sure, I would love to have some combination of Google, Facebook, Microsoft, Salesforce as being a buyer of my project," it sounds like you haven't yet published the actual RFP that project developers would respond to, but that's coming sometime this year, is that correct?Julia Strong:
Yes, the plan is for it to come this year. We're working on it now, so figuring out, okay, we have these quality criteria, how do we translate that then into the diligence process itself and what evidence we're asking for from project developers given the project stage that they are at. So we'll be releasing that and if project developers are interested, we have a form that they can fill out to get on our list to get updates on the RFP when it's available.Cody Simms:
One thing I want to understand is a little bit just the order of magnitude here. I'm not sure exactly what the price range of these projects look like. You're talking about having commitments for 20 million tons of CO2, roughly what does the buying purse of that net out to be?Julia Strong:
It's difficult to say a particular number or magnitude because these projects range in cost. Things that we talked about before, whether it's land acquisition or land lease model, the cost of financing contribute a lot to the cost or the geography. It can vary tremendously. There are different estimates on the market. You could check out MSCI carbon markets to look at estimates. You can look at Pachama's recent blog posts, but we're talking a big magnitude of dollars going to nature restoration on the order of magnitude of some of the other market commitments out there.Cody Simms:
And I understand as well, you haven't even put your RFP out, so to some extent you need to see what the market brings to bear before you can necessarily comment on the dollars at play, but it sounds like you have backers who themselves have significant amounts of dollars able to be put to work here, and they're committing to buying a significant chunk of removals, is how I'm taking away your response there.Julia Strong:
The real message to share is that these buyers are committed to paying the real costs it takes to make these projects happen and taking conservative approaches, using the latest data and technology, equitably compensating indigenous peoples and local communities can come and likely will come at a significant cost to what has traditionally existed on the market.Cody Simms:
It sounds like in addition to everything we've talked about around reforestation and revegetation, there's a separate bucket of projects that you're planning to support coming out around mangrove restoration. Can you share a bit more about that and that specific set of projects and why it's unique?Julia Strong:
Just like forestation, reforestation, revegetation projects, which are sort of the terrestrial forest projects, mangroves, they have a coastal forest and they store a lot of carbon even more than the existing mangroves can store even more than tropical forests. There's a need to both protect and restore mangroves. But the reason that we separate it out from the terrestrial forest versus mangroves is that what good looks like, there's a lot of similarities, but there's also differences. Mangroves you're planting in a coastal ecosystem where there's storm surge, where there's the ocean itself. So the different risks and vulnerabilities of these projects are unique to those in work planting on land. And so we want to make sure that we're taking into account the hydrology and other aspects that would need to be taken account for mangroves versus terrestrial forests.Cody Simms:
Basically it's one step at a time and the risks and quality criteria that you need to assess for these two different project types are unique enough that you didn't want to bite off more than you could chew all at once, and you wanted to separate these out into different buckets for your team to spend time getting up to speed on and getting diligent around.Julia Strong:
Yeah, exactly. And there are different experts who are experts on each one of these, and so in developing the quality criteria, we want to engage external experts and really understand what can Symbiosis do most to support the development and growth of those particular project types versus the others. So yes, it's a matter of bandwidth, one step at a time.Cody Simms:
And how does Symbiosis think about other solutions that are less about necessarily growing things in the ground but that are other sort of hybrid nature-oriented carbon removal type of solutions like biochar or enhanced rock weathering or ocean alkalinity enhancements? I mean, I know Frontier plays in those spaces pretty heavily. Do you see that as being in scope for you or do you think your focus will be things that grow in the ground for the most part?Julia Strong:
The scope may expand over time. We see ourselves as wanting to be complementary to the work that Frontier is doing and that Leaf Coalition is doing because Frontier is focused on projects with a thousand-year permanence of which enhanced rock weathering and other types of projects could, we probably wouldn't go into that territory. Maybe there are other hybrid solutions that would not qualify for that a thousand-year permanence bar that we might consider supporting over time that have both elements of the nature and engineered, but no intention or plans to do that. At the moment, we really are focused on terrestrial forest restoration and mangroves and we'll see what projects happen after that.Cody Simms:
An area we haven't hit on at all, but you've talked about it a couple times and it's on your website multiple times, is working with local and indigenous communities around the projects that you are looking to support. Share a bit more with us about that and the importance therein.Julia Strong:
