Jonathan Sisto
Good afternoon, everybody and welcome to Powering Sustainable Ideas, a podcast series from RBC Capital Markets where we interview the leaders and companies powering the sustainable future. I'm Jonathan Sisto, I’m Managing Director in RBC Investment Banking Department focused solely on energy transition companies. Today I'm delighted to be joined by Jon Rhone and Natalie Khtikian
the co-founders of CO280, a Vancouver based developer of large scale carbon dioxide removal projects specifically for the pulp and paper industry. With very large off take agreements with some of the biggest companies and brands and global business. Our recording of this podcast is timely, as C0280 is actively scaling critical decarbonization infrastructure today. And with that, Jon and Natalie, thanks for being with us
Natalie Khtikian
Thanks for having us.
Jon Rhone
Hey, Jon, thanks for having us. We're delighted to be here.
Jonathan Sisto
Maybe we could start by telling the origination story of CO280 and how did the company come to be. Did you all see a void in the marketplace? What inspired you?
Natalie Khtikian
Jonathan, thanks again for having us. We're really excited to be on this podcast. I think it's a really important time to be hosting discussions about new types of energy transition assets and telling stories about how we can succeed in this space, in the current the current climate. CO280 is a project development company focused on delivering really high quality carbon removal credits to customers who are trying to achieve net zero or other sustainability goals. And historically, the carbon removal space has been split into two parts, which are nature-based carbon removal and engineered carbon removal. And when we looked at the market, we noticed that most companies in the space were actually technology companies who were focused on building and commercializing a specific technology. So what Jon and I realized is that by creating a project development company that was tech agnostic in the engineered carbon space, we could really fill a gap in the engineered CDR space and that market ecosystem. So when we started out, we were the only tech agnostic project developer in the space, and we were also pathway agnostic. So we spent a bunch of time looking across the different ways that you can remove carbon from the air and decided that by adding commercially available and very high technology readiness level amine carbon capture to pulp and paper mills, we could create extremely high quality, permanent and affordable CDR credits in a way that would help us get the customers in the CDR market exactly what they wanted. And being tech agnostic is a real advantage for us, because it aligns us perfectly with our CDR customers and also with our pulp and paper partners. So it's been a really important piece of our model.
Jon Rhone
These big climate technologies, they're all really large machines. They're all very complicated to commercialize, and commercializing them requires a certain skill set, but actually getting them deployed and scaled up in the markets a completely different skill set. So by being a project developer, we're able to focus on the deployment and scale up aspect of the journey, which is business model, innovation, partnerships, financial models, capital formation, partnerships and transactions, and all of the necessary ingredients to kind of create a repeatable, scalable playbook. When we started the company, we decided that we would become obsessed with what customers’ needs are. And so our team's been done a lot of work to make sure that what we're bringing to the market in this particular pathway, and we'll talk more about it, is actually aligned with what customers want. They want permanence, they want scalability, they want affordability, and they want verification of these pathways. And we think that this pathway we're bringing has all of those attributes.
Jonathan Sisto
Maybe we'll just kind of use that as a lily pad and jump off from there. How did you both settle on the pulp and paper industry? Is there something unique about that industry that makes it so well positioned for CDR?
Jon Rhone
What's unique about pulp and paper from many other sectors is that 80 to 90% of all of the CO2 that's emitted from pulp and paper mills is biogenic. So when you make pulp and paper, what the mills do is they end up burning all of their biomass byproducts in these huge boilers. And so the industry emits a large volume biogenic CO2, which is carbon neutral. Capturing / sequestering, that creates a negative emission, which is a CDR credit. And so pulp and paper has a lot of scale. You know, just in North America, there's about 130 mills. They emit something like 120 to 130 million tons a year of biogenic CO2. Worldwide, about 500 million tons of biogenic CO2 is emitted from pulp and paper plants. In the US it's a great coincidence that a lot of the mills, most of the mills are, in fact, within 50 to 75 miles of saline aquifer storage where the CO2 can be stored. We're able to retrofit the mills to add post combustion carbon capture, to capture stock emissions, and you're leveraging all of that existing infrastructure, that's already in place with well-established supply chains to add a new value chain onto an existing mill operation. And that makes that makes our job a lot more efficient, and it allows us to keep our keep costs very low. So that's those are some of the reasons why pulp and paper is so well positioned for CDR.
