Should every dollar spent in carbon removal be maximally catalytic? Or is it okay to try to get a really good deal for your net-zero target? What even is this industry for?!
Joining the show today—somehow for the first time ever—is Robert Höglund, a long-time CDR-watcher and writer; Co-Founder of the carbon removal's data repository-of-record, CDR.fyi, and the Head of CDR at Milkywire.
Robert endures a barrage of questions about how his thinking on carbon removal has changed over the years, and him and host Ross Kenyon try to ferret out what it actually means to be catalytic. Is carbon accounting just for knuckleheads? The truth... may surprise you.
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Resources
Become a paid subscriber of Reversing Climate Change
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"Collective Action Problem" on Wikipedia
Full Transcript
Ross Kenyon: Hey, everyone. Thank you for listening. This is Ross Kenyon. I’m your host. I have two sponsors that I’d like to tell you about today. They’re both organizations doing valuable work within carbon removal. One of them is a new sponsor of the show, and the other one has been with us from the start. So I’m going to start with a new one. I’m going to give them a chance to go first. It’s Climify. Personally, I think they produce some of the best content within carbon removal. Their reports are top tier. I always look forward to reading them.
I’ve learned a lot from them. There’s one in particular that I like that I referenced in a blog post I wrote a while back called Bridging the CDR Financing Gap, the Comprehensive Guide. Just really powerful. Great work. If you’re looking for good intel on carbon removal, check out the Climify reports. They’re really good. There are lots of intermediaries within carbon removal. If someone wants to buy carbon removals, many people will heed the call and try to sell them some. Climify is a group that I see almost more as a white glove service.
They’re quite selective in what they choose to do. The way that they put it is that they empower companies to develop and manage robust, high quality, durable CDR portfolios that’s built upon market intelligence. They have a proprietary rating system. You may have heard that they just gave Deep Sky in Canada a very high rating. They’re involved in the procurement themselves of facilitating sourcing and managing RFPs for companies. So if you’re looking to run a carbon removal RFP, a request for proposal, so you have carbon removal companies coming to you with proposals for what they might be able to do.
Climify is a group that can very much help you with that, perform the due diligence, structure the portfolios, negotiating, executing transactions. That’s all something that they can help you with. And then also just managing the portfolio of Making sure that the projects are monitored, warehoused appropriately, and then when the time comes, retired. Climify’s project database covers about 95% of all the durable CDR projects globally, but out of the 500 plus projects reviewed by Climify, only 3%. 15% meet their standards for delivery and integrity that they look for. And eventually only 5% of those projects are included in client portfolios.
If you’re looking to buy some carbon removals, if you want to run an RFP, follow the link in the show notes to learn more about Climify. And of course, I’m also very happy that Arbonics is sponsoring the show again. Arbonics connects European landowners to corporate credit buyers in order to remove CO2 and protect biodiversity. They’re very data-driven. They’re trying to turn degraded and abandoned land in Europe, in the Baltic States, back into biodiverse force. That’s a really impactful, good thing to be doing for its own sake. Outside of carbon removal, it’s a good thing to do, but is also very much focused on how much carbon can be sequestered while also pointing us towards the importance of co-benefits and ecosystem services.
I think sometimes carbon removal people forget about. We’re pretty focused on the PPM, but the other stuff is really important too. They’re doing fascinating work on the data layer side. I’m not sure if you’ve seen the digital twinning of forestry, but they’re making it. It’s exactly what it sounds like. Arbonics is on the cutting edge trying to make forestry work for carbon removals and turn Europe back into that beautifully forested continent that it once was. So if that interests you, the link is in the show notes. Go check out Arbonics.
Also, Lizette Luik, one of the founders and COO of Arbonics, was on the podcast earlier this year. Go check that out because we dig into a lot of the role of temporary resources. I hope you enjoy. Link to both sponsors are in the show notes. If you’d like to be a sponsor of the show too and hear more about what that might look like, you can email me. The email is in the show notes. And then also if you’re podcasting and you want to use Riverside for recording or Descript for editing and transcription services, I have affiliate links in the notes too.
And that also helps drive the show’s financial solvency. So thanks so much for listening. Here is the intro to your show.
Unknown speaker: And there’s essentially no hurry. And it just never really happens.
Ross Kenyon: Before I go any further, though, for $5 a month, you can become a paid subscriber of the show. There’s going to be bonus content with Robert Hoagland if you want some extra stuff that made it onto the cutting room floor that’s still good enough to publish. But I’m going to keep the show a little bit tighter. So those extra segments are going to a bonus episode for paid subscribers. You also get ad-free listening, which is pretty great. Sponsorships will still be read. You’ll still hear them when I start the show, but the ones that the platform puts in, you will not face those as a paid subscriber.
If you can’t do that, a great rating and review on Apple Podcasts or a rating on Spotify. Super appreciated as well. In addition to any other platforms you may use. But okay, so the show. Robert is one of these people who is plugged into so many high leverage parts of the carbon removal ecosystem. He’s the head of carbon dioxide removal at Milky Wire and leads their climate transformation fund. Milky Wire is essentially a charitable buying group for various types of carbon removal on climate projects. They do very early work. They may only be buying a couple hundred tonnes, but getting the stamp for Milky Wire is essentially a way of saying Robert Hoagland thinks this is good enough to support.
Obviously, he has peers that this has to go through as well. But having Robert sign up support is a really meaningful signal for early stage carbon removal. It’s a very important thing. That by itself would be worthy of a podcast. That’s a very important seat to fill. But he also co-founded CDR. FYI. Surely you’ve been on that site before. If you haven’t, you really should. It has a lot of great data tracking the buying and supplying activity within carbon removal. And Paywall, they also have a lot of additional features. He does research with Carbon Gap.
He’s on a few of the SBTI panels. Oh yeah, we talk about SBTI, Science-Based Targets Initiative. They’re one of the groups that especially big corporate buyers look to know if what they’re doing is going to count for the standards that they want to qualify for or not. There’s maybe a simple way of putting it. And SBTI, everyone’s waiting for guidance from them to know Which types of credits are going to count for which scopes of emissions? And it’s a really tough spot because the biggest stakeholders in the voluntary carbon market space are legacy project developers, the established registries, and the great majority of the volume is for various types of avoided deforestation and other types of avoidances that carbon removal people in particular argue that Should not count to negate a fossil emission because they come from different carbon cycles.
