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Stripe’s head of climate said the company wants to send a signal to entrepreneurs, researchers and investors that there is a market for permanent carbon removal technology.
Stripe has launched an advance market commitment called Frontier to accelerate the development of permanent carbon removal tech, in collaboration with Alphabet, Shopify, Meta and McKinsey Sustainability.
These companies said today (12 April) that they plan to commit an initial $925m over the next nine years to purchase carbon removal from suppliers developing and scaling new technologies.
As a subsidiary of Stripe, Frontier will also be funded by businesses that use Stripe Climate, the carbon removal purchase tool that was launched in the US in 2020 and globally last year.
“With Frontier, we want to send a loud demand signal to entrepreneurs, researchers and investors that there is a market for permanent carbon removal: build and we will buy,” Stripe head of climate Nan Ransohoff said.
An advance market commitment is a model used to create a market for developing products, and has been used in the past in the area of vaccines. Vaccine alliance Gavi agreed to buy large quantities of the pneumococcal vaccine in 2009 at established prices to provide an incentive to pharma companies to accelerate the development of these vaccines for low-income countries.
Stripe said the carbon removal market is not on track to reach the scale required to help prevent global temperatures rising. To boost this market, Frontier plans to identify technologies with the greatest long-term potential and then help them scale through purchases.
The chosen technologies have to meet specific criteria, including being able to store carbon permanently and having a path that leads to affordability when scaled up.
“At Alphabet, we know first-hand from our longstanding history of working to advance new climate solutions that signalling early demand can spur innovation and lower the price for everyone,” Google chief sustainability officer Kate Brandt said.
“That’s why we are joining this exciting coalition of climate leaders, who jointly see the promise of new carbon-removal technologies and the power of sending a clear demand signal to the market,” Brandt added.
There are currently two forms of purchase Frontier plans to facilitate on behalf of buyers. For early-stage suppliers piloting new carbon removal tech, buyers will enter into low-volume pre-purchase agreements.
For growth-stage suppliers scaling their technology, Frontier plans to facilitate offtake agreements between individual buyers and suppliers. This means buyers will promise to purchase future tonnes of carbon removal if they are delivered, in order to help suppliers secure financing.
“Reaching net-zero emissions is key to building environmental resilience and to realising a future that delivers sustainable and inclusive growth,” McKinsey Sustainability senior partner Dickon Pinner said. “Carbon removals have an essential role to play.”
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