Natalie Khtikian
The credits that we can generate from these projects are extremely high quality, and a lot of that has to do with the industry itself that we're integrating into. Integrating with an existing industry creates efficiency, and that efficiency shows up in two ways. It shows up first in the amount of resources that are used to create environmental impact. So in our case, the amount of resources used to remove one ton of carbon is low. And then in addition, that shows up in cost efficiency, and that allows us to create a really affordable credit. Pulp and paper is really an important part of the fabric of our society. It's a necessary good, and it's something that will continue in a net zero world.
Jonathan Sisto
So Jon, Natalie, Illuminate the joint venture structure that you all are building with these pulp and paper mills throughout North America. Why that's a competitive advantage and also some of like the derivative impacts from your work. Not only is it great for the environment, but you're really begetting jobs in many instances.
Jon Rhone
The pulp and paper industry has gone through a lot of changes in the last few years in response to market conditions. What we tried to do in designing a business model is achieve a couple things. First of all, these are 500 to a billion dollars of capital to build one of these carbon capture plants. And then there's a whole value chain of partners we have offtake partners for CO2, transport, storage. We have CDR revenue offtake partners. So we needed to create a business model that could be financed off balance sheet. We wanted to make sure that the pulp and paper partners had a stake in in that particular venture, and we wanted to create the conditions where we could attract private capital. So the carbon capture plant that's located at the mill site that captures the CO2 is financed, owned and operated under a joint venture business model with CO280. So we are equal partners with our pulp and paper partners. And then we assemble all the pieces of that project JV, we put all the agreements together. We do all the engineering and in stage gates with our partners. We make all the decisions on how to develop that project with them. And then it's financed off balance sheet with project financing. So we, and our pulp and paper partners contribute project equity, and then we raise, we raise project debt from lenders. That does a couple of things. We're able to stack the CDR revenue on top of 405Q so these are, these are financially attractive, profitable projects. The pulp and paper partners have skin in the game, we have skin in the game, in terms of contributing real equity to the projects, but we're also leveraging project finance to make these projects happen, so they have a minimal amount of impact on our pulp and paper partners balance sheet. They also contribute profitability back to the mills. Some of our projects are doubling the EBITDA at the mill and that has a fairly significant and transformative impact on the economics of the mill and ultimately the economics of the pulp and paper industry. And that's really important, especially today, at a time when North American pulp and paper companies are facing headwinds from offshore competition and rising costs and so on. So we very much see what we're doing is investing in the industry and revitalizing the industry in a way that's going to increase revenue, increase profitability, and protect and secure rural manufacturing jobs in the pulp and paper industry across America. And that's a really important attribute and motivation for governments as well.
Natalie Khtikian
Every one of our projects is essentially like an ecosystem of partnerships. I think Jon and I believe firmly that in order to build these big, complex projects that have so many different stakeholders, we really need to make sure that everyone involved benefits in some way.
Jonathan Sisto
Natalie, use the term ecosystem, and it makes me think a lot about where this sector of energy transition has come since, call it 2019, and how it now is inclusive of midstream companies that the pore space, the saline aquifers that you mentioned. It’s so much more encompassing than it was five or six years ago.
Jon Rhone
Yeah, I 100% agree. I would argue that there's an equal amount of innovation and entrepreneurial smarts, and drive, and relentlessness required to develop the technologies but also deploy them in the market. And we need to come up with new business models and new partnership models. That's really what we're striving to do.
Natalie Khtikian
At the end of the day, with any kind of new energy technology, you have to be providing a service that fits within existing commercial structures and creates value. And the way that we've set up CO280, and something that we believe is that we need to activate private capital in order to really scale a new class of energy transition asset. And so our business model is built around the idea that in order to make large scale CDR a thing, we're going to have to have the full participation of the private financial sector, and their support, which means the projects have to be profitable and everybody has to be properly incentivized.
Jon Rhone
At the end of the day, unlocking private capital is really what's going to scale up energy transition and decarbonization.
Jonathan Sisto
So Jon and Natalie, to that end, you know, RBC does have carbon trading desk, and has had one for, you know, in excess of 10 years. So I have a slight lens into the CDR market. But maybe you guys could just talk about where the CDR market sits today, I think, you know, there's a lot of literature in the public domain. It's largely concentrated with five or 10 buyers. How do you all envision expanding that pie, breaking down and into the next tier of call it the S&P 500 potentially as buyers, in order to scale up not only your business but the whole ecosystem?