And you can’t just store carbon for a couple decades and consider that as negating a fossil emission, which would have remained very deep underground and is now up in the atmosphere for a very long time. Likely will outlive the offset, even as it half-lives out of the atmosphere. I buy this argument. I think it is sound. I think if you are emitting a fossil emission, one is responsible for removing an emission from the atmosphere and storing it in a similarly durable capacity. And that means that if you are emitting through land use change, you can use a land use change type credit to negate that land use change emission.
I think that’s fine. The shorthand for this type of approach is called like for like. So you’ll hear Robert and I name check like for like several times. We also mentioned horizontal stacking, which is a way of using the less permanent forms of carbon removal, say 10 years or 30 years of removal and renewing it over time rather than buying a durable carbon removal right now. And we talk about some of the Trade-offs of that way of doing things because it makes intuitive sense. The math does work. You can make horizontal stacking make sense.
The thing that makes it complicated, though, is that if that money is not being deployed now by being a customer of carbon removal, we’re also not buying ourselves down the cost curve fast enough. That money is just sort of treading water and not being deployed on more durable forms of carbon removal. There’s also the issue of trust. Can we trust that Big corporate buyers are going to continue renewing, are going to keep renewing their horizontal stacking of a temporary removal. Unclear. Is there some form of escrow or some way to programmatically manage the funds through software?
Open questions as well. It’s one of those solutions that it solves one problem, but not the biggest problem, which is that it makes sense from within a carbon accounting net zero framework. That’s the thing with horizontal stacking is that you’re basically just buying time until durable removals become much cheaper in the future. But of course, if everyone just horizontally stacks, they will not deploy the funds necessary to buy down the cost curve for durable carbon removal. Everyone is just waiting for someone else to spend the $1,000 a ton while they keep renewing their $30 or $50 temporary removal for 200 years or something like that.
Robert and I spend a lot of time talking about this and there’s a term for it. You may have heard it in the show that I did recently with Carbon Plan about open science called the collective action problem. And that’s a $10 way of saying it is a scenario in which it is individually rational for an actor to do something, but it’s collectively irrational for everyone to do something. Collective action problems like this are very difficult to solve because the incentives work against moving from the local maximum to the global maximum.
We could move to a better solution if we all cooperated and did something together. But if only one group or a small set of people do it, they’ll lose out. They’ll make the sacrifice, but they won’t actually get the prize that the sacrifice is meant to achieve. There’s so many versions of this, it’s pretty common. There’s a scene in The Dark Knight, the 2008 Christopher Nolan one, where there’s two ferries. And one of them is with prisoners and the other one is with civilians. Each group has a detonator for the other’s ferry.
And if one group of ferry passengers blows up the other, those ferry passengers are alleged by the Joker to survive. The conventional wisdom here is that they will race each other to detonate the other. But they don’t because they had something more powerful. They had moral suasion working against that basic desire to survive. Each group decides the prisoners, my recollection, decide that they’re there because they deserve it. They shouldn’t harm innocent people. It’s more right that the civilians should survive than the prisoners. And the civilians think that if they kill the prisoners, then they’re no better than them either.
And so both of them Choose to cooperate, and both fairies survive. One way of solving collective action problems is exactly that, moral suasion. Another way people try to solve collective action problems is regulation, where we say that, okay, there’s a base level of behavior that we expect that is enforced by law. That’s one way to solve collective action problems. One could also design better systems that create a more profitable set of outcomes. So what before was a cost now becomes a place of profit or at least not of cost and changes it where it becomes a benefit to do what was previously irrational for an actor to do.
There are other solutions here too. I won’t belabor it much further. One way of framing carbon accounting is that we’re at a local maximum. It makes sense that companies will do it this way. People are very well trained in thinking of corporate net zero. It’s a very legible solution set for climate change. It may not be the most appropriate tool for everything, but at the very least it’s well understood and it took us a long time to get here. Even though individual corporate dollars going towards getting to net zero may involve them spending their money in less catalytic ways than possible, they could be spending their money in ways that are driving innovation and making carbon removal faster, more robust, is increasing the slope of the curve of development and deployment.
But instead, they’re buying things that are the equivalent of focusing on horizontal stacking rather than spending their money in what, for the climate’s benefit, would be the right way to deploy resources. The thing is, for a lot of these companies, though, It’s a bad deal for them. They’re trading a legible story for a much less legible story, going away from corporate net zero to catalytic spending that may or may not be driving future technology cost curves down. It’s a confusing sentence to say. It’s a confusing sentence to try to convince shareholders and one board that this is a great use of funds.
It takes a very special, committed company to do something like that, even though we might be much better off if we ditch the individual net zero carbon accounting for corporations and move towards a catalytic model for financing. But also, even as I say all this, Robert and I talk about how important it is to have a robust solution set. Not everyone is coming into this thinking the same way, and that’s a good thing. Robert resists me poking him several times saying, don’t you kind of wish everyone did it like you?
And he doesn’t take the bait. Actually, it’s good that people are trying to improve things for large scale carbon removal offtake deals that are focused on price per ton and getting to scale. And it’s also cool that people are working on how do we deploy this money in a way that’s not going to help us with our net zero claims, but it’s going to help scale carbon removal and climate action broadly. I think it’s good that people have different goals here. And really, as long as money is coming into climate, I suspect it’s probably better than not for the most part.
Here it is. It’s funny that you describe yourself as a contrarian because that’s actually one of the first things I wanted to bring up about you, Robert. I think you slide under the radar a little bit as a contrarian. You’ll do things that are puzzling to me sometimes where you’ll put out an article talking about how we should actually have free market allocation for how carbon removals should be used by sector. Did not expect you to write something like that. Or you’ll think one thing about temporary removals. And then throw a major monkey wrench into your previous writing on that.
