Negative Emissions Platform sat down, virtually, with Nan Ransohoff, Head of Climate at Stripe - a key demand side player in the space of permanent carbon removal solutions.

February 28, 2022

Negative Emissions Platform: Hi Nan, thanks for speaking with us today. Let’s start with you: can you tell us a little about your background and how you came to work at Stripe? What attracted you to the company and what does the role of Head of Climate entail, exactly? Are there parts of the job that you particularly enjoy? 

Nan Ransohoff: I’ve spent much of my career building products to combat climate change at companies like Opower, Nest and Uber, where I worked on UberPOOL. When I read the 2018 IPCC report, one of the things that jumped out at me was just how much carbon removal – in addition to emissions reductions – we are going to need to do to stay within reasonable warming limits. I became very interested in the demand side of carbon removals – how do we quickly build such a market? Around a similar time, Stripe had published a blog post on its Negative Emissions Commitment. The way Stripe was approaching carbon removals immediately resonated with me, and I got incredibly excited about the opportunity to try to seed that market with Stripe.

Essentially what we’re trying to do is build a large voluntary market for carbon removals by pooling demand from Stripe’s one million plus users, and leverage those funds to accelerate promising new carbon removal technologies down the cost curve. So my job is partly about building the products that make it easy for businesses to contribute, and partly about identifying the most promising companies to purchase from, advised by a team of external technical experts. 

Negative Emissions Platform: There’s been some discussion around the potential of advance market commitments (AMCs), a financing instrument whereby funds are provided upfront to guarantee a market for a product, to scale up carbon removal technologies. You’ve previously advocated for AMCs as a means to provide an important demand sign to investors, developers and scientists to start scaling up at a time when innovators face considerable uncertainty about how to meet their financial commitments and whether governments and the private sector will invest in large-scale permanent carbon removals. Can you tell us more about the benefits of AMCs and why they would be a useful tool to help scale up carbon removal technologies?

Nan Ransohoff: A key reason permanent carbon removals are behind is that there has been legitimate uncertainty about whether anyone will pay for them. New technologies are typically expensive at first and get cheaper as they scale. Today, carbon removal solutions face a chicken-and-egg problem. As early technologies, they’re more expensive, so they don’t attract a critical mass of customers. But without wider adoption, they can’t scale production to become cheaper.

Advance market commitments work by guaranteeing future demand. An AMC for carbon removal could provide a critical demand signal to scientists, founders and investors, giving them the confidence needed to begin building now.

An AMC has the further advantage that the demand signal can be sent now, without needing to pick a winning technology. A diverse set of technologies can be developed, while incentivizing inventors to meet rigorous standards that ensure they deliver real, permanent carbon removal.

The AMC would thus ensure that funders are helping to create new carbon-removal supply, rather than competing over what exists today.

Negative Emissions Platform: In your view, would AMCs for carbon removal be enough to bring these technologies to the required scale, or should they be part of a portfolio of other demand-side approaches, including regulation? 

Nan Ransohoff: A $1 billion AMC for carbon removal won’t be big enough on its own to get carbon removal to the scale and cost needed in 2050. At, say, $100 per ton, 10 billion tons of carbon removal annually implies the need for $1 trillion of customer demand — every year.

Sustaining a market of this magnitude will undoubtedly require policy to regulate emissions. But policy takes time and tends to respond to emerging technologies rather than kickstart them. An AMC for carbon removal would help the field make progress while critical policy work happens in parallel. Furthermore, it increases the likelihood that large amounts of permanent carbon removal will even be available at a reasonable price.

Negative Emissions Platform:The concept of advance market commitments was first introduced a decade ago, when a group of governments and philanthropic organisations agreed to spend $1.5 billion to subsidise the purchase of pneumococcal vaccines for developing countries if pharmaceutical companies could produce them at a low cost. To what extent could this approach serve as a model for a carbon removal AMC, and what would need to be done differently? 

Nan Ransohoff: In theory, an AMC for a vaccine and an AMC for carbon removal aim to do the same thing – accelerate the development of supply by sending a strong demand signal. 

In practice, there are some key differences between a carbon removal and a vaccine AMC that impact how we might design and implement one for carbon removal. 

One big difference relates to scale. The pneumococcal vaccine AMC accounted for almost the entire market, while that’s not the case for a $1 billion carbon removal AMC. 

Another big difference is that most vaccine suppliers are large corporations with large balance sheets whereas in carbon removal the suppliers today are mostly startups. Large pharma organizations can primarily finance their own development and deployment, whereas startups need a different level of support from banks and other players in the ecosystem. An AMC designed for carbon removal could help solve this by facilitating demand offtake agreements that enable carbon removal suppliers to secure bank financing (as an example).

Negative Emissions Platform: Research indicates that there is no single solution that could be deployed at scale to remove hundreds of gigatonnes of CO₂ from the atmosphere by the end of this century. Carbon removal technologies and practices face varying domestic capacities, environmental and physical limits, meaning that we need to look at them as a portfolio of options that will complement one another in different locations and timeframes.  How can we develop AMCs that provide support not only for the final stages of commercialisation, but also spur companies to invest in earlier-stage research and develop new supplies of carbon removal?

Nan Ransohoff: There are at least a few ways to design an AMC to try to serve earlier stage companies:

• Develop criteria to make purchases based on the future potential of solutions, not today’s prices. Traditional AMCs set price targets; a carbon removal AMC should be prepared to pay (potentially extremely) high initial prices per tonne in order to fund technologies down the cost curve, not just the final point on the cost curve.

