Barrett Brooks

Writer and coach for mission-driven creators and startup founders

Carbon Direct: The $160 Trillion Opportunity Hiding in Plain Sight

Climate Tech, Company Profile, Essays, Featured / by

There’s an untapped $160 trillion market teeming with potential and on the verge of surging with economic activity — and one company in particular is building a carbon science dream team to take advantage. That market: carbon dioxide.

Carbon Direct’s mission is to “combine science, technology, and capital to deliver quality CO2 management at scale.” They’re working to reverse the most devastating effects of climate change — simultaneously turning carbon dioxide into the world’s largest commodities market.

There’s only one problem: we’re running out of time. As a global society, we have to deploy technology at remarkable speed and scale (shout out to John Doerr) to have any real chance of slowing and reversing the rise in temperature. Carbon Direct wants to help by pairing major companies with science-backed solutions for decarbonization and helping growth stage climate tech companies scale faster.

On one side of the house, they are building a juggernaut of an advisory business, working with clients like Microsoft, Shopify, and Alaska Airlines. Their client portfolio has a carbon footprint of over 650 million tons of emissions per year or 2% of the annualized global emissions of 34.8 billion tons in 2020. Meanwhile, Carbon Direct is also building a growth stage investment fund to grow the connective tissue of the carbon market — from point-source carbon capture and green hydrogen to carbon-neutral chemicals and concrete.

Carbon Direct is positioning itself as a major power player as we race to decarbonize the global economy over the next 30 years. In spending the past month deeply researching their history and approach, I’ve become fascinated by their founder, chief scientist, and overall operations. By the end of this essay, hopefully you will be too.

Let’s get to it, starting with how an oil and gas trader becomes one of the loudest advocates for science-backed carbon removal.

An Oil & Gas Trader Becomes a Staunch Advocate for Decarbonization

Jonathan Goldberg’s transition from Goldman Sachs commodities trader to one of the earliest drivers of a global carbon market didn’t follow the typical path of his Ivy-educated colleagues. Goldberg cut his commodities investment teeth running his own fund, where he traded underlying commodities of crude oil, gasoline, diesel, and other products. 

(Yes, he built a business to make money trading the prime culprits behind our current climate change predicament.)

As Goldberg traded in the underlying commodities, he became interested in what he saw as a lackluster conversation about climate change. He began to apply his commodities lens to the climate problem — specifically to carbon — through a mental model in systems thinking called stock and flow.

A stock is anything that accumulates. The pile of mulch at your local garden center is a stock, just like the pile of carbon dioxide in our atmosphere.

Flow refers to any activity that increases or decreases stock. A dump truck backing up to dump more mulch onto the pile at the garden center represents flow that increases the stock. A customer pulling up in their pickup to buy a unit of mulch to take home represents flow that decreases the stock.

The problem? Without equal flow in both directions, stock grows — and grows. For the entire industrialized era, Goldberg noted that we’d been increasing the stock of CO2 in the atmosphere with an ever-growing flow from a variety of sources, without the necessary outwards flow to maintain balance. 

In an interview with Patrick O’Shaughnessy on Founder’s Field Guide, Goldberg explained this model in terms of the carbon problem. “There was a lot of good work being done on energy transition for the flow of CO2 emissions.” He continues, “But the stock of CO2 already in the atmosphere was about 1.6 trillion tons. The flow is only 40 billion tons per annum. For some reason, that stock question just wasn’t addressed in the conversation, in spite of it being clear in the science that it needed to be.” 

If we assume a cost per metric ton of $100, that’s a $160 trillion dollar market opportunity.

A few years after launching his fund, Jonathan joined the board of the Center on Global Energy Policy at Columbia University, where he helped fund the Carbon Management Research Initiative. As he began to research companies and investors addressing the stock of CO2 already in the atmosphere he found… nothing. 

That led him to the idea for Carbon Direct. Before we go there, first we have to step back to understand the science behind the company’s creation.