I’m like, oh, okay, Robert has now changed this. All of a sudden, horizontal stacking is super cool. I have a hard time keeping up with all of your thinking, but it always is surprising to me. But a contrarian? I don’t know if I’d call you that.
Robert Höglund: That has like sort of a weird ego trip to it. Right. I definitely don’t want to be... You should never become a reflexive contrarian. So you used to go against... And that was... We discussed it just before the show in relation to being a Swede and maybe being a little bit too much contrarian for the kind of Swedish mindset. But yeah, no, thanks. It’s fun to be unpredictable. I think I’m logically consistent in my opinions and I think I can explain how they all connect, but I can understand why it may not seem like that.
And I mean, personally, I strive to put like two first, like it sounds silly, but... Just whatever logic and reasoning leads down to and facts and evidence is the thing that I want to be saying, even if that contradicts something I said before or hurts my position or whatever, right?
Ross Kenyon: I think that reason is very clear, though, where Grant Faber and I talked about this not long ago. We have prejudice against politicians who are flip-floppers here, a. k. a. people who change their mind. There are good and bad versions of that, but I’ve never gotten the impression that you change your mind based upon anything other than you’re up very late reading things and thinking about things. I don’t think you are being subjected to pressure in some way to come up with your conclusions.
Robert Höglund: No, no, for sure. Yeah. I mean, like Cain said as well, like when the facts change to change my mind, what do you do, sir?
Ross Kenyon: When I asked you to come on the show, which I am very surprised that we’ve never done this. One of the big mysteries of Reversing Climate Change is why we never had a Robert Hoagland show. It’s been almost eight years. I think I’ve known you for most of that time. Why did we never do this? I don’t know. A lot of people who listen are people who work in carbon removal. They probably are familiar with some of your opinions. One orienting question I have for you is how responsible are you for Milky Wire’s strategy of supporting carbon removal companies?
Is that your intellectual child or is it more diffuse than that?
Robert Höglund: No, I mean, I’ve been involved with MilkyWire since 2021, when they started, I started the climate transformation fund with MilkyWire, with Klarna as the anchor customer, and have been leading the work on carbon removal and this wider fund since then for MilkyWire. Like a head of CDR and manage the fund and so on. Um, but I also do other things, right? Because I, I want to be able to, to do other things. So I’m in this, uh, yeah, many has position, but MilkyWire has been taking a majority of my time for these past four and a half years, I would say.
So yes, um, a lot of responsibility on that side.
Ross Kenyon: Okay. Is that a characteristically Swedish answer here? Sharing responsibility for these decisions equally among your peers?
Robert Höglund: No, no. If anything goes wrong, it’s definitely all my fault.
Ross Kenyon: It’s all your fault. Okay.
Robert Höglund: Yeah. I do take a lot of responsibility. Yeah. I have a... Quite a lot of influence, I would say, on the work, especially on selecting CDR, although we have an advisory group, of course, for the final selection. But narrowing down that list of proposals and thinking about the overall strategy, I think full responsibilities.
Ross Kenyon: Well, I like the way that it’s framed. It has such a unique RFP to it. And I think anyone in CDR knows that if they want a chance of receiving a deal with Milky Wire, they essentially need it to be They need to stress the catalytic nature of what support for Milky Wire would enable, right? That’s like the main thing that I think of.
Robert Höglund: Yeah. So, and like Frontier has been doing with the pre-purchases they’ve been making, we also have been a similar buyer and really outspokenly looking at what does the field need and what would be most beneficial and try We’re trying to get these many shots of targets on where the really good ideas are, not being constrained by the cost right now, or if it’s uncertain, or if there’s some risk of non-delivery. And this has been based on Mainly donations then to this Climate Transformation Fund, which enables us to have that approach and not have like a credit delivery target.
And the fund also support decarbonization and nature restoration. But yeah, on the CDR side, That’s been these pre-purchases. And I should also say that has been the approach. MilkyWire is starting to serve companies that kind of want to buy car removal. Like they engage with MilkyWire because we have a lot of experience Maybe they just want like a thousand tonnes of biochar or something, right? Like that’s also something that MilkyWire can help with, but I’ve been focused on this catalytic part and I’m still going to do that for sure. But different buyers and different supporters may have different needs.
Ross Kenyon: I think many people when they’re buying carbon removal are thinking about how to meet their company goals. In a carbon accounting framework. How do we get to net zero for our company? But you’ve really stressed in your public leadership and your thinking that actually may not be the most sublime form of leadership. There are probably other ways that one could do it. It just requires a changing of the story, maybe a changing of the incentives and doing something closer to what Milky Wire is doing, which is about How do we get to a global maximum for CDR, not just the local maximum for our own company?
Is that an appropriate way to frame your thinking on that?
Robert Höglund: Yes. I mean, there’s a difference between what is an optimal solution and what is kind of a workable, actionable solution that people like that gets a lot of uptake. And that’s the optimal solution, according to me, Would be for a company is to look at how can we get the maximum long-term impact of these climate funds that we have? Like, does that mean that we’re supporting new solutions that we don’t know exactly how much, how many tonnes are going to get out of that? Support policy advocacy work, support grassroots organizations that are working on nature restoration that may be doing a really good job, but we’re never going to be able to account for this against our own emissions.
That would be optimal. We, the WWF framework that came out in 2020, New Climate Institute, SPTI, and then the Gold Standard Milk Warrior framework, and the SPTI and BBCM all kind of have this recommendation for companies to set an internal carbon tax, create a budget, and use that to support global climate targets. And I think that kind of approach is optimal. And there’s a corporate net zero targets in themselves are like not... The absolutely best approach. But we live in the real world, like not in the optimal world. And it’s what got companies, you know, excited enough to do something.
What’s setting net zero targets? Now we have them. We live in a net zero world where that is the accounting that we have. And companies are going to reach them and going to work to reach them. And it’s often much easier for a company to buy car removal In order to help make progress on their net zero target than it is to make a donation to advocacy work, for example, on the climate. So I totally recognize that and see that you can do both, right? You can still advocate for saying like, well, we have this approach.
