HBP# B6003

Date: January 1, 2022

ANDREW ISAACS NATÀLIA COSTA I COROMINA

Carbon180 in 2021: New Challenges for a New Era

Keep in mind that buying an offset using Direct Air Capture costs $800 per ton of CO2 and the same offset using

forest restoration costs $8 per ton.

—NOAH DEICH, CO-FOUNDER AND PRESIDENT, CARBON180

Climate-concerned donors should focus on helping to pass climate policy, not offset their emissions. On a dollar-for-dollar basis, where will your money

do the most to fight climate change? The economist Daniel Stein has a clear answer: You should give to groups that lobby for aggressive climate policies—

the Evergreen Collaborative, Carbon180, and the Clean Air Task Force.

—THE ATLANTIC1

Carbon180 accomplished a lot of its goals to champion carbon removal solutions in the U.S. in a few short years.2 To further its work, Carbon180 had grown its team to 15 members and moved the organization’s headquarters from Oakland, CA, to Washington DC, where leadership felt they could have more leverage with policymakers.3 In 2021, a new U.S. administration, with a radically different mindset regarding climate change than the former president, moved into the White House prioritizing swift action to tackle the climate crisis. President Joe Biden promised to mobilize “a

1 https://www.theatlantic.com/newsletters/archive/2021/12/most-effective-nonprofits-fight-climate-change/621013/ 2 https://carbon180.org 3https://static1.squarespace.com/static/5b9362d89d5abb8c51d474f8/t/60775cd829666d532e1ebad2/1618435289610/Carbon180+2020+Annual +Report.pdf

Professor Andrew M. Isaacs prepared this case study with Natàlia Costa i Coromina (UC Berkeley, Master of Development Practice 2023) with assistance from Case Writer Susan Thomas Springer, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

Copyright © 2022 by The Regents of the University of California. All rights reserved. No part of this publication may be reproduced, stored, or transmitted in any form or by any means without the express written permission of the Berkeley Haas Case Series. This case study is a continuation of “Carbon180: Choosing a Winning Strategy for Carbon Removal” (Berkeley Haas Case Series, 2019).

This document is authorized for use only by Tiffany Everson in OL-635-X2095 Consulting 23TW2 at Southern New Hampshire University, 2024.

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whole-of-government effort to reduce climate pollution in every sector of the economy and increase resilience to climate impacts.”4 It was the right time to chart the next strategic path for Carbon180.

Early in 2021, Carbon180 co-founder Noah Deich and his team released the first presidential transition book focused on carbon removal to provide guidance to the Biden-Harris transition team.5 Under the new administration, growth opportunities for the climate-focused startup seemed bright. However, optimism about climate progress was tempered by realism about the limits of what could be achieved in Congress.

Both Carbon180 and the new administration expected challenges. How could they convince a highly partisan Congress with the narrowest of Democratic majorities in the Senate to pass ambitious climate policy? Further, would voters reward policy makers in future elections who took bold action?

New Political Reality in D.C.

In an about-face for the federal government, US President Biden put climate change at the center of much of US domestic and foreign policy. Biden was clear in his policy statements that the US must find a path to a net-zero emissions economy-wide no later than 2050. While climate change remained a highly polarized topic in DC, there was some bipartisan agreement on pieces of climate action such as innovation funding, tax credits for climate solutions, and carbon removal. In 2019, the US Senate’s bipartisan Climate Solutions Caucus formed as the result of input from corporate CEOs hoping that reducing their companies’ environmental impact could improve the bottom line.6

Citizens were ready for action too; research showed two-thirds of Americans favored the federal government reducing climate change impacts with initiates including “large-scale tree planting efforts, tax credits for businesses that capture carbon emissions and tougher fuel efficiency standards for vehicles.”7

“Policies that have a big impact on the climate are often framed by non-climate benefits; high- quality job creation, new innovation and economic opportunities, and improved resilience in the face of changing macroeconomic and geopolitical conditions. This enables bipartisan cooperation to pass policies with real climate mitigation impact, instead of framing them as ‘climate action’ which could result in their political demise,” said Deich.

Deich added that, since both Republicans and Democrats saw themselves as populists in 2021, both parties were enthusiastic about anything that created high-quality jobs—and addressing climate change could create those opportunities. In some instances, such as drilling and operating wells for CO2 injection and geological sequestration, the job creation opportunities involved similar skill sets in similar geographies to those associated with drilling and operating wells for extracting petroleum hydrocarbons.

“Both environmental justice and labor constituencies are increasingly influential in how climate change policy is shaped on the left, leading to evolving climate politics,” said Deich. “We now have a clear idea about how to incorporate equity and justice into carbon removal policy—it’s a matter of policy design and advocacy to ensure it happens.”

