Inside Frontier, the fund pioneering a new investment model in eliminating carbon

“If you build it, they’ll buy,” Joanna Klitzke, head of strategy and operations for Frontier, told me, citing her company’s slightly modified “Field of Dreams” mantra.

The “it” in this case does not refer to a sports-themed ghost haven, but rather direct carbon capture technology promoted by an “advance-to-market commitment” (AMC) launched in April by Stripe. with nearly $1 billion in funding from a group that includes Alphabet, Shopify, Meta and McKinsey. Borrowing the AMC structure from vaccine development programs, the Frontier Fund is committed to funding early-stage solutions and technologies that represent the next generation of permanent carbon removal. But what is an AMC in particular, and why is it, and therefore Frontier, different from the current investment structure for climate technology?

In a nutshell, pre-commitment to the market relies on a draw-funding mechanism that “would award advance purchase commitments to bidding firms”. Explained clearly by Ranil Dissanayake, a research fellow at the Center for Global Development, the financing drawn is like a horse race: it catalyzes the incentive for the horses to compete for the ultimate prize, by promising a future payment according to where they stand. . In contrast, the model currently most widely used to fund innovation is the push funding mechanism, which would be equivalent to cutting the race and putting all your money on a horse (or investing in a single company) to go for a solitary ride. the track several times. Essentially, Dissanayake said, an AMC is like firing “a starting pistol shot on a race.”

With a reserve of money from reliable sources, the real fun begins. Stripe announced a call for expressions of interest in February (before the official launch of Frontier) from companies with potential carbon capture technology that could become the basis for carbon removal. “We had interest from over 75 applicants,” Klitzke told me, “we invited 26 to apply. [in March] and selected six for purchase [in June].” The six winners of the project are:

  • AspiraDAC (a subsidiary of Corporate Carbon): Australian AspiraDAC uses modular and scalable solar technology to absorb CO2. The brand new desorption technology called metal organo frames (MOFs) will be enclosed in a structure lined with solar panels;
  • Calcite-Origen: A joint venture between 8 Rivers (of North Carolina) and Britain’s Origen, the project will combine Origen’s carbon-free lime manufacturing process and 8 Rivers’ Calcite carbon removal technology;
  • Lithos: A Seattle-based company uses artificial intelligence to create soil models specific to a singular farm. This pattern then enables Lithos’ technology to precisely disperse basalt onto agricultural land, a chemical that converts and dissolves atmospheric CO2 into bicarbonate;
  • RepAir: A company 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 Boulder, Colorado company that combines carbon dioxide removal technology with other environmental and industrial benefits. Specifically, Travertine’s electrochemical process removes CO2 from the air and stores it as a mineral while producing sulfuric acid, a chemical that can be used in both elemental extraction and fertilizer production; and
  • Living Carbon: A San Francisco-based biotechnology company that genetically engineers plants to accelerate growth and CO2 removal and storage.

“We’re really looking for something that would be of the scale and magnitude to really kick-start the [carbon removal] market,” Klitzke said. And the selected technologies are Frontier’s first class of future carbon capture powerhouses. direct air capture system.

Rigorous application requirements (shared publicly, with each applicant’s submitted proposal), carefully judged by a panel of experts, minimize risk to Frontier’s investments. And this is crucial. The six companies are listed as part of the follow-up to the “pre-purchase” phase, described by Klitzke as “early dollar deals to get more companies to the starting line.” There is also an offtake agreement that Frontier uses with larger scale suppliers ready to start carbon capture, but none of the first six options fell into this category. As pre-purchase contract companies grow and capture greater amounts of carbon, the goal is to create a reliable and profitable new market.

Once the technology is off the table and in the field, Frontier pays its winners (invented vendors). The carbon removed is then sold as carbon offsets, creating a profitable cycle at an increased rate, augmenting the current carbon offset and direct carbon capture industry.

Investing in carbon removal technology is nothing new for Frontier’s lead investor, Stripe. He 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 payment pages to billing and invoicing services. Stripe’s climate initiative allows each company to dedicate a fraction of its revenue to supporting emerging carbon removal technologies.

Frontier seeks to catapult carbon elimination and offset purchases into a new era. And it looks like the early market engagement model is the right way to go.

When asked if he believed Frontier could catalyze potential change in the industry, Dissanayake replied, “Yes. [AMC]are a relatively underused way to encourage innovation.”

And innovation in any capacity is the key to mitigating or even reversing 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 properly update the context of the Joanna Klitzke quote, and to update Stripe’s call for submissions.

About William J. Harris

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