The Exchanges

Q and talk about Stripe climate. I think it's, it's becoming more things over time is my sense, right? Like you started out just being a buyer of carbon removal, and then now you are sort of also a supplier of carbon removal and a galvanizer of a carbon removal market and probably some other things I don't even know about yet. So how do you describe what Stripe climate is?

A Yeah. We are trying to build a large scale market for carbon removal in the absence of policy. And so for us, that means a couple of things. One, we are trying to raise as much money as we can to buy frontier carbon removal. And that is Stripe contributing. It's making it easy for the two million plus businesses on Stripe's platform to contribute a fraction of their revenue as well. Stripe has all of these different products, and if we can make it easy for businesses and consumers and employees to, to direct a fraction of their revenue into this pot, We then, Stripe, aggregate those funds and use it to buy carbon removal, um, from really promising solutions that are expensive today, but that have the potential to be really low cost and high volume in the future. So essentially we're trying to help, um, we're like buying the Tesla Roadster of these new technologies to get them down the cost curve, um, so that by 20 50 we have not only tree planting and soil sequestration, which we have today, but the entire portfolio of solutions that we need to hit global net zero.

AI assessment note: “We are trying to build a large scale market for carbon removal in the absence of policy.”

Q Alright, so you mentioned tree planting and soil sequestration. Um, let's do a quick overview of carbon removal. What is it? Why does it matter? And then I want to get into all the other pathways, and there are many, ah, ways that you can remove carbon from the atmosphere, permanently or semi-permanently.

A The world emits 50 gigatons of CO₂ equivalent every single year, and we need to get that down to net zero by twenty-fifty. High level, two things we can do. We can stop emitting, or we can suck CO₂ out of the air and out of the oceans and store it somewhere permanently. Um, roughly speaking, we're gonna have to do a huge amount of emissions reduction, but in addition to that, in order to hit net zero, we're also gonna have to do carbon removal, and that's because there are certain industries that are really hard to decarbonize, um, we also have to remove a lot of historical emissions, and so we need a huge amount of carbon removal, roughly on the order of 10 gigatons a year by 20 50. Um, and essentially what we're talking about is two parts. We need to find the 412 particles of carbon in the other million particles in the air. We need to separate those out, and we need to store them permanently, because a ton of emissions is permanent, so a ton of carbon removal also should be permanent as well. But a high level, there's a capture piece, and there's a storage piece. Some solutions, uh, those are inherently embedded together, and in some solutions, They are sort of more modular, and you can mix and match, um, but high level, 10 gigatons per year by 20 50, um, and we have a lot of work to do to get there.

AI assessment note: “We can stop emitting, or we can suck CO₂ out of the air”

Q which, which are all above that, basically, and, um, some of them, like you said, more than order of magnitude above that. So, to that, I guess my question is, To the extent that this is a market today, albeit a nascent one, does pricing matter? Do you care about pricing today, or do you care about what the price will be in 20 years when they get to scale?

A So we Stripe don't care what the price is today. We are very focused on trying to understand what the glide path for each of these technologies looks like on the way to sub a hundred dollars and more than half a gigaton. Are there, you know, does the underlying, you know, physics or chemistry, et cetera, work? Um, are there other limitations that would prevent it from getting to the scale necessary? We are really focused on long-term How cheap can this be? And much more agnostic as to, as to the price today. Um, for most companies, we are giving them the same dollar value or just buying different number of tons from them. We sort of back solve the number of tons based on the total contract value. Um, and this is, you know, this is, Another application of learning curves, right? Tesla, Tesla Roadsters are expensive at first, and it takes them multiple, multiple models to get down the cost curve. We are essentially buying the Tesla Roadsters for all of these different technologies, but only if we believe that, again, there is a path to sub a hundred dollars over the coming decades.

AI assessment note: “So we Stripe don't care what the price is today.”

Q can do big things and probably should be the ones, whether they, they invent the technology themselves or acquire it or license it or whatever that are doing this. Is it that they are not yet getting into the carbon removal game? It's too early in market for them. Or is it that you have a preference to spark innovation and early stage development? Tech startups, because that's Stripe's DNA.

A So far, the companies that have applied to our RFP are all startups, and we were the first customer for seven of 10. We're not opposed to buying from later stage companies, but we haven't seen them. I think for the most part, that is driven by the fact that, um, carbon removal hasn't made a compelling enough business case for them to actually do anything in the space, um, and, you know, historically, Nobody wants to build carbon removal if there's no market for it. You don't want to build a product when there's not going to be a buyer for it, and when especially large companies are looking at how to evaluate resources, that is certainly part of a big part of the ROI calculation that would go into a decision like that. Um, we need to fix that. We've been thinking a lot about a similar concept, um, in vaccine development that's helped solve some of these market problems. So there's something called an advanced market commitment, and this is essentially used when you want to develop, for example, a vaccine for the developing world, malaria, or the PPC, a PPC vaccine, and Pfizer and Glaxo will say, you know, hey, I'm not going to spend the resources developing this vaccine because if I do, nobody's going to buy it. The buyers in this country are poor. So in 2007, um, to solve, to come up with a PVC vaccine, philanthropists and governments decided to put a huge amount of money into …

AI assessment note: “We're not opposed to buying from later stage companies, but we haven't seen them.”

