How to pronounce "amc"

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)