Charm Industrial, a carbon removal startup with customers such as Stripe and Microsoft, Thursday disclosed a $53 million, multi-year contract with Frontier, a Stripe-managed buyers group signing up to support emerging and planned projects.
Under the agreement, the San Francisco-based company will remove 112,000 metric tons of CO2 from the atmosphere between 2024 and 2030 on behalf of the corporations behind Frontier, which facilitates advanced buying commitments for carbon removal technologies and approaches through a fund of close to $1 billion.
Frontier was founded and funded by Stripe, Alphabet, Shopify, Meta and McKinsey Sustainability, as well as smaller companies that buy through the Stripe Climate program. Legally, Frontier is a public benefit LLC wholly owned by Stripe.
Forward-looking offtake agreements such as the newly announced deal with Charm Industrial are seen as playing a crucial role in enabling early-stage carbon removal suppliers to scale their operations. These contracts provide access to capital and offer investors an assurance of future demand.
"The $53 million sends a really clear demand signal," said Charm Industrial CEO and co-founder Peter Reinhardt. "There's a lot of demand for carbon removal, and that's very helpful in raising capital. And the level of rigor that Frontier puts into figuring out how to make these purchases is really exceptional. They have a very deep bench of scientists, and they go [through a] really deep, multi-month diligence process on the carbon life cycle, the technology and how it can scale. So there's hopefully a tailwind for us in that."
While the per-ton price contracted under the deal was not disclosed, a back-of-envelope calculation would put the cost about $473 per ton. In 2020, Stripe paid $600 per metric ton to Charm Industrial for a deal covering 416 metric tons of carbon storage, and that is still the number listed per credit on Charm Industrial’s website.
According to the press release about the new contract, the $53 million contract covers removals from projects being developed by Charm Industrial in as-yet-undisclosed locations. It also pays for the meticulous measurement, reporting and verification (MRV) procedures to ensure proper storage and tracking. Charm Industrial said it expects prices to decrease by at least 37 percent during the agreement period and potentially up to 75 percent because of Charm Industrial's scaling plans and potential government subsidies from the Inflation Reduction Act.
"The bulk of the cost today is in our pyrolyzer, the machine that converts the biomass to bio oil," Reinhardt said. "What we expect is that we're learning a lot about how to simplify and streamline that machine, streamline and simplify those operations. We discover which components can be simplified or made smaller or a cheaper version, and that capital cost of the equipment comes down quite a lot. That's where we expect the bulk of the cost savings to come from over time."
Reinhardt likens the technological advancements possible for Charm Industrial’s system to that of solar panels, which have seen drastic cost cuts over the past two decades.
Charm Industrial’s approach converts waste biomass from agricultural harvests and forest fire management to a bio-oil that is then injected into storage wells underground, durably storing the CO2 that otherwise would have been released during decomposition.
The process called pyrolysis heats the biomass to high temperatures in an oxygen-deprived environment, resulting in the production of the oil. Charm Industrial has emerged as a market leader in the nascent carbon removal market, having already successfully removed 6,055 tons of carbon through pilot processes. Aside from early work with Stripe, Microsoft inked an agreement with Charm Industrial in 2021 to pay it to remove 200 metric tons of atmospheric carbon.
Critics characterize carbon removal, storage and capture as too expensive and too small-scale to facilitate large-scale decarbonization of the planet — the holy grail price seen as inspiring broader adoption is $100 per ton. For perspective, as of April, Frontier had signed contracts with 15 early-stage companies for credits generated by their forthcoming projects. Prior to the new Charm Industrial deal, the collective value of those projects was $5.6 million, covering 8,993 metric tons of carbon removal.
