Brian Hong
Welcome to Powering Sustainable Ideas, a new podcast series from RBC capital markets where we interview the leaders and companies powering the sustainable future. I'm your host. Brian Hong, director in the environmental market solutions group at RBC Capital Markets. This week, we'll be talking to Luke Connell, CEO and co founder and Shannon Sterling COO, CSO, and Founder of CarbonRun. Luke is an entrepreneur and renowned leader in product development and commercialization. And Shannon is a distinguished hydrologist and esteemed educator. CarbonRun is a Canadian carbon dioxide removal company whose mission is to restore the health of rivers and their natural ability to draw carbon from land to ocean. In this episode, we look at how carbon run took their company from the lab into the real world, and how their technology can help solve climate change while also enhancing biodiversity. Shannon, Luke, it's great to have you on.
Shannon Sterling
it's a pleasure to be here.
Luke Connell
So great thanks for having us.
Brian Hong
So could we start by with you giving us a quick overview of CarbonRun. And for those of us who aren't carbon markets nerds, explain to the audience what is carbon removal, and why is it important?
Luke Connell
Yeah, great question. And Shannon, I'll lead off on this one, if that's okay. Carbon removal is necessary because we simply have burned too much oil and gas, and there's a need to remove some of that excess greenhouse gas emissions that have come from that. You know, simply put, we've overfilled the bathtub, which is our planet, and now there's a need for some technologies like carbon runs and others like director capture, afforestation, a number of pathways to then remove that excess carbon and get us to a place where we can avoid the worst impacts of global warming. And what CarbonRun does to play a role in this space is we add crushed limestone to rivers and de acidify them, and basically turn back the clock on the impacts of acid rain and enable rivers to play the role that they're supposed to be playing, which is transporting carbon from the land to the ocean for permanent storage. We do it safely with natural materials, responsibly, and it's highly measurable and verifiable.
Shannon Sterling
We were founded in Nova Scotia, Canada. This is local technology COP is happening next week in Azerbaijan and we've just now got the news that we have crossed the 1.5 degree threshold as a planet, which is increasing the risk of severe climate change. An analogy from Senator Colin Deakin so we've got an atmosphere, a room that's smoky, right, and people are still smoking, we're still adding it, and that's going to be net zeros when we have net stopping people smoking, right? But we also have to clear the room. This is why Senator Deakins analogy so good, and that's what carbon dioxide removal is for. So we can have a world with carbon dioxide removal where we have a chance at sucking that down and getting back to those safe climate thresholds, or a world without where we're going to surpass them. And what's alarming is that those models that we've been developing the forecast on, they have carbon removal baked in them. They're already assuming that we'll be drawing down billions of tons. So we need to get doing that to meet those targets. So that's the urgency there. That's why carbon removals is critical.
Brian Hong
So when thinking about the broader energy transition and the global net zero challenge to use Shannon's previous analogy, I think that broader energy transition is about stopping the smoke from being emitted in that room. And the kind of global net zero challenge that CDR can help with is actually taking that smoke out of the room itself. So where do, where does CarbonRun, fit into that and how are you guys positioning yourself within this space?
Luke Connell
I think we're positioning ourselves as an early stage responsible pathway to scale quickly because of the co-benefit simplicity and low cost to deploy our technology. So it's not a substitute for decarbonization, but it's an ‘and’ to decarbonization, and ours is maybe one that can be deployed faster. There's less regulatory concerns around the safety of the background of the solution. And again, we answer some questions that some other ones have us unknowns at scale. So I think that's where we fit. And I think it is very important that we have to decarbonize first and focus our energy there. But in order for us to again reach those gigaton scales by 2050 we do have to start scaling up rapidly today, and I think that's where we fit.
Shannon Sterling
We've invented, created a whole new pathway for carbon dioxide removal. So we're creating a new option that has community benefits, environmental benefits, more ability to show those benefits to the community. So social license, and we're also providing a new option that has high verifiability, and where you can see the carbon removal in real time, because we know where the water goes in rivers.
