Nearly $2 Billion Pursues Carbon Removal in the Last Month

Illustration of Frontier’s expected business model
Source: Frontier

Key Points: The past month has seen an acceleration of funding put towards carbon removal, led by the introduction of the US$925 Million Frontier fund and a US$650 Million capital raise by Climeworks. Notable about Frontier is a willingness to pay up to $400/ton as it encourages new technologies and a structure that pays out on successfully removing CO2.

Frontier raises $925 Million. Frontier, a public benefit LLC owned by Stripe with funding support from Alphabet, Shopify Meta and McKinsey, is employing an Advanced Market Commitment (AMC) model, in which buyers will commit to an annual spend on carbon removal between 2022 and 2030. Suppliers will have to meet certain criteria, including permanence of removal and verifiability and a path to a cost structure of <$100/ton CO₂ at scale; suppliers will get paid based on delivering on carbon removal. The emphasis is developing new technologies, and indeed a diversity of technologies, from entrepreneurs. In this way, as Bloomberg has opined, it is meaningfully different than the carbon capture (funding) approach, which has been concentrated — and used technologies from — emitting industries like Oil & Gas. The AMC model resembles one of the options available to partners (i.e. purchase commitments) in Bill Gates’ Breakthrough Energy Ventures/Catalyst investment platform; Frontier notes that the model is borrowed from the Gates Foundation’s experience in funding vaccine development.

Earlier in April, Climeworks raised US$650 Million in equity. Climeworks began operation of its 4,000 metric ton per year (TPY) Direct Air Capture (DAC) plant in Iceland, named Orca, in September 2021. The company is targeting its next generation plant of approximately 40,000 tons over the medium term and speaks to scaling to 1 Million TPY by the end of the decade. Climeworks’ technology includes a selective filter to capture the CO₂; the captured CO₂ is then injected underground, where it mineralizes.

For reference, another established DAC company, Carbon Engineering, plans to start construction of an up to 1 Million TPY facility for Occidental Petroleum’s Low Carbon Ventures subsidiary 1PointFive later in 2022 in the Permian Basin; in March it announced sales of 400,000 carbon credits over a four-year term to Airbus. Carbon Engineering cites use of a potassium hydroxide solution to capture the CO₂ in the processed air.

Also in April, Lowercarbon Capital launches a $350 Million fund for carbon removal startups. Lowercarbon Capital, founded in 2018 had already raised $800 Million in 2021 with a broader climate mandate and has invested in dozens of companies, including Carbon Engineering.

Heirloom raises $53 Million. At the end of March, another DAC entrant, Heirloom Carbon Technologies, completed an equity financing round. Heirloom’s technology differs from peers in that it uses limestone as opposed to solvents to pull the CO₂ from the air. Breakthrough Energy Ventures was cited as a lead investor.

4/25/2022