Natalie Khtikian
The engineered carbon removal space is dominated by a relatively small group of relatively wealthy companies who have been really leading the way. And those companies have been thinking about CDR for a really, really long time. Most notably, Microsoft has purchased, I think, about 70 or 80% of the credits ever, ever sold in the engineered CDR space. But we are seeing new companies enter that space and our thesis has been and it's really bearing out to be true that it takes years for a company to set a net zero goal, think through their carbon accounting, think through their reduction strategy, and really understand the different levers that they can pull to decarbonize, and get to the point where they know how much CDR they need to achieve their goal, and then they need to learn how to purchase CDR. So there's a multi-year journey that a customer needs to go through and in order to buy CDR, and that that is something that that we're really focused on accelerating and helping customers through. And we've seen some real success with that. We announced our big offtakes with Frontier, Microsoft and JP Morgan. And I want to note that the JP Morgan off take we announced is the largest offtake in engineered space ever done, not by Microsoft. And we also have agreements that we can't talk about with other new buyers who are entering the space, who've never purchased CDR before. So I do believe that it's coming, and we're seeing really hopeful signs. At under $200 a ton, we are a fraction of the cost of other engineered solutions, and that really allows buyers who would like to buy really high quality, permanent, engineered CDR to take advantage of that and get involved.
Jonathan Sisto
That's great to hear. And you know, from our vantage point, we're seeing some of those same customers that we speak to look at their purchases on a bundled basis and how they can allocate
dollars across an assortment of solutions. So it's great to hear the momentum that you see as well, Natalie.
Natalie Khtikian
Every buyer who's got a mature outlook on carbon credits is looking across a portfolio of solutions. And one thing that's great about CO280 is that we have a portfolio of projects as well. So even within that, 10 or 20% of their portfolio that they're purchasing from CO280 specifically, we have further risk reduction across our portfolio of projects.
Jon Rhone
Our commercial team, they spend every single day talking to customers in different markets. And this idea of having an obsession with what customer needs are in CDR, has been an incredible learning process for our company. Customers from one vertical market to another vertical market have different motivations for why they want to buy CDR and there's a huge amount of education required to help customers understand how to develop a portfolio, and where to get advice on how to do that, and how to buy and how to procure. What's been interesting is, even in the last sort of 12 months, we've not seen a slowdown in motivation. We've seen a different way that customers are communicating about their net zero goals, but we haven't seen a pullback on goals or objectives around net zero or CDR procurement.
Jonathan Sisto
I couldn't agree more. In our conversations, I think there's been an undoubted societal shift in what individuals, companies or entities want that has more staying power no matter who is in control or what sort of administration policies are being set forth on any given day.
Let's talk for a moment about technology. You know, you guys pride yourself on being technology agnostic, but maybe help bring to life for the audience where you are on the TRL scale, for those who follow that, whose technology you're using for maybe your first project or two, and what are some of the gating items or benchmarking techniques that you guys look to before you move forward with technology A or B?
Jon Rhone
The technology that we select for these projects, has to be fully commercially proven, and they not only fully commercially proven, they need to have been deployed at scale in other industries, successfully, where we can validate the performance of those technologies, and we can validate, all the key inputs to our economic model. We need to understand what the capabilities are of our technology suppliers. You know, what are their supply chains? What kind of risks do they have in terms of being able to execute projects? Are they able to deploy projects and technology on time, on budget, that's going to meet performance guarantees. There's a lot of work that we do with our technology suppliers to make sure that they meet and exceed all of the technical, performance, commercial financial criteria. In terms of, you know, the technologies that are available today, the liquid amine, solvent-based capture technologies, are really the only category of technology that Is that meets all of those criteria today. Those technologies are bankable today. Now we also benchmark all the other post-combustion capture technology. So we're also looking at the attributes of technologies like cryogenic technologies, which look very promising. Hot potassium carbonate technologies, also very promising. Some of the other technologies we think are going to take a long time to develop, like solid sorbents is a fairly long path to being fully commercial and bankable. There's some emerging technologies on the horizon, like membrane technologies, and some more exotic earlier stage technologies, but they're really kind of lower levels of in the TRL scale. And we so we spent a fair amount of time, and we're continuously benchmarking, and we're very interested in some of these technologies as they mature and as they're ready for prime time.
