Carbon to value: Not your mother’s carbon capture

There’s been a recent surge of startups in carbon conversion and utilization – a.k.a. reusing carbon as an ingredient for materials.

Under many projections for limiting climate change, capturing a large amount of carbon dioxide will be necessary to keep global warming to a few degrees. The reason for this is simple – there is no other way for us to reduce our emissions within the necessary timeframe. Even with rapid deployment of renewable energy, electrification, and increased efficiency, carbon removal will be needed to address emissions from hard-to-decarbonize sectors like aviation, shipping, and agriculture.

Carbon capture has a bad rap for being too expensive and difficult to deploy at scale. However, there’s been a recent surge of startups in carbon conversion and utilization – a.k.a. reusing carbon as an ingredient for materials. This space, which has received a number of different monikers (e.g., carbon to value, carbon utilization, and carbontech) may represent a major shift for the carbon ecosystem and encourage higher levels of capture necessary to meet a 1.5-2ºC future.

Increasing policy pressure and corporate interest in decarbonization could drive a major ramp up in this space, but serious questions remain. Will there be a rapid tipping point for this space, or will the existing barriers keep startup growth small?

Using carbon

  • A significant amount of startup activity is focused on carbon utilization applications. Circular Carbon Network has been tracking new companies in the carbon space, identifying ~80 companies tackling utilization (making up 24% of the overall circular carbon economy). There is a wide range of applications for CO2 – from specialty chemicals to carbonated rocks for building materials.
  • This could be a huge market. Carbon 180 has estimated that the total addressable market of ‘carbontech’ companies could be $1 trillion annually in the US and $5.9 trillion globally.
  • Three product areas stand out: fuels, chemicals, and building materials. Despite the broad range of possible end products that could include CO2, these three sectors will likely have the largest addressable markets (estimated at $5.6 trillion collectively) and have seen the most amount of activity.

End applications for carbon to value:

Possible applications for CO2 (from Madison Freeman)
  • Building materials: The cement and concrete industry make up around 7-8% of global emissions annually, a figure that is expected to grow as construction booms in rapidly developing countries. The cement industry has limited pathways to decarbonizing and is likely to require some form of carbon capture and/or utilization to meet emissions goals, so this is expected to be the largest market for carbontech. Startups in this space are tackling the challenge differently:
    • Carbon Cure injects CO2 into concrete as part of its curing process, permanently embedding the CO2. This process has two key advantages over other approaches: it makes the concrete stronger and cheaper (which provides a clear business rationale for adoption even without decarbonization) and it doesn’t require changing the makeup of the cement in any other way (thus avoiding any regulatory or safety hurdles). Carbon Cure claims it has already “saved”  nearly 100,000 tons of CO2 in initial deployments.
    • Solidia offers a new cement formulation that can be used in traditional cement kilns to reduce emissions by 30-40% through reducing the amount of fossil fuels needed. The company also offers a curing solution similar to Carbon Cure’s.  
    • As a capture solution in the same space, Sublime Systems is developing an approach to reduce emissions from the cement kiln by 50% without changing the properties or chemistry of the cement. 
  • Fuels: Zero-carbon or low-carbon fuels could help rapidly decarbonize the transportation sector, both bridging the transition to electric vehicles and solving the challenge of aviation and shipping, which rely on long-lasting planes and ships that are difficult to fuel with just hydrogen or electrification. 
    • LanzaTech is the largest company in this space and has raised about $400 million in funding so far. The company is working on a number of approaches to carbon recycling and sustainable fuels, including an approach using microbes that consume CO2 and produce fuels such as ethanol. They recently launched a spinout company called LanzaJet to focus specifically on sustainable aviation fuel.
    • Dimensional Energy uses concentrated sunlight and catalysts to break down CO2 to produce fuels.
    • Prometheus Fuels has highlighted a number of technical advances which they believe can produce cost-competitive gasoline from CO2 conversion.
  • Chemicals and plastics: CO2 can be transformed into a variety of useful materials in the petrochemicals and plastics space. Adoption of new low-carbon methods might be accelerated by major industrial commitments. For example, Unilever recently announced that it would replace all of the carbon from fossil fuels in its clean products with “renewable or recycled” carbon by 2030.
    • Newlight converts carbon into plastics and chemicals and has started product lines for foodware and fashion. 
    • Opus 12 enables the conversion of CO2 into materials that are chemically identical to fossil-fuel derived products such as plastics, methane, syngas, and ethylene.
Representative roundup of startups in the carbon capture and utilization space (from Madison Freeman)

The rest of the ecosystem – carbon capture and storage

The carbontech space is best viewed as part of a broader ecosystem, in which all parts – capture, storage, transportation, transformation, and storage – will help each other grow by increasing supply of and demand for carbon as more than a waste material. The past year has seen an increasing number of large-scale carbon capture and storage projects from oil and gas majors, and a number of startups pursuing new methods to capture carbon directly from the air to store it in a variety of non-traditional areas.

Diagram depicting the entire circular carbon economy (from Circular Carbon Market Report)

Key takeaways

  • Carbon-to-value may represent the most VC-backable sector within the broader circular carbon economy. Carbon-to-value presents a double whammy of removing carbon while generating additional value. C2V can plug into the huge addressable markets of building materials, fuels, and chemicals which are currently lacking a pathway to decarbonization. On the other hand, different areas of circular carbon (e.g., carbon capture and storage) require forming entirely new markets and infrastructure and are therefore better suited for specialized venture investors with longer time horizons such as Breakthrough Energy Ventures.
  • Growing commitment to decarbonization may be a key driver of C2V innovation. The first adopters will be companies that have participated in the recent spate of net zero commitments, including notable announcements from Unilever and Airbus who have significant R&D teams for pilot testing and development. These corporates will be essential to scaling up deployment of circular carbon solutions.
  • “Negative emissions” could be an interesting revenue stream. Large tech companies such as Microsoft, Shopify, Stripe, and Amazon have all made decarbonization investments – either through a dedicated climate fund and/or incorporating carbon removal options to customers. By directly investing in high quality carbon removal technologies, these corporates can help drive down the cost of frontier carbontech.
  • Challenges around unit economics and incentivizing adoption remain. Despite a few initial adopters, corporates will be reluctant to purchase carbon negative products purely for climate reasons. C2V products still need to be on par or cheaper than existing materials and even then, many legacy industrial, building, or transportation companies are extremely conservative and unwilling to adopt new technologies given the scale and risk of their businesses.
  • Policy may be the deciding factor. No matter the degree of carbontech innovation, pricing the externalities of carbon emissions will be necessary to incentivize corporates to adopt carbon negative products. This level of policy needed will likely happen in Europe first, with other countries watching and learning to follow in their footsteps. For now at least, carbontech companies need to be able to succeed without strong governmental support, especially in the US.

Special thanks to Sameer and Nicholas from the Circular Carbon Network and Madison from Energy Impact Partners. If you’re interested in learning more about this space, join CCN’s membership network and check out their just released market report. They’re also looking to hire a Product Management Fellow to continue building out their circular carbon ecosystem.

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