Sidebar: The Science of CO2 and Temperature

More CO2 equals higher temperatures. When Earth was in its early innings 500 million years ago, CO2 concentrations were as high as 3,000+ parts per million (ppm), contributing to  temperatures as great as 14ºC/25ºF above current averages. 

Over the last million years or so, plants in particular have helped regulate the atmosphere to between 150-300 ppm. That’s great news for humans: around 250-300ppm of CO2 in the atmosphere is ideal for humans to thrive.

Above 500ppm, life for humans becomes very uncomfortable: think wildfires, hurricanes, droughts, torrential rainfalls and floods, and extinction of plant and animal species. It’s what’s happening now, but much worse. Taken to the extreme, global temperature increases could result in human extinction (although that remains unlikely). 

The modern industrialized era has set us on a collision course with 500ppm or higher. In 1950, CO2 had reached 310ppm, a clear but innocuous increase. By 2021, we reached 415ppm. This may not seem like much given our planet’s past history, but even small changes in atmospheric CO2 and temperature cause massive variations in weather patterns, climate, and ecosystems on Earth. 

Here’s where all of those emissions came from in 2016:

We’re already seeing all of the signs of excessive atmospheric CO2. But like a frog boiling in water, the gravity of our situation hasn’t fully sunk in.

The good news: we’re still in control of our destiny. If we take the right actions over the next 50 years, we could avoid the most catastrophic effects of climate change.

That’s where the stock and flow mental model comes in. Avoiding the worst effects of climate change means reducing net global emissions to zero by about 2050. We need to reduce the flow from the sectors above to as close to zero as possible — which means transforming every major industry on Earth to a net-zero or carbon negative industry over 30 years. 

Whatever emissions we can’t reduce to zero, we need to eliminate through technology collectively known as carbon removal (CDR) or carbon capture and storage (CCS). And then, if we can, we need to try to make up for historical emissions to reduce atmospheric CO2 to a level we all agree (haha, what do we ever all agree on?) is optimal for humanity on Earth.

Enter Carbon Direct’s business model, built to tackle that last part: creating and scaling technologies to capture and store CO2 to systematically reduce atmospheric levels. 

In other words: turn carbon into a commodity.

Defining the Problem Space: Why and How Companies Need to Eliminate Emissions

There are many reasons why a company might make a net-zero commitment to decarbonize their operations. I categorize those reasons in three buckets:

  1. Companies who want gain the brand and marketing advantage of being carbon negative before anyone else — think Google, Microsoft, Shopify, and Stripe
  2. Companies being pressured by investor demand to become carbon neutral — think Shell, Exxon, Nucor, or Cemex
  3. Companies being forced to become carbon neutral by regulation — mandatory markets like this are not common today, but are rapidly becoming more likely

This can be broken up into two different kinds of carbon markets: a voluntary market is one in which companies decide for themselves to reduce or eliminate their carbon emissions. A mandatory market is one in which companies are forced to reduce or eliminate their carbon emissions by legislation.

Because climate legislation still trails far behind the scale of the problem around the world, the voluntary market remains much larger than the mandatory market. The majority of companies taking action today are doing so either because they want to be recognized as an innovative, climate-forward company OR they are being forced to by investors.

More companies are making net-zero commitments every day — and many leaders wake up the day after making a commitment with no idea what to do next. Decarbonization isn’t a topic taught to most MBAs (yet) and it’s not an expertise most companies have in-house. This leaves CEOs and their executive teams looking for help from advisory firms like Carbon Direct.

Reducing emissions for most companies is a four-step process:

  1. Measure emissions
  2. Make a plan to reduce and offset emissions to zero
  3. Reduce emissions
  4. Remove what you can’t reduce

Companies who measure their carbon footprint use tools like Watershed, Normative, or Persefoni to get a baseline measurement for their contribution to the problem. There are advisory businesses who specialize in carbon accounting as well. 