• Consider having multiple ‘tracks’ based on the technology’s stage.

• Make it long-term. An advance market commitment of five to ten years would hopefully encourage a wave of new engineers and investors to enter the field.

Even with these tweaks, an AMC isn’t the whole solution. The industry also needs R&D support, bank financing, and investment capital to create the conditions for carbon removal to scale.  

Negative Emissions Platform: Stripe has pledged, in its Negative Emissions Commitment, to spend at least $1M per year on the direct removal of CO2 from the atmosphere and its secure, long-term sequestration. You’ve since built a team within Stripe to focus on creating a market for carbon removal by being an early customer for promising carbon removal technologies. Can you tell us about the technical criteria you apply when selecting carbon removal projects for your portfolio? 

Nan Ransohoff: Stripe Climate’s mission is to identify technologies with the long-term potential to solve this problem at scale. Based on that, we derived six criteria for suppliers to meet:

• Permanence: Stores carbon permanently (>1000 years)

• Physical footprint: Takes advantage of carbon sinks less constrained by arable land

• Cost: Has a path to being affordable at scale ($100 per ton by ~2040)

• Capacity: Has potential to become a meaningful part of the carbon removal solution portfolio (>0.5Gt per year by 2040)

• Additionality: Results in net new carbon being removed rather than taking credit for removal that would have occurred regardless

• Safety + compliance: Legally compliant, responsibly and actively engaging with the public to determine and mitigate possible risks and negative externalities

• Verifiability: Uses scientifically rigorous and transparent methods for monitoring and verification

• Net negativity: Results in a net reduction in atmospheric CO₂

To date we’ve committed $15 million to purchasing carbon removal from 14 companies based on these criteria. We were the first customer for 11 out of the 14.

Negative Emissions Platform: Your Fall 2021 selection saw the addition of four new projects harnessing a range of different capture and storage methods. How is the portfolio shaping up in terms of the diversity in representation of carbon removal technologies?

Nan Ransohoff: We’ve been encouraged by the sheer range of carbon removal approaches. Our recent purchases include Running Tide, who grow CO2-absorbing kelp on the open ocean and then sink it in the deep ocean, and 44.01, who inject CO2 into peridotite rocks, where it is permanently mineralized. 

On one level, this diversity is a good thing – we need as many attempts as possible in order to identify scalable, affordable solutions. At the same time, it illustrates just how early we are. We need to move extremely quickly from here to identifying and scaling the highest-potential technologies. 

Negative Emissions Platform: There have been some interesting policy developments in the United States in the last year, with the federal government announcing its first major efforts towards large-scale CO2 removals. The Department of Energy launched its “Carbon Negative Shot” in November 2021, calling for technologies that will, within this decade, remove carbon dioxide from the atmosphere and store consequential amounts of it, long-term, for less than $100 per t/CO2 equivalent. The DoE is also starting to channel funds in this direction, including through the $3.5 billion Regional Direct Air Capture Hubs Program, a $115 million DAC technology prize, and $14.5 million to leverage existing low-carbon energy to scale-up DAC and storage technology. What are your thoughts on these developments?

Nan Ransohoff: Given how far behind we are on carbon removal, every dollar flowing into the space is an important step in the right direction. Still, winning awards and subsidies isn’t a business model. Healthy markets require buyers and it isn’t clear to carbon removal companies today who they'll be selling to in five years’ time. In addition to the developments we’ve seen, policymakers also need to play a critical role in creating a large, reliable, long-term market for carbon removal.

Negative Emissions Platform: The European Union, too, is starting to pay greater attention to the issue of carbon removals. In December 2021 the European Commission published a Communication on Sustainable Carbon Cycles that includes a goal of removing and storing, long term, 5Mt of CO2 removals per year by 2030. The Communication, part of the Commission’s wider carbon farming initiative, places a relatively strong emphasis on nature-based removals, i.e. those from sustainable land management, farming and forestry practices. What is your view on this initiative, and should a greater focus be placed on technological solutions? 

Nan Ransohoff: We need all of it. Twenty years ago, it might have made sense to have a conversation about which basket to put our eggs in. Now we just need to fill every basket with however many eggs it takes. 

What is clear is that nature-based solutions won’t be sufficient on their own, simply because we’ll run out of arable land at the scale needed. To get to large-scale (i.e. gigatons) permanent (1000 years plus) removal, new solutions will very likely be necessary, and it’s these solutions that are particularly far behind. 

Negative Emissions Platform: The Commission is currently designing a regulatory framework for the certification of carbon removals to ensure the transparent identification of nature-based and industrial solutions that remove carbon from the atmosphere. It seeks to improve the monitoring, reporting and verification of carbon removals, thereby providing a future robust accounting and certification framework that ensures comparability and recognition of the work that has already been done in this regard. In your opinion, what should the EU prioritise in its upcoming regulation to certify carbon removals? 

Nan Ransohoff: We’d encourage the Commission to consider a few themes as it designs this regulatory framework. 

First, create a tech-neutral standard that works for a portfolio of diverse solutions. Given how nascent this field is, we want to encourage innovative new solutions rather than only support what exists today. 

Second, hold a high bar for quality. For example, a carbon emission is functionally permanent; therefore, any removal effort must similarly be permanent.

Finally, it’s important to be realistic about where the field is today – it’s basically at the starting line and quite far from being a typical commodity. So, what creative solutions can we come up with to help early solutions get cheaper and scale up faster?