How much money do we need
in order to remove a significant
amount of carbon dioxide
out of our atmosphere?
And what are the mechanisms
that we should use
to spend all of that money?
I'm the head of sustainability at Shopify,
a company you may not know
but you might interact with every day
because our technology
powers millions of online retailers.
In 2019,
we wanted to become
a carbon-neutral company
and be accountable
for all of our historical emissions.
Instead of buying typical,
traditional carbon offsets
that simply pay someone else
to not pollute as much as we already had,
we actually wanted to delete
our emissions.
It quickly became obvious
that carbon removal,
those solutions that pull carbon
dioxide out of the atmosphere
and store it safely,
were very expensive and in short supply.
So to kick-start this almost
non-existent market,
we launched our sustainability fund
and committed to spend a minimum
of five million dollars every year
on the most promising solutions.
Now, obviously we need
deep emissions reductions,
I'm not disputing that.
But alongside this,
we also need to build the world's capacity
to pull ten gigatons
of carbon dioxide out of the sky,
every year, by 2050.
Now, at the time,
five million was a big number,
and it was a really big number
to spend on something in its infancy.
And we thought we were doing
something significant.
But then we totally hit a wall.
We weren't even thinking
at the right scale.
We need to build massive facilities
capable of pulling one million tons
of carbon dioxide out of the air
every year,
and we need thousands of them.
And in order to do that,
we need project financing
of about one billion dollars per plant.
Now, to put that into perspective,
our five-million-dollar annual budget
would probably buy about 10,000
tons of carbon removal every year.
That's tiny.
That's only one percent
of the annual capacity
of the size of the facilities we need.
And like I said,
we need thousands of them.
So we've learned that in order
to move the dial on climate
and to build the necessary infrastructure,
we need more money,
way more money.
And in order to do that,
we need collaborations
and we need structures that leverage
the significant power of capital
to create even bigger effects.
So now I'd like to tell you
about what we did next.
It's a mechanism that we launched
alongside four other companies.
It's an AMC.
AMC stands for Advance Market Commitment,
and this one’s designed to help
guarantee a future market
for carbon removal by trying
to de-risk the R and D investment
and capital expenditures
needed to scale carbon removal
and grow that industry.
Now, why I think this is such
a promising approach
is because it's not new.
AMCs have been used in the past
in the health care sector
to encourage and accelerate
the development of vaccines.
It worked by essentially guaranteeing
the economic viability of production
by setting a price in advance.
This meant that companies
could justify the R and D resources
needed to develop the vaccine
as well as the costs
associated with bringing it to market.
They just needed to know that someone
was going to buy their product
at a set price.
So this AMC borrows the idea
of a purchase guarantee
to try to accelerate the development
and scaling of carbon removal.
And to do that, we set up a fund,
and it's a pretty big fund.
It’s nearly one billion dollars,
and it's called Frontier.
But Frontier has to overcome
some significant differences
between vaccine development
and carbon removal.
First, vaccine development
has been done for a long time
and we've largely worked out
the supply chain
and infrastructure challenges,
the operational issues
and the policy definitions.
But for carbon removal,
this is essentially still a new industry
that faces all of these hurdles.
For example,
a lot of carbon removal technologies
rely on clean power to operate
because if they don't,
they'll emit more carbon dioxide
than they capture.
But clean power does not exist today
at the scale and distribution we need.
Second, vaccines are developed
by established companies
with deep R and D teams and experience.
Whereas today,
carbon removal largely exists on paper,
in the lab or at the start-up stage,
there’s only a handful of companies
worldwide right now
that are any further along.
Third, the manufacturing facilities
for vaccines already exist at scale.
But for carbon removal,
the largest facility in operation today
is Climeworks’s as Orca plant in Iceland.
It has an annual capacity of 4,000 tonnes,
which is orders of magnitude
less than what we need.
This means that today there's no company
or facility in operation
that can respond
to the demand signal of Frontier.
So to summarize,
for vaccine development,
all these companies needed
as an incentive was a dollar sign.
They had everything they needed
to jump into action and respond.
But today, carbon removal
needs so much more.