If you just want to support global climate targets, if you’re up for that, but if you just want to buy car removal, then that’s fine too. And here we go and put it This kind of topic where I said the misunderstanding is holding CDR back as well. I think that certain guidelines like SPTI has a 10% limit on CDR. You have the Green Claims Regulation, the EU. Where it’s discussed that companies may only be allowed to make claims of net zero if they use CDR only for a small unabatable part.
Like we don’t know how the final text is going to look, but that was partly that article that you referred to. That was a surprising free market. And that kind of perception of CDR can only be used for a certain part of emissions is something that also, I would say, risks holding emissions back. And we made this meme with what happens if SPTI, Microsoft will follow The SBTI requirement, the draft requirement to buy a car removal. Like now they bought 20 million tonnes. How much will they buy with the requirements?
And the answer is zero, of course, because there’s no requirement for a company like Microsoft to buy. It’s just for hardware to know if we score one. So having that kind of strictness around what you can use CDR for also risks limiting ambition. But this is a long topic and there’s many subtopics into this that we can go into. But I think just finally to close on this, There is a difference what is like CDR optimal when you reach net zero and that’s quite limited. But then there’s also like a temporal aspect to that.
Like what can you do now? And for many companies, they don’t actually have like all these investments that’s sitting over here. Like, oh, if they only wanted to lower their emissions, they could just do that. They could just pay for that. But instead they’re paying for cover removal. Often they don’t even have that option. So it could be temporary optimal to buy cover. Right? It becomes complex to describe. There’s this carbon gap paper that I’ve been working on for, and we started over a year ago. We talked about going on the show, and now this show is about that topic.
So it’s not released yet. Hopefully it will release after summer. But going into that, what is CDR optimal in the long term for ongoing emissions? And what is the optimal choice in the short term? Those are different things, really.
Ross Kenyon: Robert, if we let companies that don’t only have hard-to-abate emissions that they’re using carbon removals against, we’re going to run out of a supply of carbon removals.
Robert Höglund: No.
Ross Kenyon: I know. This is me just setting you up. I know you’re really just not this one. No. Why is that wrong? I think, I think some people probably, probably think that we only have a certain supply of them.
Robert Höglund: Right. And this is a critical question to understanding this whole like debate. Um, and essentially what creates supply is demand, right? Like the, of course there’s no supply, no one wants to buy it. And we’re not talking about making claims in 2025. Uh, then yes, it’s short supply for exposed credits. But, uh, if you look at 2030 targets, for example, and you start buying carbon removal now, Yeah, you can remove many millions of tonnes by 2030. If you order it five years ahead, then you can get it delivered. And the question is also, is CDR like inherently scarce resource?
Like, is it a finite resource? Like all resources are limited. Like there’s always like bottlenecks, how much you can deploy, but that’s more rate limited than like stock limited. So if you deploy CDR now, you’re not depleting some finite stock. If you make BioShare out of this biomass that otherwise would have rotted and the CO2 gone back to the atmosphere, it’s not like you depleted future capacity of doing CDR. No, you built future capacity by creating more infrastructure for creating BioShare. And likewise with direct air capture and developing storage capacity, if you’re a buyer now, you’re developing the capacity that we can use to pay back carbon deaths later.
So the more CDR we buy, the more CDR we can do later to pay off carbon debts as well. So the whole idea that CDR is the scarce resource that needs to be carefully managed and it can run out and so on is completely wrong. Even though there’s a truth to it being rate limited, it gets the whole idea wrong. And I think that’s the root of a lot of misunderstandings and harms on the role of CDR.
Ross Kenyon: I think if we had a really strict carbon removal positive policy at SBTI that said, hey, you can reduce your own emissions or buy carbon removals, they might come close to 90% reductions and 10% removals. It depends on the industry and the company specifically. But we would probably still end up with a heck of a lot of reductions if that were the case, given how expensive removals are.
Robert Höglund: Yeah, I mean, I can’t think of a stronger incentive for companies to actually reduce their emissions than having to pay carbon removal for all remaining emissions. That’s super expensive. Then you have a very strong incentive to actually reduce.
Ross Kenyon: Can SBTI make a decision that will not make at least one group very angry? No. I feel like someone’s going to be very unhappy no matter what.
Robert Höglund: Yeah. Yeah, definitely. There’s a lot of competing interests. I mean, on the one hand, you have companies that may not want to get more requirements, kind of must-dos, and especially not requirements that cost money. What has been proposed for CDR now in the SBTI is quite limited and wouldn’t be very expensive for almost any company because you start very low, you only do for scope one and so on. It’s really tiny. But still, that is one kind of interest group that don’t want that. And then you have kind of the traditional carbon credit industry, avoiding emissions from deforestation protecting forests and so on, that want to see like a mandate for supporting all of that.
And this is also where there’s this confusion about Like what’s needed to continue to have some hard-to-weight emissions and the need for us to scale up a sector that can meet those needs on the one hand. On the other hand, what is a cost-effective climate solution that if you have like $10 million to spend, spending it on forest, it’s great. If you want to continue to emit jet fuel, like forest is not great. It’s just two different things, right? People don’t get that most of the time. I think that’s also one of these miscellaneous findings.
Ross Kenyon: Has your thinking changed on like for like at all?
Robert Höglund: So I think also here, like if you’re talking about the ongoing long-term emissions, like after you say like, well, we’re not going to stop using this. It’s going to be hard to wait. It has to be permanent. Like, otherwise you wouldn’t allow it. There’s hardly any CO2 emissions that’s impossible to reduce to zero. Yeah. Like the only thing I can think of is really this 5 to 10% of CCS emissions that you just can’t capture with CCS, like because it would be extremely expensive to go to 100%. And you probably have to use CDR for that.
But other than that, there’s basically options for everything. But some of those options are expensive and takes more resources than CDR. So essentially CDR is just a great tool in the toolbox to reach net zero cheaper and more efficiently. And when we’re talking about that, essentially enabling a limited amount of fossil fuel we use, right? That’s what that tool does, but it makes it easier and cheaper and faster. Then it has to be permanent. There you have to have life for life. Otherwise, you wouldn’t allow companies to continue to use this fossil resources.