As I mentioned, it's not just the sort of right thing to do or the just thing to do, but it means that your project will be more successful. If you don't integrate indigenous communities and local people from the beginning through processes like free, prior and informed consent to have them really understand, what is this project, what does it entail for me? What would I benefit from it? What are the trade-offs? And ensure that you have the buy-in and that the design of the project is such that the revenue streams and the other benefits that may be coming from the project are actually equitably compensating the community, then you will not have a long-lasting project. The community won't be incentivized to take part in that project over the long period of time. We are very intentional here to say, it's throughout the project life cycle, it's not... In the beginning, you just engage them and then not throughout the rest of the project. You need to engage the community at the inception of the project, before the inception of the project, and then throughout to ensure that you're having adaptive management, that you're engaging them. And we point to the CCB label, Client, Communities, and Biodiversity label, which talks about some of that best practice in that dimension, and it's something that we'll be working on over time to make sure that we're reflecting and incorporating best practice for that. And another thing that we've done is incorporated quality criteria on financial transparency. So to really have transparency on, where are the dollars going in the project? Are they actually going to the community on the ground? What percentage of dollars is going to make sure that we can have confidence that the local community and indigenous peoples are benefiting from and are bought into the project.Cody Simms:
I remember when I first interviewed Peter Reinhardt at Charm Industrial and asked him why he started Charm and he was talking about at his prior company's segment, they had kicked off a small project internally probably back in 2016 or so or maybe even earlier, to try to offset the emissions of their own operations. And so they were buying some forestry credits and whatnot, and then he started to dig into it and realized that of the projects he was buying, something like 70 or 80% of the funds were going toward driving marketing activities in the US around these projects. You hear that all the time when you go to give money philanthropically and whatnot, is you want to make sure you understand that your dollars are actually going to as much as possible drive the cause that you're hoping for. It feels like that kind of financial transparency is so important in this space to generate support and generate ongoing dollars, and yet I would have no idea where to even go to try to find that stuff if I were deciding to look into a project. So how do you expect that this all gets published to the world of potential buyers?Julia Strong:
That's one of the things that we'll be working through is what is diligence that stays within Symbiosis versus we transparently share publicly and we want to be sharing lessons learned, sharing guidance, sharing ways that more than just the buyers and Symbiosis can benefit from, but project developers, buyers, others outside of Symbiosis can use and benefit to the benefit of the overall market. I think being able to share both what's working, what hasn't worked and what we've learned will be a critical part of that. And so we'll be looking to and learning from what's been done with Frontier and others. I think they've done a really good job of trying to be transparent around their process, their pathways and how they evaluate those. So we'll be trying to take lessons learned from what's already out there in the market, but also expand on that.Cody Simms:
So I'm hearing overall for you guys a focus on defining what is quality and helping more people understand what that is. I'm hearing spurring more dollars into the space to actually drive bankability and drive more financial outcomes, and I'm hearing essentially publishing and sharing best practices and learnings so that the market can learn from your work as being kind of three big priority areas based on our whole conversation here. Is that roughly right?Julia Strong:
That was a great summary, Cody. I'm glad that I conveyed that through our conversation, and it was well put.Cody Simms:
Anything else we should make sure to hit on before we click ourselves off this conversation?Julia Strong:
I would just say that if you have listeners who are either in a company that is interested in exploring the carbon market or that is interested in supporting nature restoration, don't be shy to forward this to your CSO or to your other folks who could make a difference in potentially joining or supporting the work of Symbiosis. We're looking for additional members. We're also excited to engage with project developers and investors. This is a collaborative and whole ecosystem effort. If we're going to be successful, Symbiosis is one piece of the puzzle. We need all these other pieces of the puzzle to come together to scale the market to the point where we can have the impact that we need for the climate and for nature. So I would just encourage, if you have listeners who are listening to find out ways that they could help, in one way is to forward this to folks who maybe either would want to join Symbiosis as a buyer and member or get involved in other ways.Cody Simms:
And Julia, you haven't mentioned, but you also host a podcast, right?Julia Strong:
I do, yes. Not quite the reach of My Climate Journey, although we have started informal gatherings. We have a quarterly happy hour in DC for nature and climate people, but it's Solving Climate Naturally. So thanks, Cody, for giving me a chance to plug that where we're digging into nature-based solutions in particular, and the nuances and innovations and challenges, Cody, that you brought up in this episode in our conversations.Cody Simms:
For what should be a relatively simple idea of let's quit cutting down our trees and let's plant more trees because they're the lungs of the world or whatever, it's an incredibly complicated topic when it comes to how to make this a financial endeavor, and I appreciate all the work you're doing, Julia, to drive that and to come on here and share with us what you're doing.Julia Strong:
Thanks so much, Cody. Really appreciate the time and look forward to future episodes.Jason Jacobs:
Thanks again for joining us on the My Climate Journey podcast.Cody Simms:
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem-solving capacity.Jason Jacobs:
If you'd like to learn more about MCJ Collective, visit us at mcjcollective.com. And if you have a guest suggestion, let us know that via Twitter @mcjpod.Yin Lu:
For weekly climate op-eds, jobs, community events, and investment announcements from our MCJ venture funds, be sure to subscribe to our newsletter on our website.Cody Simms:
Thanks, and see you next episode.