Luke Connell
And I'll just add to that option piece. And like, the world is losing options, so I think it's very exciting when you can add an option back that makes the opportunity bigger. I think that's something that we think is a quite hopeful part of this new pathway that Shannon has discovered. Jane Flagel talks about like, it's not a silver bullet, and Jane's the GR/PR lead for Frontier. It's a silver buckshot. So it's going to be a range of pathways that get there, but not all those bullets will hit the mark at the same time. I think for us, we don't have a lot of those hurdles in terms of immediate scaling up. So I think where we fit is potentially like this near term low CAPEX, low OPEX solution that could be rolled out quickly, and it's quite tangible in that we have these great local benefits coupled with this global climate benefit. So I think, yeah, for us, we're positioning ourselves as this near term, low risk opportunity to scale up a viable pathway rapidly.
Shannon Sterling
We're the only company in the world operating in these river systems and we do need an all buckshot approach. You just try many of these different approaches now and have very careful guardrails and no goes and safety checks before we allow them to scale. But we do need to have a lot of different strategies right now and then eventually we like to scale by 2030, 2040, 2050, is when things really have to the rubber has to hit the road. So there is a sequence there.
Brian Hong
Yeah, we've talked about some of the different types, but maybe just for our listeners, one of the ones that you might be more familiar with is direct air capture. So maybe, compared to that, what are, what are some of the pros and cons of your approach versus one that's getting a lot of attention right now, which is direct air capture?
Shannon Sterling
So the way I look at direct air capture is these engineered facilities with fans that remove the CO2 from the air and then they inject it for long term storage, typically in geological reservoirs. Rivers are super saturated in CO2. And so our technology, there it is, we use crushed old seashells or limestone, which react with that CO2. They dissolve quickly. It actually captures that CO2 into a stable form. It's called a bicarbonate ion. And then the rivers take that ion to the oceans for long term storage for 10000s of years. So we're one difference between direct air capture and what we're doing is we're basically enhancing a natural cycle. Direct air capture is really strong with the MRV. So that would be the ability to prove how much carbon is removed. And it can be more challenging in open systems, but with rivers, you know where the water is going, so it actually is also easy to prove how much you're measuring.
Brian Hong
Yeah, I love that explanation, and it it really just maybe, to put it simply, you're taking what the earth already does to sequester carbon through these river systems and just supercharging it, helping it do it better and faster.
Luke Connell
That’s right and I used to work in the restaurant industry, and we had a sign on the wall, and it said, you know, when it comes to butter versus margarine, trust cows before chemists, there's something here too about the simplicity of our approach and just enabling nature to do what it's always done, versus building large, engineered solutions, which, yeah, just expensive, take a lot of energy and don't maybe offer the same co benefits locally that river alkalinity enhancement can offer.
Brian Hong
And in talking about scaling, we've been giving the term gigatons. And just to put it in perspective, science, the science tells us that in order to reach net zero by 2050 we need to be removing between five and 10 billion tons of carbon dioxide from the atmosphere annually, a billion tons is a is a gigaton of emissions. Where are we today? How much are we actually removing from the atmosphere? And then how does that fit in with carbon runs planned to scale?
Shannon Sterling
Yeah, those scales are daunting, right? Like all the terrestrial net primary production, all the tree growth on land, is 60 billion tons a year, right? So that's huge. Currently we're not nearly anywhere near gigatons, because it's the beginning of the scaling, and that'll be, as I was saying, like probably 2050 right? You want to get commitment to gigaton by 2030 and then actually executing by 2050 so right now, it's on the order of 10,000s of tons.
Luke Connell
It's hard to put a pin, and it's like, we're a niche within a niche so the signals are confusing. What's cool, though is, I was at a conference last week and someone mentioned that last year there were four or five companies actively removing carbon and delivery. This year we're, like, 25 to 30, The volume doesn't matter. It's the signal that we all believe in this we can get behind. What's been fun to see is, 90% of the CDR companies that are alive today were founded in like, 2020, to 2023, right? So, like, you have all these companies that are all sort of coming to life at the same time. So that gives me some optimism that things are going in the right direction.
Shannon Sterling
That trajectory is just going to go up. But we really are at the very, very beginning. So that's why it's so small. Because we also have to be safe and responsible scaling.
Brian Hong
And I would just say to Luke's point about trying to grow the overall industry, that's where RBC is trying to play a role. We are buying carbon credits ourselves and increasingly looking to CDR is one of the solutions we support as and we're also supporting clients to look at this space as well. So hopefully broadening that tent. One of the reasons RBC has been interested in CarbonRun in particular are the really interesting co benefits from your projects. So can you touch on those specifically as it relates to nature and biodiversity and maybe some of the history there.