So there, that’s where it’s important. Where I could be willing to compromise or see some nuance is more on recognition of short-term corporate targets. So if you have a 2030 target and you make a claim that you’re counterbalancing all your emissions with removals and part of that is for us, yeah, I think we There can be a role for that. Of course, there’s the risk that you kind of debase the net zero target, like in some way, right? And have different definitions of net zero. One is like when all the reductions that are going to be made have been made and some of like net zero where there’s still some reductions been made, but you’re actually net zero before you’ve done all the reductions.
Can we have two different names for those? That’s an area where People have been thinking about it for a long time. And my previous answer was like, well, just do BBCM. Just do this kind of optimal approach. But I see it’s not flying with the majority. So I’m willing to find compromises. Not that I am the decision maker, but you know, from my opinion’s point of view.
Ross Kenyon: How exactly does the BBCM mechanism work, at least in how you conceptualized it?
Robert Höglund: Essentially, it would be just taking responsibility beyond your value chain for your emissions. So having some kind of connection between the emissions you still have and taking responsibility for the emissions under the curve, the way we have suggested it. And the SPTI suggested it was to have a carbon tax on your own emissions and then use that money in a budget to support climate solutions. But you could also do a BBCM approach where you just buy carbon credits for all your emissions, but you don’t make a neutrality claim. That would also essentially be like BBCM.
You can still use carbon credits, but it’s the claim part and connecting it to your claims on what you have done. That’s the... The most defiant features.
Ross Kenyon: The claim portion of this seems like where most of the anger, vituperation, sorrow comes in. I was talking with Freya Che from Carbon Plan recently, and it ultimately just comes down to what corporations and governments are claiming that their climate action does or does not do. Whereas I think we can all agree that all of these things outside of the claim, except for cases of fraud or negligence, are on balance net positive and a good thing to be doing. But most of this is just bad when it comes to what we’re talking about, the claim of what is the outcome?
What does it enable you to do or not do? Do you agree with that?
Robert Höglund: Yeah, I think so. And all of this really comes from the overuse of climate neutral claims, like a few years back and up to a decade ago, when there’s like these $1 credits, like $1 to $5 credits being used to make the claim that we’re climate neutral. Like we’re done, basically. That’s what you’re saying. If you’re saying we’re climate neutral, we have no effect on the environment and using like very questionable credits. If that had never happened, like if we just forget about all of that, there was no VCM. Like we started with durable cover removal, the VCM.
I think like a climate neutral claim now where you don’t do like for like, you have high quality credits that could be fine. But now you have this history, right? And NGOs that are willing to attack This at any moment, anyone makes any claim, everyone’s just sitting with loaded rifles. Um, so that’s what you put yourself out to when you, when you took your stake in the ground and say, I’ve done this. But I think we should celebrate all voluntary action, essentially, as long as you’re not really fraudulently giving people the impression that if you do, like you can have this Go, go fill your car up with gasoline.
It’s clamp neutral. You know, like, uh, we, um, we bought some red credits from 1998 or whatever, you know, like, um, like that’s harmful, but as long as you’re like, transparently communicating about what you’re doing and not misleading people, I think we just be very celebratory about anyone that does anything at all that they don’t have to do. Most companies don’t support any climate action outside their blockchain. It’s very rare. The VCM before durable carbon removal was at its max $2 billion, which is, yeah, Many times smaller than the shoe and gum industry, right?
Like it’s such a tiny, tiny thing. So you can get the impression that like everyone’s doing this and it’s just a way for companies to commit fraud or whatever, like that someone would be saying, but... In reality, it is a small part of companies that actually have done something and want to pay for climate, and we should really cheer on. And my hope has been that we can get more like a default expectation that, of course, companies contribute to climate outside their value chain. Like, how are you contributing? What are you supporting?
Like, what are you putting your money into? And if that’s... Like soil restoration or if it’s durable carbon removal or if it’s something else, that’s not so important. Like exactly what it is more important when you, in the nets you’re counting, but just having the expectation that companies contribute and sharing on those that do, I think is really, really important, but we don’t do enough sharing outside of like the industry.
Ross Kenyon: Um, you know, I’d like to see many more companies, both the ones that we know and the ones who haven’t participated in carbon removal yet, focus on catalytic solutions and think more about bringing parts per million in the atmosphere down relative to their company’s parochial net zero targets. I think we would all like to see that type of catalytic action. But that net zero story, as you note, is still a decent story and it still motivates a lot of buyers that otherwise may not do it at all. And then the story for the catalytic action is a way more abstract story.
It’s hard to point to an outcome and say we’re responsible for that and we can go brag to shareholders, make a commercial about it, talk about it. I think there’s both a problem of storytelling here. It’s really hard to sell the story both probably internally and also to external observers to get the brand equity back to the company for this support. But also the incentive is probably not there since most of the value as I can see it from voluntary climate action is at the level of brand equity and that this catalytic action is a harder story to create.
Then again, I have seen those like bad oil and gas commercials that are all about innovation. It’s like we support such and such. And people do make commercials about that too. But I don’t know. It just seems like a harder thing to communicate as opposed to just we negated our emissions and now we’re net zero. Am I on to something right now?
Robert Höglund: Yeah, you’re definitely on to something. And I mean, I’ve been living this the last few years and having these discussions, right. I’m trying to figure out how to, what can motivate. And I think those companies where like leadership is already convinced that it’s the right thing to do and, uh, Maybe they have buy-in, maybe then it’s easier to do things that are harder to communicate as well. Like they’re just willing to do whatever they think is a good idea. But the broader majority may need to have more like extrinsic motivators.
But yeah, I mean, one way is tying to your mission still saying like, well, we tax ourselves and we pay a tax for every mission. Like Microsoft started that in 2012, I think, right?
Ross Kenyon: They won’t tax it.
Robert Höglund: And they’ve been using that by CDR and they use that for a lot of things. That’s a way of tying it back to your emissions. So like, and if you set a credible tax, then you could say that you’re taking full responsibility for all your emissions. So for me, that’s, Like path A, path B would be to like reach net zero as fast as you can with like for like mobiles. That’s also something we’d be sharing on. Like if you can accelerate that timeline and you don’t want to do carbon tax, you don’t want to do donations, PPCM, you want to do net zero.
