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Inside Frontier, the fund pioneering a new model for carbon removal investments

Investing in carbon capture technology

Investing in a greener tomorrow. Image via Shutterstock/Lovelday12

"If you build it, they will buy," Joanna Klitzke, strategy and operations lead for Frontier, told me, citing her company’s slightly altered "Field of Dreams" inspired mantra.

The "it" in this case doesn’t refer to a sports-themed haven for ghosts but rather direct carbon capture technology promoted by an  "advance market commitment" (AMC) launched in April by Stripe with close to $1 billion in funding from a group that includes Alphabet, Shopify, Meta and McKinsey. Borrowing the AMC structure from vaccine development schemes, the Frontier fund is committed to financing early-stage solutions and technologies that represent the next generation of permanent carbon removal. But what is an AMC specifically, and why is it, and thus Frontier, different from the current investing structure for climate tech?

In a nutshell, an advance market commitment relies upon a pull financing mechanism that would "award advance purchase commitments to bidding firms." Explained plainly by Ranil Dissanayake, policy fellow at the Center for Global Development, pull financing is like a horse race: It catalyzes the incentive for the horses to compete against one another for the ultimate prize, by promising a future payout depending on where they place. In contrast, the model most currently used for funding innovation is the push financing mechanism, which would be the equivalent of cutting out the race and putting all of your money on one horse (or investing in one single company) to take a solitary run around the track a few times. Essentially, said Dissanayake, an AMC is the equivalent to firing "a starting gun on a race." 

With a pool of money from reliable sources, the real fun(d) begins. Stripe announced a call for interest back in February (before Frontier was officially launched) from companies with potential carbon capturing technology that could become the foundation for carbon removal. "We had an interest from more than 75 applicants," Klitzke told me, "we invited 26 for application [in March] and selected six for purchase [in June]." The six project winners are:

  • AspiraDAC (a subsidiary of Corporate Carbon): Australia’s AspiraDAC uses modular and scalable solar powered technology to absorb CO2. Brand-new desorption technology named metal organic frameworks (MOF) will be encased in a solar panel-lined structure; 
  • Calcite-Origen: A joint venture between 8 Rivers (from North Carolina) and the U.K.’s Origen, the project will combine a zero-carbon lime manufacturing process from Origen and the Calcite carbon removal technology from 8 Rivers;
  • Lithos: Seattle-based company uses artificial intelligence to create soil models specific to a singular farm. That model then allows Lithos’ tech to precisely scatter basalt on the farmland, a chemical that converts and dissolves atmospheric CO2 into a bicarbonate; 
  • RepAir: A company hailing from Israel, RepAir has created an electrochemical device that uses electricity to separate carbon dioxide from the air. The clean air is then released and the CO2 is stored or used; 
  • Travertine: A company from Boulder, Colorado, that combines carbon dioxide removal technology with other environment and industry benefits. Specifically, Travertine’s electrochemical process removes CO2 from the air and stores it as a mineral while also producing sulfuric acid, a chemical that can be used in both element mining and fertilizer production; and
  • Living Carbon: A San Francisco-based biotechnology company that genetically engineers plants for accelerated growth and CO2 removal and storage. 

"We’re really looking for something that would be at the scale and magnitude to really jumpstart the [carbon removal] market," Klitzke said. And the selected technologies are Frontier’s freshman class of future carbon capturing powerplayers. Each startup tackles direct carbon capture in a unique way, from genetically engineering trees to grow faster and sequester greater amounts of carbon to constructing a solar-powered direct air capture system. 

The rigorous application requirements (shared publicly, along with each applicant’s submitted proposal), thoroughly judged by a panel of experts, minimize risk for Frontier’s investments. And this is crucial. All six companies are listed as tracking in the "prepurchase" phase, described by Klitzke as "early small dollar contracts to get more companies to the starting line." There is also an offtake agreement Frontier uses with larger-scale suppliers ready to begin carbon capture, but none of the first six options fell into that category. As the prepurchase-contracted companies grow and capture larger quantities of carbon, the goal is to create a new, reliable and profitable marketplace.

Once the tech is off the table and on the field, Frontier pays their winners (coined suppliers). The carbon removed then gets sold as carbon offsets, creating a profitable cycle at an increased rate, scaling up the current carbon offset and direct carbon capture industry. 

Investing in carbon removal technology is nothing new for Stripe, Frontier’s main investor. It has nurtured an investment program for three years. Stripe is an online system that provides businesses with payment infrastructure, including everything from customer-facing payment options and online checkout pages to invoicing and billing services. Stripe’s climate initiative allows each business to contribute a fraction of their earnings towards supporting emerging carbon removal technologies. 

Frontier is looking to catapult carbon removal and offset purchasing into a new era. And it appears that the advance market commitment model is the right path to take.

When asked if he believed Frontier could catalyze potential industry change, Dissanayake responded, "Yeah. [AMC]’s are a relatively underutilized way of incentivizing innovation."

And innovation in any capacity is the key to mitigate or even reverse the severity of the climate crisis. Put me in the game, coach, I’m ready.

 

Editor's note: This story was updated on July 15, 2022, to correctly update context of  Joanna Klitzke's quote, and to update Stripe's call for applications.

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