Zachary Bogue, co-managing partner for DCVC, speaks through the Way forward for Innovation: Highlight on Artificial Intelligence Conference in San Francisco, California, U.S., on Thursday, June 22, 2017. The marketplace for AI technologies is estimated to generate greater than $60 billion in productivity improvements for U.S. businesses annually.
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The Silicon Valley enterprise capital firm DCVC invests in every kind of climate tech corporations including geothermal power, aerial methane imaging, advanced nuclear fission reactors, fabrics made out of mycelium, wastewater filtration technology — to call a number of.
But there may be one category of the climate tech landscape that Zachary Bogue, a co-founder of DCVC doesn’t put money into: Carbon offsets.
“We actually don’t underwrite or wish to see corporations which are using carbon offsets,” Bogue told CNBC in an interview at the top of September in an interview within the Palo Alto office. “We don’t have a look at corporations that need to make use of carbon offsets to make their business model work.”
A carbon offset is a certificate or voucher that an organization or organization buys that represents the reduction of a metric ton, or 2,205 kilos, of carbon dioxide emissions. If an organization or organization is unable to eliminate the discharge of greenhouse gasses of their operations, they could purchase a carbon offset to compensate for his or her emissions.
“There’s been some studies on the market that as much as 90% of carbon offsets are completely ineffective — have had no impact — which is a tragedy of our time, because big Fortune 500 corporations are paying hundreds of thousands of dollars to those carbon offsets, and continuing to emit within the meantime,” Bogue told CNBC. “And these offsets are literally having zero impact.”
The effectiveness of a carbon offset is a contentious issue, but not less than one white paper published in April 2021 from the Finnish nonprofit and startup Compensate found that 90 percent of carbon capture projects were ineffective. Compensate has each a non-profit advocacy arm and an organization that sells what it deems to be prime quality carbon offsets. For the white paper, Compensate analyzed greater than 100 nature-based carbon offsets certified by third-party verifiers within the space.
Of the carbon offsets which Compensate deemed a failure, 52% were guilty of what Compensate called “additionality” — as an example, offset credits sold to guard trees that were never in any danger of being cut down. One other 16% of the projects Compensate analyzed were considered a failure because their permanence was considered in jeopardy. For instance, coastal restoration projects for mangroves in Bangladesh were jeopardized when floods devastated the country, Compensate said.
So, too, said Bogue of local California projects.
“There have been some forests north of here that were the topic of carbon offsets where someone paid hundreds of thousands of dollars to not cut the forest down and — whether or not that is legitimate, we will leave that aside — because those forests burned down,” Bogue said. “So that they actually released the carbon that the corporate was paying to not have released and that the corporate emitted.”
DCVC doesn’t put money into corporations that use carbon offsets immediately, but that just isn’t an indictment against the thought.
“To be clear, I would like I would like them to exist,” Bogue told CNBC. “I would like there to be a carbon tax, I would like carbon credits, carbon offsets.”
But there is not enough transparency or accountability within the industry, Bogue said. To properly arise the industry, there would should be an agency akin to the USA Food and Drug Administration (FDA), in accordance with Bogue.
“There is a very set and rigorous process that it is advisable to do to take a molecule from discovery and up until you are dosing a human with it: You might want to prove that it’s effective, it is advisable to prove it’s non toxic,” Bogue said. “I might say that the imperative to reducing CO2 is as high of a human health imperative as putting small molecules into our body. Full stop.”
Until then, the industry is simply too uncertain to be a secure place for the cash that DCVC invests on behalf of its limited partners, that are the likes of faculty endowments and hospitals.
“It must be rigorous, and apples to apples and, and verifiable and documentable,” Bogue said. “That is just not where it’s today. That is where we want to get to, but that is also why don’t think it’s investable.”