4 https://www.whitehouse.gov/priorities/ 5 https://carbon180.org/annual-report 6 https://www.coons.senate.gov/climate-solutions-caucus/ 7 https://www.pewresearch.org/science/2020/06/23/two-thirds-of-americans-think-government-should-do-more-on-climate/

This document is authorized for use only by Tiffany Everson in OL-635-X2095 Consulting 23TW2 at Southern New Hampshire University, 2024.

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Lack of Business Traction

If Washington had seen a way to move forward with climate-friendly policies, Deich observed that American corporations were not consistently enthusiastic.

“The problem with US companies, even if they talk a lot about climate change, is that meaningful action is challenging. In many cases, it means accepting more regulation or incurring short-term costs to reduce much larger, longer-term risks. Large companies, most of which are publicly traded, are hesitant to take these steps alone, especially without significant pressure from investors, employees, and customers—or the government making sure that none of their competitors can free- ride on their good corporate citizenship,” said Deich.

Although Carbon180’s focus was to develop and enact science- and justice-driven policies that would result in billions of tons of CO₂ being removed from the atmosphere, as of 2021, there was no single government agency driving carbon removal. Removal occurred through a mix of state and federal incentives, such as tax credits to drive down businesses investing in wind and solar power. The Biden administration vowed to advance carbon capture research funding and tax incentives by pledging to make U.S. electric power carbon pollution-free by 2035. One North Dakota power executive said such incentives were wholly dependent to allow companies to build a bridge from past practices to carbon-removal practices such as retrofitting a coal-fired power plant. “No one is going to build a billion-dollar project on the idea that you don’t know where the return is going to come from for that.”8

In this context, Deich feared that neither investors, philanthropists, nor large companies would step up to fund large-scale atmospheric carbon removal. “None of those three parties are purchasing carbon removal offsets at any meaningful scale. Although this has been changing slowly, it is still at a small scale and pales in comparison to what the federal government can potentially do with the right policies and funding.” In addition, he explained there was no natural market for taking CO₂ out of the atmosphere because “nobody wants to pay to clean up their invisible trash if no one is forcing them to do so.”9

Hope on the Horizon

In September 2021, Orca, the world's largest carbon-capture plant, was switched on in Iceland, taking tons of CO₂ out of the air every day and pumping it deep underground in a solid, stable form. At that time, Orca was the only “direct air capture” facility to sequester, or permanently dispose of, CO₂ rather than recycle it. Partners Climeworks and Carbfix said that despite high prices, customers were lining up to pay for credits associated with Orca.10 (Exhibits 1 and 2)

Deich and his team were hopeful, continuing to work relentlessly and optimistically towards “removing forward” in an equitable, inclusive, and scalable way.11 What else could they do to engage public companies in real action? And how could Carbon180 capitalize on the political environment to magnify its impact?

8 https://news.bloomberglaw.com/environment-and-energy/incentives-spur-investors-to-pick-up-pace-on-low-carbon-projects 9 For more reference on carbon pricing from Direct Air Capture and forest restoration, refer to https://www.iea.org/reports/direct-air-capture 10 https://www.economist.com/science-and-technology/the-worlds-biggest-carbon-removal-plant-switches-on/21804774 11https://static1.squarespace.com/static/5b9362d89d5abb8c51d474f8/t/6115485ae47e7f00829083e1/1628784739915/Carbon180+RemovingFor ward.pdf

This document is authorized for use only by Tiffany Everson in OL-635-X2095 Consulting 23TW2 at Southern New Hampshire University, 2024.

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Case Discussion Questions

1. How might Carbon180 encourage corporations to “do the right thing” and buy carbon offsets that remove carbon from the atmosphere for the long term (such as direct air capture and geological sequestration) as opposed to the cheaper route of buying offsets that are of dubious long-term benefit (such as reforestation)? Must these actions be government- mandated in order for companies to take this step?

2. Since climate change is a global problem, does it make sense for Carbon180 to extend its reach beyond the US?

3. Is Carbon180's focus on changing federal policy to help bring down the cost of carbon removal solutions the best use of their scarce resources at this time? If not, should they instead work on:

• Direct innovation? i.e. to change unit economics of products to make it more profitable to use atmospheric captured CO2 than fossil fuel alternative?

• Corporate sustainability? i.e. convincing employees and/or customers to demand that companies purchase carbon removal as part of their climate strategies

• Investment? i.e. changing capital flows to support carbon removal activities • Something else?

This document is authorized for use only by Tiffany Everson in OL-635-X2095 Consulting 23TW2 at Southern New Hampshire University, 2024.

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Exhibit 1 Orca carbon-capture plant constructed by Climeworks.

Source: climeworks.com

This document is authorized for use only by Tiffany Everson in OL-635-X2095 Consulting 23TW2 at Southern New Hampshire University, 2024.

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Exhibit 2 Orca plant outside Reykjavik, Iceland, where Carbfix provides the storage solution.

Source: carbfix.com

This document is authorized for use only by Tiffany Everson in OL-635-X2095 Consulting 23TW2 at Southern New Hampshire University, 2024.