Q bear for carbon removal? Will it all be standardized? And so at the end of the day, as long as you meet the criteria, say they're your criteria, thousand years of Permanence and, and all that, then if you're the cheapest dollar per ton, you win. Or is it gonna have to be more nuanced than that? In which case, like, what does this market end up being structured like?

A In the really long term, I, I, I don't, I probably don't have a fully formed opinion on this, but, you know, my, my initial thoughts are that in the long run, I could see this becoming a commodity market if that market takes into account different characteristics of a ton of carbon removal, right? A tree planted for a hundred, that lasts for a hundred years is very different from, um, Climeworks, a ton from Climeworks, which is mineralizing, um, the CO₂ underground, and so if we can come up with a way to incorporate All of that information into the price per ton. I, I think there is a, is a path to this looking and feeling more like a commodity. Maybe there are different tiers or something like that. Maybe we end up looking at, um, a price per ton year, for example, to take into account the number, uh, the number, the amount of permanence. Um, but, you know, I think we're the, the, something that I worry about is that we are really far from Getting to the point where, where carbon removal is a commodity. And I worry that there's a lot of pull to treat it like that right now. Um, and there's a lot of pull to sort of, um, to, to, you know, list everything on a carbon market and have it compete with 10 dollar per ton, um, offsets. And that's, I don't think that's going to set it up for success.

AI assessment note: “in the long run, I could see this becoming a commodity market”

Q questions that I have about this market is sort of, is there a possibility that there's a winner here? Not necessarily a company winner, but a technology winner. We solve it with DAC, right? For example, um, or is there just no way that's going to happen because everything has some kind of a resource constraint that's going to mean it can't scale to the total size of the problem?

A I don't think we know at this point. Um, I think it's too early to pick a horse. I think it's probably too early to pick multiple horses. My hunch is that there will likely be a few kind of winning solutions in different areas that, uh, and, and companies that are leaders in those areas that collectively get you to the 10 gigaton. I think if you purely think about this from the perspective of What is your, you know, CAGR need to look like from now until 20 50 to get to a 10 giga 10 number? It's hard to imagine a single company or a single technology growing that quickly. You probably need to parallelize a few different technologies so that in sum they aggregate up to that 10 giga 10 number, but it's possible. It is, it is certainly possible that, that, you know, uh, the charm folks or the Climeworks folks, you know, figure out how to scale this. Really massively, and I, you know, let's compete for that. Like, let's, let's, let's see what we can do and try to get there as quickly as possible.

AI assessment note: “My hunch is that there will likely be a few kind of winning solutions”

Q you've acted as the aggregator of those purchases. And you've done two cycles of this so far, at least that have been announced publicly, where you've not only issued a call for proposals, but then actually procured some of them and published Everything that you've done, um, how would you high-level categorize the, the pathways for carbon removal that you've actually selected thus far in the procurements that you've made?

A Yeah, so maybe we'll start with talking about what we look for when we're looking for, um, looking to purchase carbon removal, and what we've, we've, we've, we've published a set of target criteria, and the intention of these target criteria is to characterize the gap that we currently see Um, in that portfolio of solutions. Um, so we're, we're quite agnostic as, as to the pathway. We're agnostic as to the technology type, whether it's quote unquote nature-based or engineered or synthetic. Rather, we're trying to, um, uh, really highlight what we're looking for. And what we're looking for is, um, solutions that have more than a thousand years of permanence, um, that have a pathway to sub a hundred dollar a ton removal, even if they're expensive Today, and we've paid more than 2000 dollars per ton from heirloom this last cycle. We are, um, we are not hunting for the cheapest tons. Three, we're looking for solutions that have the potential to get to more than half a gigaton. And then, um, in addition, we're looking for solutions that are not competing with other uses of arable land. So, doesn't compete for food, for, for land that would be used for food or for shelter, et cetera. Um, and so, our solutions take a bunch of different shapes, but that is the target that we're looking for. And in practice, um, you know, this, this allows us to look at a pretty diverse set of technolog…

AI assessment note: “we're quite agnostic as, as to the pathway... we've published a set of target criteria”

Q finance an asset off your balance sheet, which is what all these companies, carbon removal companies would love to be able to do. So do you think the market will head toward, you know, you stripe and everybody else who's buying credits, buying strips of 10 years worth or 20 years worth of Carbon removal from a given asset at a time as opposed to transacting on an annual basis?

A Yeah, so to answer your first question, When are these technologies going to get to scale? Um, there's a lot of uncertainty, uh, right now, and I would say generally this field is not currently on track for carbon removal to make a material dense in the climate crisis. Like, even with the recent progress, even with all these companies that we're finding and funding and all the press and, um, and, you know, Stripe purchases and Microsoft purchases, like, we are still so far off target, um, and it's a problem. So we can Talk a little bit more about how to fix that and, and what needs to happen in order to get this field on the best possible trajectory. Um, but currently we're, we're not on track to scale. Um, in terms of contracts, Yeah, so Google pioneered this back in, um, you know, in the nineties with renewables where they essentially said, we will pay a premium to purchase clean energy from solar, wind, et cetera, companies, um, and in order for those companies to get the financing to build out their plants, they needed a customer offtake because banks are worried about, you know, there's gonna be nobody to buy this ultra expensive power that you're producing. And so we, um, this field is going to benefit from a very similar construct of offtakes, um, right? So these companies need, need to de-risk, especially in carbon removal when there, you know, isn't an intrinsic use li…

AI assessment note: “this field is going to benefit from a very similar construct of offtakes”