Shannon Sterling
Our technology was created to restore rivers from pollution, so that the carbon removal was a discovery later that this actually also removed carbon. So, there's lots of really great co-benefits for the ecosystems. And so, for example, work that our co-founder, Eddie Halfyard, has been doing in the West River Sheet Harbor with the Nova Scotia salmon Association, they've been adding alkalinity to a river for 10 years, and the salmon population there has tripled, which is a really strong signal for those co benefits. And there's similar stories for studies in Norway and Sweden, showing the salmon populations recovering from acid rain, also flourishing, but also the other parts of the ecosystem. So for example, the invertebrates or the creepy crawlies along the stream bed, they're doing better. There's also co-benefits in the water quality, which was before the work was done. It wasn't meeting the quality thresholds, and now it is. So pH is now at a healthy level. Metals are now at healthy levels, and you can see that also in estuaries as well. So where the river enters into the ocean, it's adding more calcium that was depleted, and the calcium is needed for the seashells. And so for oyster farms or aquaculture, there's co-benefits there, and it also helps increase the resiliency of coastal areas from ocean acidification, and that's another problem caused by fossil fuel burning, where the carbon dioxide comes in the ocean, because there's adding more into it, and that creates an acid, and it's dissolving the seashells. So it helps to counteract that.
Brian Hong
So I love that you're helping nature recover and flourish. And as a side benefit, helping solve climate change as well and taking carbon out of the atmosphere, right?
Luke Connell
Brian, when you're thinking about building your portfolio, how are you weighing things like aforestation versus permanent CDR and the price differences and duration? Is there a formula? Or, is it an art?
Brian Hong
I think our approach, similar to our earlier conversation, is that we need it all. And all these technologies are very different and at different stages of kind of the life cycle, in terms of where they're at and how much they're scaling, and what the future looks like for them. We need to support lots of different technologies and see what works best and in terms of the different price points, just for our listeners, carbon credits can be bought for $1 and or $1,500 and everywhere in between, and each credit represents one ton of carbon either avoided or removed from the atmosphere. So why companies spend so much on these more expensive credits is generally because they have a similar philosophy to us. They want to support new technologies that they think will be very important in helping mitigate climate change. They may place a lot of value on the co-benefits that you heard from Shannon regarding helping improve biodiversity and nature. And then, in many cases, these may be technologies or projects that are really relevant for their business. So a lot of energy intensive and carbon intensive businesses are looking to things like direct air capture and Point Source Capture as ways that they can actually decarbonize within their value chain. So those have a lot of value to them as well. So that's why you see a lot of effort in these higher price points, or a lot of investment going into these credits at higher price points. But there's always going to be this kind of range, and it really is dependent on what's important to a company and where they think they can get the most value out of their money.
Luke Connell
That's excellent. I think that's sort of what we're seeing, too, in that, like, when we started this journey, like the market, there was no 1500 credits in 2020 But we knew the need for removals was there. We knew the cost would be high. And I think with what's been fun for a lot of us in this space, when we first probably went out there to talk advisors people we trusted to guide us to build the company. And we said, well, if we make a carbon credit, it's going to cost somewhere between three to $500 per ton. The response was, typically, if you do that, like, I'll eat my shorts. You know, it felt unbelievable at the time, but I'm very heartened by the flight to quality that we're seeing, where people are very quickly becoming aware of the differences between a $1 and, you know, $1,500 credit, and what that means for them, and how they talk about it as a company, and their sustainability journey. What we're finding is a greater concern around risk reputation and greenwashing so wanting that observation and verifiability is critical right now, and people are willing to pay for that. So I think for CarbonRun it very much was a, we hoped, if we build it, they will come. If we make a high quality product that doesn't exist in the market, buyers will be attracted to it based on the qualities of that product and the price and the utility, and that's happened for us, and I think that will happen for a number of companies in the next year or two.
Brian Hong
Yeah, absolutely, we spend a lot of time thinking about who's next. So this market was created largely by the tech giants. Now we're starting to see the financial sector play a bigger role. But we have lots of clients waiting in the wings watching this, and I think one, the one major thing a lot of them are waiting for. I know we talked about willingness to pay for a lot of companies. It is challenging at those price points. So how are you guys thinking about scaling the business, and where do you think we'll get to in terms of price over the next five or 10 years?
