CDR Procurer Interview - Carbonx Climate

'Unbound Showcase' is a globe-spanning series of interviews with pioneers of carbon dioxide removal (CDR). We’re questioning innovators, business leaders, policymakers, academics, buyers, and investors taking on the challenge of our lifetime—gigaton-scale carbon removal from the earth's atmosphere.

Today’s interview is with Paolo Piffaretti, Founder and CEO of Carbonx Climate.

“What is Carbonx?”

Paolo Piffaretti - Carbonx is a leading Market Intelligence and Carbon Dioxide Removal (CDR) Procurement and CDR Portfolio Risk Management services provider. The company facilitates and manages CDR portfolios for global clients such as Boston Consulting Group (BCG), Adyen, and Euronext.

Carbonx's role consists of two key components:

1. We facilitate cutting-edge and cost-competitive portfolios (optimal resource allocation) through open RFPs and stringent CDR Project Quality Assessments.

2. We manage all carbon credit-associated risks, such as Carbon Integrity and Non-Delivery Risks, to ensure a reliable, high-integrity CDR credit while maximising delivery probability.

“The elephant in the room when it comes to scaling is - What’s stopping buyers from taking the plunge and purchasing their first credit?” 

Paolo Piffaretti —To solve the buyer issue, two significant challenges must be addressed. Firstly, the absence of policy enforcement mechanisms makes CDR procurement a voluntary decision that necessitates foresight and substantial internal backing—this can be particularly challenging for organisations with limited resources or those operating in markets with weak regulatory oversight.

Secondly, the CDR space needs more transparency. As an over-the-counter market, stakeholders need help to gather comprehensive insights into market dynamics, appropriate commercial terms per removal pathway, and the clear upsides of securing their carbon credit streams early on. This opacity hinders informed decision-making and complicates the process of gaining internal approval from procurement teams, often requiring a clear understanding of potential investments.

"When conducting due diligence for new potential portfolio partners, how do you ensure that start-ups and their solutions are truly sustainable and equitable?"

Paolo Piffaretti - It's essential to recognise that carbon removal projects aren't limited to startups. While some CDR projects begin as startups, a growing number of established small and medium-sized enterprises (SMEs) and large corporations with relevant experience are launching high-quality projects. At Carbonx, our primary focus is on permanent carbon capture. We ensure captured carbon is securely stored for centuries or millennia, minimising the risk of being released back into the atmosphere (reversal risk). This approach lays the groundwork for a significant, enduring carbon removal market compatible with future carbon accounting frameworks. We specifically concentrate on quantifying the potential reputational and financial risks that buyers might face when partnering with CDR projects.

"What advice would you give entrepreneurs and startups aiming to secure investment or new buyers in the carbon dioxide removal industry?"

Paolo Piffaretti - I encourage entrepreneurs to prioritise Corporate Venture Capital (CVC) over traditional Venture Capital (VC) when securing investments. The CDR industry is in the making, laying the foundations for a sustainable market is at stake. Multiple years, if not decades, will be needed for the market to fruition. As such, entrepreneurs need to prioritise investors with a longer investment horizon and look into building strategic partnerships that foster broader market adoption of CDR technologies. In contrast, investors prioritise high-return models with investment horizons often ranging from 5 to 10 years. 

Regarding new buyers, I encourage entrepreneurs to adopt a transparent business model free from potential conflicts of interest. The CDR market is inherently complex, so strict, high-integrity business principles will simplify the buyer's journey and promote internal adoption. Transparency is critical to creating a straightforward and accessible environment for buyers. By streamlining the process and focusing on fostering openness, you'll increase the likelihood of success within the CDR market.

"What are some red flags for buyers looking for new carbon credit purchase opportunities?"

Paolo Piffaretti - The red flags for buyers depend heavily on the chosen removal approach. Open systems like Enhanced Weathering or Marine CDR require scrutiny of ecosystem safety and verification protocols to ensure legitimate carbon capture without harming surrounding environments. Biomass CDR projects necessitate focusing on sustainable feedstock sourcing and verifying technical additionality (guaranteeing the project removes more carbon than natural processes). Reviewing system performance data, financing strategies, and community engagement is crucial for capital-intensive methods like Direct Air Capture. Additionally, the level of detail and supplier expertise in critical documents like Life Cycle Assessments (LCA) and Techno-Economic Assessments (TEA) often indicates a project's maturity and ability to meet buyer expectations.

“What, from an industry perspective, should we be aware of in the next 18 months to see the scale necessary to hit 2030 targets? It’s just 24 business quarters away.” 

Paolo Piffaretti -  CDR success hinges on scaling logistics, value chains, and infrastructure. To achieve a meaningful impact by 2030, most CDR projects must be operational and actively remove CO2 today. A critical challenge is the need for more financing beyond initial equity rounds. This stems from the "first-of-a-kind" nature of most CDR projects and their mismatch with traditional investors' risk tolerance. Building more track records is crucial, but we also see public-private partnerships playing a pivotal role in bridging the gap towards bankability, ultimately unlocking significant financing to help projects reach climate relevance.

The industry must prioritise the broader adoption of more robust and financially viable long-term purchase agreements, known as bankable offtakes. These offtakes serve as a crucial foundation for the industry, enabling access to project financing and ultimately funding the deployment of the infrastructure required to reach climate relevance.

To secure large-scale offtakes, fostering and promoting a fully operational and transparent market is essential. This entails ensuring that all stakeholders – from suppliers and sellers to intermediaries – effectively fulfil their respective roles while avoiding potential conflicts of interest and minimising market inefficiencies.

Over the next 18 months, industry players must remain acutely aware of these challenges and actively work towards creating an environment that accommodates and stimulates the across-the-board adoption of bankable offtakes.

Unbound Summits’ mission focuses on unrivalled connections, new insights and unbound CDR opportunities. Learn more about Carbonx’s unique carbon credit procurement and management approach here.