I think you should be celebrated for that as well. There’s the question of like, is there only one claim? Is there only the final net zero claim? Then you probably need like for like permanent. Is there some other claim you can make if you’re not doing like for like? That’s something that could be discussed. But yeah, having that ambition and accelerating net zero timelines, I think is... Really important because there’s a load of emissions that’s going to be emitted from now on to global net zero and like forgetting about that and just talking about reductions and not doing anything about like the emissions under the curve.
That’s just like so ambition lowering. Uh, and we want whatever messages going out to companies to first and foremost, be ambition raising and multi-week action.
Ross Kenyon: Is the way to break the stranglehold of carbon accounting thinking internal to companies, is it a regulatory issue? Is it a storytelling one? Is it both? What needs to change so that it’s not just, we’re going carbon neutral, everyone. And that’s really exciting.
Robert Höglund: Yeah. I mean, on the one hand you have the voluntary action and it is limited, but it’s also Doing an outsized impact, especially in durable carbon removal, like how a small amount of buyers have essentially kickstarted an industry and got all these approaches tested out. It’s not going to scale it to gigatons, but it really has an outsized impact and the voluntary side of things is really important in the coming like five to 10 years for sure. Then it goes into kind of more compliance and that’s a different logic really than Then it’s mainly like integration into ETS and so on.
So sometimes you get criticized because maybe focusing too much the corporate side is forgetting about the policy side, but yeah, it’s not forgotten. It’s just that this is important right now. And that’s the only source of capital. And the compliance side is just going to take much longer. So we have to make sure that we don’t miss the opportunity to get companies to contribute.
Ross Kenyon: So many conversations I have with companies, many of them are just hanging on until compliance comes along. It’s going to be a couple of years still, I think, before you’ll see revenue off of that.
Robert Höglund: More than a couple. Today, there’s a workshop in Brussels about that. Procurement in the EU. So, and they, they’re floating numbers like several billion euros. So that could be like a really big thing. And that’s not, that’s not compliance. That’s more just direct purchasing with the EU acting as a voluntary buyer. So there are things on the short term horizon that could really matter. But if we’re talking about compliance measures that get companies to buy CDR, then it’s essentially integration into emission trading systems. The ETS is going to be post 2031.
You don’t necessarily get like an immediate demand signal either if the allowances are cheaper. So it may still be a while and then you have other ETSs, right? But also when it comes down to policy, if there’s no policy that takes care of the hardware beta emissions and force them to go down to zero, then there’s no policy to force CDR. Like it’s absolutely fundamental. Um, cause otherwise it is never gonna be like a forcing mechanism. It’s just gonna be the carrots, like subsidizing CDR, but CDR is not like other products.
There’s no natural demand other than some kind of voluntary buyers. Um, you do need to have that compliance side. And that’s also another point that I made before that we, we, uh, in a scenario where emissions go down slowly. And you have this high emission scenario. Then you have a low removal scenario. So the more emissions go down, the more carbon removal we’ll have. The century, like, of course you increase the need for more carbon removal down the line, like you’re increasing your, your depth. But when we talk about practical deployment, that’s really slow emission reductions, then small amount of carbon removal, fast reductions, more removal, because then you go down to those last emissions where removal actually makes most sense.
Um, And the U. S. doesn’t have a system to force heart-to-abate emissions to go down. The EU has, and therefore the Cures plans are.
Ross Kenyon: I have a question about those models that take into account the rest of the century and beyond and what it’s going to look like under various circumstances. I have this intuition. It’s definitely influenced by my time at Nori and thinking that 100 years of permanence is going to do a lot of work and we don’t need to be looking towards extreme thousand or ten thousand years of permanence. But I keep seeing papers come out that dispute this logic and attempt to prove why very long, at least a thousand years of permanence is necessary to really achieve the outcomes that we want.
And I like cannot fit it into my brain. Can you just make the case for why, assuming that you agree with it, that a thousand years is truly the standard that we need to be holding on to?
Robert Höglund: I don’t necessarily, I also have some more thoughts on that. I don’t think you have to have that limit, but the reasoning is that if you have The rate will no longer be as limited by then in a hundred years that will be orders of magnitude greater than what it is now, right?
Ross Kenyon: You mean that we do a lot more removals by them so we can easily fill the gap?
Robert Höglund: Yeah, possibly, right? It’s more about the unwillingness to pass the ball down to our children or grandchildren and kind of make them, put them in a harder situation unnecessarily. But if you look at it from a physical perspective, And the Paris Agreement is that, like very physical, it’s 1. 5 degrees. You need to go down to that. And that’s one thing. If you look at it from an economic perspective, when you take into like a discount rate into account, like we may all be dead in the future, like AI maybe kills humanity.
Like there’s a baseline risk of extinction. Like, and if you then start to look at What’s the actual farm in the future and the benefit now and start to discount it. That’s when you quickly go into a place where you would be fine with like a short-term removal. So it’s two different ways of thinking that doesn’t necessarily are able to be like coalesced and combined because it’s like, do you, it could also be like, are you limited by So should you continue to burn fossil jet fuel or should you force people to make electrofuels?
Like in option A, you say like, well, CDR is better because it’s cheaper, but we’re going to do forestation and it’s going to be, it’s just a hundred years, but like discount rates and so on makes it fine anyway. And that’s just so much harder to slow and say like, okay, we’ll skip electric fuels and we’ll do CDR for these emissions than saying, oh, no, we’ll use this permanent CDR. So I think it’s a reasonable... A reasonable requirement to put on emitters that want to continue to use fossil fuels, that it has to be permanent.
So then it costs whatever it costs. And if that permanent CDR is more expensive than electric fuels, then do electric fuels instead. That’s the scenario for that. And that’s why that question is so different from just like, how can we maximize the climate impact of a million dollars? Which is a completely different question. Yeah, now I am rambling, but I have writings in this link to posts.
Ross Kenyon: There’s going to be like 15 links to your writings in here. I’ll definitely put the SAF article that you wrote about comparing it against carbon removal. That’s a really good one. I think also... If you let emitters do cheaper, less durable CDR and then deal with the horizontal stacking of it later and then upgrade to truly durable CDR, they’re going to do it. And then they might actually not pay to develop the rate now and we won’t actually have the pipeline of the big, beautiful... I can’t say big, beautiful now.