Luke Connell
I think we're blessed in the sense that we have enough near term demand to focus on the construction of our first wave of projects, and the frontier offtake and purchases from RBC are helping us do that. In terms of this, like the scaling. I think again, with CarbonRun, we see a clear path to credits that are under $100 per ton for us and that number is sort of being batted around. Is that critical point where, if we get volume up, and we get that price to that point, then then buyers will flood in. That thesis hasn't been tested, but I think that's where we're all sort of gunning for and for us, like our current, off-takes are high priced, and there are small number of FinTech software companies that have the budget to pay for high volume at that price, but their thesis as well as if we can get the technology figured out, get that price down, get volume up, you will attract a big wave of buyers, whether they're corporate or government. I would say targeting 2030.
Shannon Sterling
Right now, there's operating in small to medium sized rivers where we can really focus on demonstration the next few years and the but the best way to scale, to get below, you know, $100 a ton, which is our goal by 2030 is to go to bigger rivers, right? So that's, that's our focus now, is just making that technological leap by 2030 and what is great about river systems is that they scale exponentially.
Brian Hong
Where I think we’re at with CDR. A good analogy that might be familiar for our listeners is the early days of renewable energy, where it was very expensive, but you did have some leaders, again, some of the tech companies and governments as well paying high prices, which eventually helped the technology scale, and now we have wind and solar is the lowest cost of electricity globally. So I think the same goal is that we're going to get there with CDR, and that's the role that leaders can play today, is helping it get there.
Shannon Sterling
Exactly if I can just add, that's the goal for 2050 we want this is when one of our investors counteract has said, we want this to be really boring technology that's like a utility.
Brian Hong
I think we'll get there.
Brian Hong
So what's been the most surprising thing you've both learned since starting CarbonRun?
Shannon Sterling
I feel so moved by the community support and engagement, and I know we working really hard on that, like informing and engaging people from the beginning and communities and working with professionals to make sure that we're doing that the most responsible way.
Luke Connell
That's been surprising and humbling for us to be held up as an example of what this can look like when the community gets behind it, and we don't take that for granted. We know, you know, there's lots of communities to engage with down the road,
Brian Hong
What are you guys most excited for in 2025 you guys received a large purchase from Frontier, which is a coalition of some of the companies that are really trying to kick start this space. How is that going to play out for the next year?
Luke Connell
I think for the first half of 2025 it's very much focused on getting the projects going to service the demand that we stimulated. But then also, I think in the second half is going after some big carbon buyers that we've had initial conversations with, and we'll have a little experience under our belt, have delivered some credits and hopefully can sign some other large off takes in the second half of 2025 to keep that growth and momentum going towards new projects, especially on larger rivers. As Shannon's mentioned, it's a key priority for us.
Shannon Sterling
Yeah. I mean next, next phase is we're deploying in different river types, and learning a lot, and then that's gonna be really exciting for next year. And then also the goal of getting the price down.
Brian Hong
And when you look at the projections for what this industry can be, we mentioned five to 10 billion tons of carbon removal annually by 2050 and Luke mentioned that magic number of $100 per ton, per carbon removal credit. That is a 500 billion to $1 trillion market. In order to get there, it's going to need a lot of support from the financial sector, and this can be a massive opportunity for those of us in this space. So when we're looking at our support here, we want to see how we can kind of wrap all of what we do at RBC. We call it our One RBC approach around some of these clients that we think will be the leaders in this space and really help drive the scalable carbon dioxide removal market that, again, we think is so crucial to meeting climate targets. I think more and more people are wanting to come into this, as opposed to push it away. And like, yeah, you sticking to it, is going to draw people in?
Luke Connell
I appreciate that. And just to go back, like for us over me, I think, like, when I look back at like, what for my thinking around like, why CarbonRun should exist and why we should form a company here, I think the scale is the main reason. You know, we know that grants and contributions and philanthropic pathways can't scale up the heights we need. And I still remember an article, 2022, like a Forbes article that talked about how the next Tesla, Amazon, Google, Shopify, should all be CDR companies for all of our sake. So it's nice to know the banks are also thinking that we could be that, because it's going to take that whole ecosystem to become that big of an industry. So yeah,
Brian Hong
Absolutely. And that truly, I do think is a great point to end on. So thank you, Luke and Shannon, and that's it for our conversation today. Thanks again for listening to powering sustainable ideas. Brought to you by RBC Capital Markets. Please remember to subscribe to get more great content and be alerted about future episodes. This episode was recorded on November 8, 2024, If you'd like to learn more or continue the conversation, please visit rbccm.com/energytransition, See you next time.