Stripe’s Frontier Fund Shows How Quickly Carbon Removal Has Evolved

(Bloomberg) --

Last week, a new fund went public with its plans to support carbon dioxide removal technologies. The Frontier Fund was set up by payments company Stripe Inc. and is supported by Shopify Inc., both regular backers of innovative approaches to removing atmospheric CO₂. Also funding the effort are bigger tech players Alphabet Inc. and Meta Platforms Inc. and the management consultancy McKinsey & Co. Inc.

This fund's premise — an “advance market commitment” to purchase carbon removal from startups honing various technologies — is unusual in climate circles because it guarantees a market rather than subsidizing assets. Its scale, $925 million, is significant too. But it is actually on par with the sort of funding that carbon capture technologies received more than a decade ago.

Today's funding is distinctly different, however. The contrasts between then and now are instructive for helping us consider how the global market for carbon removal might evolve. 

In the early 2010s, BloombergNEF tracked more than $7 billion of funding allocated to carbon capture projects, most of it from government sources (and most of that in Europe). I've grouped that funding here in two ways. The first is by the source of the carbon dioxide. More than $5 billion of funding was focused on methods of power generation, capturing carbon either after fuel had been burned or from the transformation of hydrocarbons into other combustible molecules like pure oxygen or hydrogen, in so-called integrated gasification combined cycle plants, which allow CO₂ to be captured. Oil refining, too, got more than $1 billion of allocated carbon capture funding. 

Just as significant as the source of the captured CO₂ was the intended destination. Almost half of CCS dollars went to enhanced oil recovery (i.e., the carbon was pumped into oil wells to increase reservoir pressure and therefore allow for more oil to be extracted). Most of the remainder of funding supported pumping carbon dioxide into saline aquifer formations often found in oil and gas fields, or into depleted oil fields themselves. Only a small fraction of funds went to storing CO₂ underground in formations not associated with hydrocarbons, or transforming it into a long-term stable mineral. 

Looking back at a decade's remove, these funding approaches reveal something important. In the late 2000s and early 2010s, carbon capture and storage was viewed as a problem for the companies that emitted large volumes of CO₂ — power companies and oil and gas companies. And to solve their problem, CCS used approaches that those industries were familiar with, such as pumping hydrocarbons into storage underground (instead of extracting them). 

What did these approaches amount to? Not much, honestly. One of the marquee carbon capture and storage projects in the power sector, the Kemper power plant in Mississippi, literally imploded in 2021, at significant cost to customers of the utility that built it. Because these earlier efforts were almost entirely funded without a specific price of captured carbon indicated, economics and prices were perhaps not integral to their operations. 

Today's carbon removal efforts are quite different, in instructive ways. First, most of the technologies that Stripe is funding, like 44.01's and Ebb Carbon's, do not capture carbon dioxide from a heavy emitter's “point source” of emissions, such as a refinery or a power plant flue. They extract it from the atmosphere. That means that today's approaches view atmospheric CO₂ not as an emitter's problem, but as a societal one, worthy of specific yet widely distributed technology solutions. 

Second, the advance market commitment has clear, upfront, and straightforward ways of measuring project success. If companies can meet targets, then the Frontier Fund will buy the result. Finally — and I believe of greatest interest to the investment community — is that this approach could create an entirely new cohort of champions. 

At the turn of the 20th century, the Wright Brothers' expertise was bicycle mechanics, and the knowledge of geared systems they developed through the Wright Cycle Co. allowed them to build their Wright Flyer in 1903. The early days of a new industry, aviation, necessarily drew on other established industries. 

Aviation's first leading companies came from wholly new places, with wholly new priorities. The winner of the 1909 international aviation meet in Rheims, France, was a “young unknown” named Glenn Curtiss, whose company would become the largest aircraft manufacturer in the world during World War I. William Boeing, similarly, was already a timber baron when he was “developing a passion for aviation.” There is a lesson here for carbon dioxide removal: A sector may originate with one set of priorities and technological principles, then find new ones and grow in scale, scope and sophistication. 

Nathaniel Bullard is BloombergNEF's Chief Content Officer. 

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