Sorry, that’s been tainted by American politics. I’m about to call it something else. But that rate will just never develop if we don’t force them to do it. I also just don’t know how much good faith we can assume on the part of major industrial concerns that... Are probably just trying to continue business as usual for as long as possible and not face major complexity and introduce that into their operations. What does persuade me that we don’t want to go for cheaper, less durable CDR exclusively or just make that horizontal stacking case is that it’s political economy.
And I don’t know that we can trust the people that we’re going to regulate to do what is truly in the climate’s interest unless we force them to pay a much greater amount.
Robert Höglund: Yeah, no, that’s, that’s great arguments. Uh, and I mean, if you set off money for replacement in some kind of trust funds that theoretically that could work as well for short term removals, but it is harder to implement and it’s harder to trust. It’s actually going to be, be there later on.
Ross Kenyon: Um, and the argument during the work too, I know that you have it in your heart. You want that to happen.
Robert Höglund: Yeah. Yeah. I mean, the, the logic is makes sense. The math works out. You don’t need to put, but you know, you don’t want future growth rates going to look like either. Like if you put money out, how much is that going to grow? There are more complexity to it. Um, but you make another great argument is that even if you want this, if you allow all of these kind of more short-term removals, there’s just not enough of them anyway for future needs. So if we’re ever going to pay off that carbon debt, Which is going to be like many hundreds of gigatons of carbon removal to go down to 1.
5. We’re going to need like the expensive permanent solutions anyway, because like forestation is limited to maybe max 100 gigaton. Then it’s over. That’s it. That’s how much more carbon we can store on earth, on trees, like on available suitable land. And that’s like not even going to be like a fifth of all the carbon removal we need to remove. So that’s also a great argument that you need to build that capacity.
Ross Kenyon: What do you think is next for carbon removal? Rest of the decade? Can you even look that far? What about the rest of this year?
Robert Höglund: Yeah, I talked about the 2020s as the startup decade, right? Like, and really trying to figure out what’s the best solutions. And the Milky Wire work, like we have 280 applications from CDR suppliers, durable CDR suppliers, the biggest so far. And among those, like there’s still people coming up with things that I never heard about before. And there’s like really novel ways of doing it. We’ll talk more about the ones that are selected later, but yeah, there’s still cool ideas that could be Sustainable sheep, durable car removal. So we don’t want to lock in too fast on like dominant solutions and start scaling a few, but still have the kind of pathway open for trying more things.
So in some sense, I’m kind of, there’s definitely a silver lining to not having massive amounts of demand right now, because that gives the time to also kind of figure out MRV protocols. Like I’m thinking about enhanced rock weathering. Like you don’t want to issue like millions of tonnes before you’re completely certain that you’re doing the MRV in your right way. So in a way, maybe a blessing in disguise. And I want to see it for the rest of the decade. And I think this is what’s going to happen as well.
Like that we gain much more knowledge on... These are the most promising pathways, and this is the best ways to deploy them. These are the best ways to measure them here. Like you have a full package. These are all the things we need to consider. Here you go, compliance. You know, take this, schedule it. Yeah, but this year, yeah, we see more layoffs and more bankruptcy, I would say, because people are going to, some are going to struggle to raise Series A or B or C. So that would be natural if all the companies get started at the same time.
Actually, a few years, some of them are not around anymore, but that will be a new experience for this sector. You’re one of the first to go through that, so you know much more about what that feels like. But yes, that’s something that I would expect. But at the same time, purchases will most likely continue to go up. So we have these two stores at the same time. Maybe we pass the peak of expectations, but then on the other hand, purchases will just continue to go. You adjust expectations downwards for Cisco.
Ross Kenyon: A lot to respond to. How long do you think biomass-based carbon removal is going to be so prominent? Big deals, pretty much all BEX deals. The CO2 80 deal was announced, a new one that was this morning.
Robert Höglund: JP Morgan.
Ross Kenyon: Yeah, really big. Third biggest. I saw CDR FYI. I saw it on there. Do you think that kind of, and then of course, biochar dominates on deliveries. And so like biomass is just, it leads in different kinds of ways. But how long should we expect those trends to hold for a biomass-based CDR?
Robert Höglund: It’s a great question. For BEX, there’s the possibility to put CCS essentially, capture the CO2 from BEX facilities on all the existing facilities. And I mean, in Sweden, it’s like 30 to 50 million tonnes, depending on how far you go. And in the rest of the world, it’s It’s in the hundreds of millions of tonnes, I think. So there’s a lot of capacity there for like relatively low lift in a way, right? Cheaper than DAX at least. And so there’s a lot of potential for that. It’s mostly limited, I think, what you do with the actual physical biochar.
So how fast can you have uptake on that and with farmers and so on and making sure that it’s put to good use. But the limit there is more around like two gigitons per year. I do think that for the coming foreseeable future, we’re not going to run out of biomass solutions. We’re not going to get limited by that. Of course, when you start to reach closer to one gigaton or something, then I think you may probably feel it a lot more. And even if it’s theoretically possible to do two gigaton of biochar, there’s a lot of other competition for biomass, of course, in some regions and biofuel, not the least.
Um, but that’s why I’ve been saying that the, the more expensive carbon mobile methods probably need to compete a price with biomass based ones, if they’re going to make it.
Ross Kenyon: What did you make of the co-production and additionality debates? The longer I stared at that one and talked through it with people like Grant, the more I’m just like, what even do I think about this? Does this result in the outcomes that I want to see or not? Has your thinking changed at all about how we should think about companies that can produce non-carbon removal assets in addition to the carbon removal?
Robert Höglund: There may be some gray cells where it’s hard to say, but in most cases of the things that we have seen, it’s pretty clear that the income that’s not CDR credit is not enough to increase. To do it, or if it’s enough to do it, it’s just for a small scale. Like BioShare, for example, this was a niche industry, right? So it was around, but it’s no way that would go to like relevant levels. And selling CDR credits is what got a lot of BioShare producers started, is what makes them expand in many cases.
