Investment

Family offices and direct air capture – a growing relationship

Two breakthroughs in carbon capture have won the backing of family offices led by Bill Gates, Nat Simons and former Google executive Chris Sacca.

The news follows warnings by the Intergovernmental Panel on Climate Change that mankind will fall short in curbing its carbon emissions to limit climate change. A tree planting programme, on its own, would not head off catastrophe, due to insufficient land and current climate stress on vegetation. The IPC has decided direct air capture (DAC) must be part of a net zero strategy, along with renewable and nuclear energy.

There is unlikely to be a single winner in the DAC race and there will be quite a few losers

Impact opportunities in DAC for family offices are likely to be significant. Vivid Economics, owned by McKinsey, says DAC could be worth $1.4 trillion by 2050. Energy companies, like Shell and Santos, are investing heavily. The likes of Stripe, Shopify and Microsoft are paying DAC firms to offset their emissions. The cost of DAC has fallen but remained expensive in 2021,  at $250 – $600 per tonne of carbon dioxide, against $50 for a forest, according to the World Resources Institute. Achieving economies of scale are key, as Bill Gates has made clear. 

The US government’s DAC strategy will invest $3.5 billion in four hubs to foster innovation and sequester a million tons of carbon dioxide at $100 a ton, a sixth the current level. It plans to extend its reach further. 

In January, the UK government said it was backing 24 DAC ideas including a project to remove carbon dioxide from seawater. Australia is another keen investor. 

Former NASA executive Scott Frazier has raised $40 million for a new business, Climate America, to advise companies on their options. His initiative has been backed by Jeremy Grantham’s Neglected Climate Opportunities. Tesla’s Elon Musk has offered prizes worth $100 million for enterprising DAC ideas.

DAC deals normally expose air to solvents or materials which absorb its carbon dioxide which then gets split off and sequestered, usually underground, but sometimes reused. 

A more novel idea from California academic Cheuk-Yiu Ng says lasers can split up carbon dioxide molecules by exposing them to vacuum ultraviolet (VUV) light on a short wavelength.  Whether this approach is commercially feasible is another matter.  The world currently offers a number of DAC ideas which can be useful but offer little chance of mass adoption. Measuring the scale of savings is also a challenge.

Through DAC, clients offset the cost of carbon permits they need to operate in regions like Europe. The use of DAC can also improve corporate sustainability credentials through B Corp or similar accreditations. 

Some DAC initiatives plan to use unwanted carbon dioxide elsewhere. LanzaTech, backed by the Mittal family, is setting out to feed it to bacteria, to turn it into other products, like jet biofuel, as described in Family Capital on 11 January.

There is unlikely to be a single winner in the DAC race and there will be quite a few losers. But Bill Gates’ Breakthrough Energy; Nat Simons’ Prelude Ventures and Lowercarbon Capital, a VC business connected to Lowercase Capital, the family office of  Chris and Crystal Sacca, are currently celebrating two breakthroughs.

One of them comes from Heirloom Carbon, also backed in a new fund raising by Yes VC, led by Caterina Fake, co-founder of photo-sharing venture Flickr. 

Heirloom is not short of ambition. It pledges to remove a billion tonnes of carbon dioxide by 2035 at a cost falling to $50 a tonne over time by speeding up reactions that occur in nature.

Through its process, specially-treated calcium carbonate rock is put into a high-temperature reactor and breaks down into carbon dioxide and calcium oxide, a fine white powder that nicely reacts with carbon dioxide at room temperature. 

This recreates the carbonate, sent back to the furnace, so the process can be repeated, leaving the carbon dioxide to be sequestered. Heirloom uses renewable energy to heat its furnace and automation to speed it up.

Gates & Co have also emerged as backers to Verdox, which uses a DAC process developed in a laboratory at the Massachusetts Institute of Technology. It uses a new type of plastic that attracts carbon dioxide when charged with electricity, released for storage when it is switched off. 

Verdox has raised $80 million in a funding round. As well as Gates & Co, it has won backing from climate-aware philanthropists at Sarah Kearney’s Prime Coalition. 

Another DAC venture, such as Sustaera, has raised $10 million from Breakthrough Energy and Jeremy Grantham’s Neglected Climate Opportunities. It says it can use a cheap alkali-based material to capture carbon dioxide.  UK-based Mission Zero is out to develop a solvent that says it absorbs more carbon dioxide using less energy. 

Noya wants to retrofit cooling towers to create DAC units at low cost. It has won backing from Y Combinator and Kerem Ozmen, whose billionaire parents own Sierra Nevada Corporation. 

Carbon Clean Solutions, based in the UK, has raised a total of $64 million from companies and VC firms for solvent-based cleaning which it has developed for industrial use. 

Solvents and solar energy at the ready, Carbon Capture has raised $35 million from investors including Marc Benioff of Salesforce and Idealab, run by CC co-founder, the entrepreneur Bill Gross, no relation to Pimco’s former bond manager.

Carbon Infinity is developing modular DAC units using solvents capable of being quickly deployed to end-users. Ireland’s Carbon Collect uses “mechanical trees” whose discs absorb carbon dioxide from the atmosphere and get scrubbed when they are filled up. 

Longer-established DAC pioneers are led by Carbon Engineering, backed by Bill Gates personally, which has raised $110 million from VC firms, including Thomvest, founded by Peter Thomson who co-chairs Woodbridge, his family office, and Lowercase Capital. Carbon Engineering uses a classic mix of fans, chemicals and energy to trap carbon dioxide.

Climeworks of Switzerland is another pioneer which uses fans. It has raised $140 million from a string of Swiss entrepreneurs and built a plant in Iceland capable of scrubbing and burying 4,000 tons of carbon dioxide a year.

Not everyone is performing in line with expectations. One pioneer, Global Thermostat, backed by Edgar Bronfman Jr., has missed earlier targets and decided to reshuffle its management. Green lobby group Global Witness has accused Shell’s DAC facility in Alberta of failing to hit carbon emissions targets. But Shell has denied this and there is unlikely to be a shortage of capital to invest in DAC in the months, and years, ahead.

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