Buying carbon removal — Learnings from Klarna and Milkywire
Co-written with Janek Kose at Klarna.
Supporting carbon removal is a new endeavour that few companies have gotten involved with so far. It’s essential that early players share their learnings and thinking to help advance the field.
In 2021 Klarna realigned its climate program and created a transparent blueprint for companies to prioritize climate impact over claims with its partner Milkywire. Klarna and Milkywire are committed to supporting the climate solutions needed to reach global net zero. This means funding decarbonization, restoring nature and climate policy advocacy projects. But also recognizing the great need for permanent carbon dioxide removal (CDR), Klarna does this through supporting projects selected for The Milkywire Climate Transformation Fund that curates and supports projects within these areas, focusing on maximizing climate impact.
We are far from the only ones supporting carbon removal. Recently, Frontier launched a new advanced market commitment from Stripe, Shopify, Alphabet, Meta and McKinsey. This is arguably the most significant thing that happened in carbon removal and follows Stripe and Shopify’s early work in the field. Frontier has a long-term focus, trying to help kickstart the CDR field and support new solutions rather than just buying as many tons as possible today. As massive and impactful as this collaboration is, there are still multiple open opportunities and niches to address in the CDR field. There is a clear need for more buyers. Frontier cannot purchase from all high-quality carbon removal projects and explicitly says so. They also exclude solutions that have a durability of less than 1000 years.
“Since we do not know which carbon removal solutions will be successful, we need a broad starting line with participants willing to keep a long-term perspective and take action under uncertainty. “
Just in the last few years, hundreds of new carbon removal companies have been born. There is a good chance that the specific CDR methods that will be most effective have not even been founded. Since we do not know which carbon removal solutions will be successful, we need a broad starting line with participants willing to keep a long-term perspective and take action under uncertainty.
Most of these early CDR companies have no or very little funding yet. Currently, prepurchases of carbon removal has emerged as the primary way of supporting them. But there are only a handful of significant buyers of carbon removal. The 1,4 million USD that Klarna has spent to date on carbon removal likely puts us in the top 10 of CDR buyers today. We have agreed to pre-purchases with projects from biochar, direct air capture, enhanced weathering and woody biomass burial.
“Instead of treating CDR as a commodity trade, early buyers should focus on widening the field and try to find out where the money spent can be most catalytic rather than just focusing on buying as many tons as cheaply as possible today.“
Being an early buyer when CDR technologies are new and small means taking on a very different role compared to a mid-stage buyer when solutions are more mature. Instead of treating CDR as a commodity trade, early buyers should focus on widening the field and try to find out where the money spent can be most catalytic rather than just focusing on buying as many tons as cheaply as possible today. Keeping a long-term perspective also means staying close to the project’s progress and curious about the market and technology developments. This also means allocating internal resources with climate expertise and finding partners and intermediates that fit the buyer’s purpose of long-term impact.
For this year, our approach was a mix of scaling solutions that already are known to work today, like biochar, selecting the organizations where we think the co-benefits and long-term sustainability are the best, and getting new solutions, like the one’s Heirloom, Silicate and InterEarth are working on, tested and tried out. For us, it is crucial to be research-led and not scale up too quickly before key questions have been answered — both on effectiveness, safety and the ability to measure and verify the carbon removed.
In 2022 Klarna supported these four carbon removal projects selected for the CTF:
- Silicate: a company in Ireland harnessing the power of mineral weathering to permanently remove carbon dioxide from the atmosphere.
- InterEarth: a company in Australia that harvests plants’ above-ground biomass and stores that biomass, and its contained carbon, underground.
- Heirloom: a company in the US that is developing a promising and novel technology to capture CO₂ directly from the air using common minerals
- Husk: A carbon-based fertilizer company in Cambodia that creates biochar from the rice husks, which is then used as fertilizer by farmers, restoring soil health and increasing yields.
In 2021 Klarna also supported Climeworks and the biochar producer Mash Makes. Going forward, we plan to address one of the niches created by the bigger market commitments and plan to select even more new solutions that can get tested and tried out thanks to us. More details on the companies supported can be found here.
Carbon removal will play an essential role in reaching global climate targets. However, in all scenarios, the role will be limited. More critical is reducing emissions. That is why the Milkywire Climate Transformation Fund also selects and supports solutions in restoring and protecting nature and advances decarbonization solutions such as fossil-free energy and advocacy to phase out fossil fuels. In total, Klarna has contributed 2,72 million USD to projects selected for the fund. Where money to help reach global net zero will do the most good is a moving target, and there is a need to be flexible, assessing different opportunities as they mature and other funders enter the field.
We urge others to also start supporting carbon removal and other climate projects, focusing on creating as much impact as possible. The handful of players purchasing carbon removal today can just help get the field started. To make it grow in any relevant way, we need an explosion of new buyers.
Written by Robert Höglund and Janek Kose.
Janek is a senior sustainability professional who successfully built sustainability programs in different tech companies. He is heading Klarna’s climate program and investments in carbon removal solutions.
Robert is a climate advisor, managing The Milkywire Climate Transformation Fund. He follows and analyses carbon removal closely and works with creating best practices for how companies can support climate projects.