Yeah. If you’re just continuing to do something that you already been doing before, um, then there may be a problem with additionality, but if you’re rapidly expanding that and doing a lot more than what was done before, then I, I, I, I don’t, in practice, it’s not a problem.
Ross Kenyon: Hmm.
Robert Höglund: But it’s looking at what, what are the income streams? Like, are you just getting 1% of your income from CDR credits? Yeah, then maybe it’s not very believable. So there’s need, there’s a financial additionality test in the standards. And I think just as it currently stands, it’s sufficient.
Ross Kenyon: FIOCHAR manufacturers mostly hate that requirement. I hear them gripe about it constantly.
Robert Höglund: Yeah.
Ross Kenyon: I think the way that you’ve approached this, I imagine the way that you have framed Milky Wire’s purchases is probably very close to how you think is the most valuable work for deploying capital within carbon removal that is available. I doubt there are solutions that they said no to that you would rather do than what you’re doing now. In which case, you want to make sure the money that you’re spending is as catalytic as possible. And for you, if a biochar company was profitable or nearly so without your support, you’re probably looking for something else that would be a better use of your funds for catalytic reasons, right?
Robert Höglund: 100%, yes.
Ross Kenyon: Do you disqualify potential applicants when you’re saying like, you’re really cool, but you don’t actually need my money?
Robert Höglund: Yeah, because we, we’ve been trying to do this really, how can we maximize the impact of these dollars rather than just how can we buy a high quality? And that’s, so when we, if we say no to someone because they’re already well-funded, it has nothing to do with their quality. And it’s like everything to do with how can we make sure that this money just makes as much, has as much leverage as possible.
Ross Kenyon: Do you think that principle should be universalized or is it okay to remain idiosyncratic to yourself? Do you think other people should just say, you’re already the most efficient and most profitable company, but we want to make sure you grow way more and therefore we’re going to give you a $100 million offtake?
Robert Höglund: I think that’s completely fine. There’s absolutely nothing wrong with this. Absolutely not. Yeah. And so it’s just, we try to do, like, try to maximize for optimal outcomes. Like, how can we make sure that this small amount of money, like, is used in the most strategic way, really. But that’s not saying anything about anyone else. Like, that’s just... A special pot of money, right? That hasn’t been used to make any claims and everything. So I totally understandable that other pots of money, like have other restrictions and strategies as well.
Ross Kenyon: It would be nice if everyone did exactly what you wanted them to do, but they have their own visions of what is good that they want to support.
Robert Höglund: I’m just gonna say like, you should be humble about that. Like the, the work that we did with catalytic purchases is also something that’s relatively small scale, right? Like it’s not, it wouldn’t, we couldn’t use a hundred million dollars for it. Like back at least not for pre-purchases, like for off-takes and so on. Yeah.
Ross Kenyon: But, um, huge pre-purchase. They would be very happy to receive it.
Robert Höglund: Yeah.
Ross Kenyon: Do you wish that people approached this more catalytically, though? Do you see big deals and think, I wish they had followed our methodology? Or are you just, you’re just glad money is in carbon removal, no matter what, but kind of like you kind of wish they were emulating you?
Robert Höglund: I think there are risks to just looking at what’s high quality and a good price and then going for that. You definitely do risk that there are companies with really promising solutions that just can’t offer a good price right now, and there’s not going to be anyone that can support them. And Frontier and Milky Warriors, Frontier’s pre-purchase side, has filled that role. And if, are we enough? Should we others? If we weren’t around? And if no one does it, it’s a huge problem. I think if there’s no funding for these kind of more expensive niche things that may be risky and like not fully figured out, then we definitely have a problem because you’re not gonna, then we’re just gonna settle on some solutions too quickly and put all the money there.
But as long as there’s like a meaningful amount of money going to those new promising but not fully proven out things, then I think we’re okay. But yeah, there is that risk in the future. Like if the EU would do a purchasing program and just say like, we’ll use buy at any... Whoever has the lowest price, as long as it’s doable, will put the money there. That would be awful. Like, then they wouldn’t be building the future that they need for the EU ETS. And there’s a workshop on that today and Wednesday.
And that would be like a really poor use of money because you wouldn’t be... You would just give the money to a few big companies that maybe max out on capacity and you’re not actually building a sector that can help you reach your long-term goals. So... It’s okay if private buyers think like that, but not all of them does. And decision makers, when they have budgets, should be smarter.
Ross Kenyon: When you see big, highly concentrated offtake deals, do you wish that money were better spread around lots of companies at the same time? Or do you think that some of these majorly concentrated deals serve a valuable market function?
Robert Höglund: I definitely see that there is a value in doing some big projects as well, like to show that it actually works. Um, and, um, not just this kind of weird thing. And, uh, it’s not just a small thing. So, and, and, and having infrastructure, storage built out, all of that, there’s definitely, there’s definitely something good intrinsic in, in having a few like large scale projects as well.
Ross Kenyon: Hmm. But you also like buying from lots of weird little biochar makers too.
Robert Höglund: Yeah, there needs to be ability and buyers for both, for sure.
Ross Kenyon: Yeah, I do like this niche that you’ve carved out for yourself because you are so much smaller. I’m sure you’re looking at Frontier and Microsoft and saying, we cannot play by the same rules and be effective. What can we do that is highly impactful, that is not just about quantity of funds received? I feel like you’ve been really successful at doing that. Everyone wants a Milky Wire purchase. In fact, for most of the companies I know, Milky Wire is the first step on the way to getting the Microsoft Frontier deal.
Anyways, it’s sort of a rite of passage.
Robert Höglund: Yeah, I mean, there’s a lot of truth to that, I think. We fill different niches and have different roles. Microsoft wouldn’t buy for someone that can only deliver 300 tonnes. Like that’s not on their agenda. So having that pathway and different actors can take different roles, I think that makes sense.
Ross Kenyon: We should clearly just do some more of these because that was really fun. And yeah, we have not exhausted any of this. Thank you for being here at long last, Robert. I’m so happy we were able to do this.
Robert Höglund: It was great. Thank you so much.
