How an AMC first used for vaccines can work for carbon removal

When Stripe, the online payment processing company, was looking for a model to dramatically increase the funding it could drive to the carbon removal market, it found its inspiration in public health. The model for Frontier, Stripe’s new $925 million advanced market commitment that guarantees future demand for carbon removal technologies, was first used for vaccines. To design the innovative financing mechanism, Stripe teamed up with experts who had worked on crafting advanced market commitments for vaccines for pneumonia and COVID-19. “AMCs had been used to help fix market efficiencies and pull vaccines into developing countries,” said Hannah Bebbington, head of strategy for Stripe Climate, a program the company launched in 2020, before launching Frontier last month. “We essentially did a copy-paste into the carbon removal market,” she told Devex. Stripe Climate began as an effort to allow companies to direct a fraction of their revenue to support carbon removal technologies. By the end of last year, it had already deployed $15 million to carbon removal technologies. But the Stripe Climate team knew more financing would be needed to remove 10 billion tons of carbon dioxide annually by 2050, in order to keep the planet from heating past 2 degrees Celsius. “We needed to think about a way we could have a step change increase in the number of funds coming into the carbon removal space,” Bebbington said. Many carbon removal technologies were stalled due to lack of customers and investment. The Stripe Climate team started to explore whether carbon removal, like vaccines, might benefit from an AMC. This would allow the company to send a clear signal that there is a market for carbon removal technologies. The partners behind Frontier include Alphabet, Facebook’s parent company Meta, Shopify, and McKinsey. Gavi, the Vaccine Alliance, first piloted AMCs to help purchase pneumococcal vaccines for low-income countries by incentivizing pharmaceutical companies to address their needs. The mechanism has since been replicated to support global access to other vaccines, with COVID-19 Vaccines Global Access, or COVAX, drawing heavily on the AMC model. Stripe worked with academics who had been critical in crafting the pneumococcal vaccine and COVID-19 vaccine AMCs, including Susan Athey, a professor at the Stanford Graduate School of Business; Rachel Glennerster, an associate professor at the University of Chicago; and Christopher Snyder, a professor at Dartmouth College. The academics, together with Stripe’s head of climate Nan Ransohoff, co-authored an opinion editorial outlining how AMCs could incentivize the development of innovative carbon-removal approaches. “[Frontier] allows us to send a really robust demand signal to the carbon removal market that’s tech neutral. It doesn’t pick a horse, but rather allows for innovations across disciplines.” --— Hannah Bebbington, head of strategy, Stripe Climate “Today, carbon removal solutions face a chicken-and-egg problem,” they explained. “As early technologies, they’re more expensive, so they don’t attract a critical mass of customers. But without wider adoption, they can’t scale production to become cheaper.” A $1 billion AMC for carbon removal would provide a critical demand signal, giving scientists, founders, and investors the confidence to work on solutions, they wrote. “The role of Frontier is to facilitate purchases between the AMC buyers, or founding members, and carbon removal suppliers,” Bebbington said. Frontier works with interdisciplinary experts who vet technologies against a set of criteria. “We focus on carbon removal that is permanent, for greater than 1,000 years, that doesn’t use a significant amount of arable land, and that has a glide path to being cheap at scale in the future,” Bebbington explained. Prior to the launch of Frontier, Stripe had already made carbon removal purchases as part of its Stripe Climate program. Companies in the program’s portfolio include Charm, which turns waste into bio-oil then injects it deep underground; Climeworks, which builds and operates direct air-capture machines; and Running Tide, which grows kelp then sinks it to the ocean floor to sequester carbon. Stripe believes that numerous technological pathways are vital to achieving the levels of carbon removal needed, said Bebbington. “That’s what is so exciting about Frontier,” she said. “It allows us to send a really robust demand signal to the carbon removal market that’s tech neutral. It doesn’t pick a horse, but rather allows for innovations across disciplines.” Stripe talked with hundreds of companies ahead of the AMC launch, with the goal of raising as close to $1 billion as possible, according to Bebbington. Now, Stripe is working to increase the number of buyers participating in the AMC, and grow the size of the $925 million fund. Frontier’s launch comes amid heightened interest in carbon removal. XPRIZE and the Elon Musk Foundation recently announced 15 milestone winners of their XPrize Carbon Removal competition, who will each receive $1 million, before overall winners are awarded $80 million in 2025. But although Frontier is spending 30 times that amount to date on buying permanent carbon removal, its almost $1 billion fund is less than 1% of what the world needs to spend every year by 2050, Bebbington said. “We need an entire carbon removal market,” Bebbington said. “This is just the beginning.” Update, May 5, 2022: This article has been updated to better reflect the way that Frontier works with buyers and suppliers.