Even though there's a lot
of different ways to approach this,
I do believe that this
is a significant market signal
that Shopify, alongside Stripe, Alphabet,
Meta and McKinsey Sustainability
have committed to buying nearly
one billion dollars combined
of the product.
But the carbon removal ecosystem
is underdeveloped.
Even though Frontier
is essentially helping to underwrite
all of the broad investment needed
to scale carbon removal,
this is an imperfect application
of the advance market commitment mechanism
because the carbon removal
ecosystem is underdeveloped.
However,
however, this is exactly
what we need to do
to supercharge progress
by accelerating innovation.
It is so important to take chances
and to experiment.
And as buyers of carbon removal,
we have an opportunity to stand up
and do our part to build for the future,
and this commitment does just that.
So now we have Frontier,
which is the demand pull
by providing capital and resources
through the advanced
market commitment mechanism.
But what about the other side
of the equation?
We also need a supply push.
To start,
in addition to all of the new
climate companies being launched,
we also need companies from existing
industries with transferable skills
to jump in and start
developing carbon removal.
I'm talking about --
now, don't get mad --
I'm talking about industries
like oil and gas,
mining, manufacturing,
infrastructure and electricity,
who all have deep experience
building huge projects.
That's the massive scale that we need
that I was talking about at the beginning.
Alongside this,
we also need to build
a robust management system
to ensure that all of these
new carbon-removal solutions
are in fact capturing more
carbon dioxide than they emit.
This is kind of along the lines
of the quality assurance,
quality control and process
trials we rely on
to ensure that our vaccines are safe
and that they work.
But most importantly,
we need more practice
doing the actual thing
rather than trying
to get it perfect on paper.
If we don't try, we can't learn,
and if we don't learn,
we cannot iterate and improve.
This AMC is technology-neutral.
Frontier sends out the demand signal,
but we do not specify which technology
should be used to meet it.
But what we do specify
is the quality standard we expect
in order to ensure
that real, permanent
carbon removal took place
at the agreed-upon price.
Now this arrangement, we’re hoping,
should encourage experimentation
and tight iteration cycles
that should quickly separate
the promising solutions
from all of the distractions.
Now, I’d like to ground this in reality
by providing three solid examples
of companies who are already on their way
and some of them
are actually doing the thing.
First, we have Climeworks,
operating in Iceland.
They use direct air capture machines
to filter carbon dioxide out of the air
and capture it for storage.
And they've now since broken ground
on their next-scale facility,
which should be able to pull 36,000
tons of CO2 out of the air.
Next, we have Running Tide,
who sink kelp deep into the open ocean
to lock away carbon dioxide
that's been captured
through photosynthesis.
They’re currently working
through their first-scale deployment,
and they're building all
of the measurement,
quantification and monitoring systems
at the same time.
And third, we have Heirloom,
who plan to accelerate
the natural capacity of limestone
to react with and capture carbon dioxide
and lock it away.
And now they plan to do this
by accelerating the natural
absorption rates of the rock
from approximately a year to just days.
They're set to break ground
on their first commercial-scale facility
in the United States in 2023.
Now, there are many other companies
that are starting to emerge
that I could have mentioned here.
However, from these three examples,
what you can see
is the diversity of solutions.
And we're agnostic about that.
All that matters is that they achieve
the results within the set parameters.
Now, before I end,
I must address the question
of our own operations.
So to start,
Shopify is a carbon-neutral company,
and we've committed to kick-starting
the carbon-removal market.
Our business is all about helping millions
of entrepreneurs succeed.
And today, they're experiencing
so many challenges.
We have an opportunity to help
them become carbon-neutral
and to leverage carbon removal
in order to future-proof their businesses,
which in turn safeguards ours.
Now, not a lot of them have climate teams.
But we have the opportunity to share
our experience and expertise with them.
And so what we're trying to do
is take everything we've learned
about reducing and managing
Shopify's emissions
and from vetting and buying
high-quality carbon removal,
and we’re trying to take those lessons
and put them out on our platform
to make them available
for all of our merchants.
Not only will this help reduce emissions,
but this will also help create
the very market that all of these new
carbon-removal companies
who are building in response
to Frontier's demand signal will rely on.
This is a feedback loop
that will spur innovation
and drive the development
of carbon removal
at the scale the world needs.
Thank you.
(Applause)