Stripe, Shopify, H&M spend $7 million on carbon removal via Frontier

Stripe, Shopify and H&M Group announced Thursday they are spending $7 million on carbon removal from a dozen new startups.

The deal was facilitated by Frontier, a public benefit company owned by payment processing company Stripe, which launched in April 2022 to accelerate the development of carbon removal technologies and make sure there is future demand to support the growth of the nascent industry.

Stripe, Shopify and H&M are three of the member companies of Frontier, and together, they spent $7 million on carbon removal purchases from 12 companies: Airhive, Alkali Earth, Banyu Carbon, Carbon Atlantis, CarbonBlue, CarbonRun, EDAC Labs, Holocene, Mati, Planetary Technologies, Spiritus Technologies and Vaulted Deep.

The techniques for removing carbon dioxide vary significantly: Alkali Earth applies alkaline byproducts from industrial processes to gravel on roads which acts as a carbon sink. CarbonBlue uses calcium to mineralize and remove dissolved carbon dioxide in freshwater or ocean water. Mati applies silicate rock powder to agricultural fields, where it reacts with water and carbon dioxide to produce dissolved carbon, and is starting to test its product on the rice paddy farms in India — and the list goes on.

Frontier facilitates carbon removal purchases for its member companies via multiple pathways, including pre-purchase agreements and offtake agreements. Pre-purchase agreements are generally smaller purchases where payment is made upfront and is not conditional on delivery, and the goal is to support early stage carbon removal companies.

The $7 million announced Thursday are pre-purchase agreements, and the amount of carbon expected to be removed ranges from 58 tons to 1,666 tons, depending on the startup.

Offtake agreements are significantly larger purchases intended for later-stage companies and get paid out as the tons of carbon are removed and sequestered.

So far, Frontier has made one $53 million offtake agreement announcement with Charm Industrials to remove 112,000 tons of CO2 between 2024 and 2030. Charm sequesters carbon dioxide underground by gathering excess organic material — like corn stover — and converting that into a bio-oil, which it then pumps into abandoned oil and gas wells.

Offtake agreements with larger carbon removal companies will comprise most of the $1 billion-plus that Frontier has secured from its member companies, which also include Alphabet, Autodesk, JPMorgan Chase, McKinsey, Meta and Workday. Participation in the pre-purchase program for member companies is optional, but all Frontier members participate in the offtake purchases.

“But we still have the pre-purchase program to support the early stage companies, and really to make sure that we can get to the portfolio of gigaton scale removal that we need eventually, by starting today,” Joanna Klitzke, Frontier’s procurement and ecosystem strategy lead, told CNBC on Tuesday.

In addition to the pre-purchase agreements, Stripe is announcing on Thursday it has provided $250,000 in a research and development grant to both carbon removal startups, Carboniferous and Rewind, for a total of $500,000. Also, Stripe has provided $100,000 in funding to carbon removal start-ups Arbon and Vycarb, for a total of $200,000, in a partnership with the climate tech accelerator, Activate.

All of these efforts today are capturing minuscule amounts of carbon emissions compared with the quantity of emissions being released — humanity emitted 36.8 billion metric tons of CO2 in 2022 just to produce energy, according to the IEA. But the thought behind Frontier is that these techniques will be tested and built out over time.

And the carbon removal industry will need to grow dramatically in order for humanity to achieve its climate goals, according to the United Nations Intergovernmental Panel on Climate Change. Carbon dioxide removal cannot be a “substitute for immediate and deep emissions reductions, but it is part of all modelled scenarios that limit global warming to 2 degrees (Celsius) or lower by 2100,” the IPCC says.

Stripe Climate began carbon removal purchases in 2020 and Frontier launched a couple years later. Since then, there has been an increase in both the quantity and quality of applications, Klitzke told CNBC.

“In my mind, that’s a really encouraging sign that the field is growing and maturing,” Klitzke told CNBC. Frontier is seeing new approaches to carbon removal coming from a more diverse range of geographies in the applicant pool, which is also encouraging, Klitzke said.

For Frontier, the idea of carbon removal is not isolated from a primary climate goal of “really, really deep, deep emission reductions and fossil fuel phase out,” Klitzke told CNBC. “The role of carbon removal is fully to address legacy emissions and is not to be an offset or an excuse for the fossil industry.”