Natalie Khtikian
The whole question around technology and TRL is really interesting. As a project developer, there's sort of two things we want to do, and one is to make sure that the technology we're deploying now is fully de-risked and bankable. And the other is really encourage all these earlier stage technologies to come along, and we think a lot about how we can help the ecosystem develop and what's next.
Jon Rhone
Hey, Jon, I'm gonna make one other point about technology. The capture technology is actually a fairly small percentage of the overall capital cost. The balance of plant that is required to support thecapture technology is really a lion's share of the capital and the integration with the mill, or with any industrial operation, that's another amount of capital that's required. What's very important in in looking at any of these new technologies, is we need to drive down the cost of energy. The Achilles heel of amine technology is the requirement for large amounts of steam, thermal energy and having the flexibility to produce or to run a carbon capture plant, it doesn't require so much steam, but might require electricity instead, or driving down that amount of that amount of energy required for capture is super important. And so, when we look at, when we look at technologies, we're looking at benchmarking them across a whole range of different attributes, but energy is the most important one.
Jonathan Sisto
So Jon, Natalie, maybe this is a nice segue. I know that you were in Washington, DC last week, and you saw many members of Congress and leaders of President Trump's energy dominance Council, but maybe you could give us a sense of what you saw, what you heard, what you're feeling specifically as it relates to 45Q and then also, similarly, you know, in so much as we're RBC, would love to hear what you're also hearing from the Canadian government as well.
Natalie Khtikian
Overall, I think there's a lot of enthusiasm for projects like ours that can bring private capital to the forestry industry and can help protect forestry jobs. We’re quite excited that 45Q has continued. Tax Credits like that are critical to getting new industries off the ground, and we're hopeful that the class six permitting process becomes clearer and more straightforward. As project developers process is really at the center of everything that we do, and understanding a permitting timeline process allows us to integrate that into our work streams. Even if it's a long process, or a long timeline, that's okay, as long as it's defined. And that's one thing that Canada has done really, really well, is permitting CO2 storage. Canada has already issued permits for that and has very clear permit timelines and process for getting permits for CO2 storage. The EPA is working on it, it's getting better, but so far, the process has not been incredibly transparent, and also has taken many, many years. So we're pretty excited to see Canada's leadership in that space.
Jon Rhone
In Washington, what we found was that, there's a really, really strong reception to the idea of what we're doing, strengthening an existing industry and helping to enhance the competitiveness of the of the pulp and paper industry. The Canadian government has made it clear that that they want to do everything they can to help accelerate project development, project deployment, and create the environment for private capital, for large projects in Canada and get the economy moving. So we're excited to do our part.
Jonathan Sisto
That's awesome to hear. Okay, so we're recording this podcast on June 30, as you guys speak to the rest of your executive team and do your planning, what are your goals for the second half of 2025?
Jon Rhone
We've got eight priority projects, Jonathan that we are driving forward through our stage-gated project process. So, on our first project in in the Gulf Coast. Our goal is to complete, or near complete final FID study, complete our transport and storage contracting. We've already secured all the CDR that we need to complete the revenue stock for that project. So we want to get all of the conditions precedent to begin the financing process for that project. The other critical thing that we want to get done before the end of this year is to support our transport storage partner and get authorization for construction on their class six well permit. And that will drive the final pieces that we need on the regulatory side to get that project ready for FID in 2026. We've got a handful of projects that are in in pre FID right now, and we expect to end this year with first project FID study near completion, and then five to six other projects well in pre FID, several of those completed. And really the big milestones are in ‘26 and ’27. Our goal is to get a minimum of two projects past FID in ‘26 and another two in ‘27 and then, combined with that, we just brought on board new CFO. We're working on completing a big capital raise for project equity and also to support ongoing development activities over the next four or five years
Jonathan Sisto
Jon, Natalie, thanks again. What a fantastic conversation, and also a timely one, the fact that we've got so much going on here in the carbon capture ecosystem in North America, the fact that you guys were just in DC, and the momentum you have on your first project on the Gulf Coast. Thanks again for your time, and we'll hope to see you again.
Thank you again for listening to Powering Sustainable Ideas brought to you by RBC Capital Markets. Please remember to subscribe to get more great content and to be alerted to future episodes. This episode was recorded on June 30, 2025. If you'd like to learn more or continue the conversation, please visit rbccm.com/energytransition.