Shopify’s head of sustainability on the realities of carbon removal

Begin with the delivery record, because it reorganizes everything else. Shopify signed its first contract in June 2020 and announced a batch of eight that September, spread across direct air capture, ocean alkalinity enhancement, biomass sinking, biochar and Charm Industrial. Nearly four years later, purchases stand just under 85,000 tons of durable removal and deliveries are only starting: the first ocean deliveries from Running Tide and the first batch from Climeworks both landed in the back half of 2023, the latter against a contract signed in 2020. Volumes are small by design, since a direct air capture contract might cap at a hundred tons a year and the credits come from pilot facilities. Roughly three years from purchase to first delivery is the number Kauk has observed. Some deliveries run six or twelve months late, which she treats as normal; the severe delays come when a company runs its pilot, discovers the approach does not work and has to redesign, or when permitting drags, such as getting a Class VI injection well in the United States. Her standing complaint is that companies pitch delivery in a year when they have not built or commissioned anything, so contracts have to be flexible. And the technology working is only part of the job: carbon accounting, third-party verification and measurement all have to happen too, and for several pathways no methodology yet exists.

That is why the purchase is really an investment, and why the portfolio looks the way it does. Shopify holds about 40 companies across many pathways, for two reasons. One is to learn and advance the field. The other is to hold a diverse technology stack inside each vertical, so seven direct air capture companies rather than one or two, and five or six biomass-based approaches, each taking a different angle on the same problem, precisely because none has run at enough scale to know what it will cost. They balance maturity too, keeping some closer-to-commercial bets because they need credits actually delivered to retire against a carbon-neutral commitment. Prepayments supply non-dilutive catalytic capital early, and in exchange Shopify takes rights to future volumes at better cost per ton, on what Kauk calls a ten-year line of sight. Every six months they run a health check on runway, cash burn, technical progress and whether other market players are backing the company, and once a year they flag the ones they are worried about and sign a startup in the same vertical as a backup. That rebalancing is only now beginning, she says, because they finally have enough data points to see which way a company is trending.

On price her position is two-sided and easy to flatten. Pressed by Kann on whether removal should become a commodity, she says flatly that it is not one today, because the credits are not fungible or comparable, while agreeing completely that it has to become one, both to give suppliers a level playing field and to make credits tradable for whoever retires them. She puts that 20 or 30 years out and argues the work has to be done now anyway. Her sharper point is that price is not cost. Some suppliers price at cost; others deliberately price below cost, taking a loss to signal where they believe a technology is heading, so published per-ton prices misinform the market about what removal actually costs. Shopify therefore asks for the capital and operating costs behind a ton, and then for the cost curve itself, including each step change, the reason for it, and the risks that would prevent it. The informative part is the quality of the answer: a company that says a projected reduction is 50/50 reads as more credible than one that says it will be fine. She requires that a curve exist at all, since a pathway whose cost stays flat is not pushing innovation, and she is blunt that in most of their prepayment contracts the return is “maybe we’ll get a credit someday,” with some contracts signed without expecting delivery.

Which leads to her structural argument, the most portable thing in the episode. Carbon removal is financed by venture capital because there is no money anywhere else, and she does not think that is the long-run answer, because carbon removal is waste management. Cleaning the air is like treating water or collecting garbage, none of which makes money for anybody. Without a requirement to buy, demand is entirely voluntary, which she calls not a solid structure on which to build a new industry. Her expectation is that the present setup delivers proof of concept, after which regulation has to set rules on both the buying and selling side to produce a tradable ton, leaving the question of who pays open and possibly landing on governments. Meanwhile the near-term gate is measurement rather than technology: the first at-scale credits from ocean alkalinity enhancement, biomass sinking and enhanced rock weathering were due within six to eighteen months, with their methodologies written just ahead of the deployments that would test them. Kauk calls immature measurement the single biggest thing keeping other buyers on the sidelines, and puts about five years on it.