Once a company knows their footprint, they have to implement strategies to reduce that footprint. That could be applying point-source capture technology with a company like Svante, adding capture technology to truck exhaust pipes with Remora or taking a fleet electric with Jaro, or simply reducing the amount of plane travel their employees do or using renewable sources of electricity for office locations.

When a company has a plan in place to reduce their footprint, they typically arrive at a number of tons of emissions per year that they know they cannot eliminate, no matter how well their reduction plan goes. The only way to reduce their stock further is by offsetting flow externally — and this is where Carbon Direct comes in. 

The Carbon Direct Flywheel

Any time I look at a business with momentum, I try to understand its flywheel. What is the causal loop leading to this company’s success? Every flywheel is a model. As always, all models are broken, but many are also useful.

Goldberg has built a fascinating flywheel to fuel Carbon Direct’s growth engine:

  1. Leverage his network to hire the best scientists in the world that are willing to work in the private sector
  2. Leverage those scientists’ expertise to win consulting clients — Provide consulting service to first mover companies who value their reputation as an innovator and therefore will be willing to go first on net-zero via carbon removal
  3. Method-agnostic approach to carbon removal recommendations — Research, understand, and recommend the leading edge carbon removal solutions
  4. Leverage consulting research to make growth-stage investments in carbon removal ecosystem — Parlay consulting knowledge into growth-stage investments that have exponential growth potential (unlike the linear growth of consulting services)
  5. Invest returns back into science 

1. Build a dream team of scientists

Carbon Direct has doubled the science team in less than a year: 

  • In March 2021, Goldberg said they had 25 scientists on the team
  • In an interview with Lisa Stiffler at Geekwire in November 2021, Goldberg said the science team at Carbon Direct had reached 50 people 

At the time of this writing in January 2022, I count 45 people on the “CO2 Management” (science) team on the Carbon Direct team page.

By contrast, I count just six people on the investment team. There’s also a nascent software team being built behind the scenes, which I’ll cover briefly later. Let’s overestimate and say there are 10 people working on software.

That means 75% of Carbon Direct’s paid staff (whether on a contract or full-time basis) are on the science side. This is a remarkable commitment to science for a private, for-profit entity. It’s also one hell of a moat. This study on the scientific consensus of climate scientists counted 69,406 people named on published papers related to climate science between 2013-2014. 

Let’s say a generous 30% of those ~70,000 are expert-level scientists who can advise companies with authority. Within those 21,000, a small percentage have expertise in carbon removal and storage — let’s say 50%. Of those 10,500, an even smaller percentage would have specialized expertise in any one area like soil carbon, direct air capture, biomass, etc. Let’s say 30% have a specialty. That leaves us with roughly 3,000 scientists who can deliver expertise via consulting. And 50 of them are in one company!

I know it seems small, but when at least 2% of the world’s experts on carbon removal and storage are all on one team, the multiplier effect this one company can have is astounding. In less than 12 months, Goldberg has compiled the equivalent of the Olympic dream team of carbon removal scientists in one place. 

To understand how he brought the group together, you don’t have to look any further than Goldberg’s involvement on the board at the Global Energy Center at Columbia. That’s where he met Julio Friedman, who would go on to become the Chief Scientist at Carbon Direct and serve as the fulcrum for recruiting a world-class team of credentialed experts. 

At least six people on the science team have connections to Columbia. Add in another even larger group from Berkeley and you can see how network clusters have led to the growth of the science team at Carbon Direct. Once a critical mass of experts gather in one place, it’s a magnet for others.

This science-first approach means:

  1. Clients can trust Carbon Direct to be the experts on carbon removal
  2. Carbon Direct can trust their own advice without question
  3. Their competitive advantage is clear and out in the open — good luck competing

2. Leverage expertise to sell consulting clients

Winning massive consulting clients is hard — but Carbon Direct’s science-first approach means they’re the obvious choice for anyone looking to take a first-mover approach to removing carbon from the atmosphere.

One of the more surprising things I learned in researching for this essay is that the companies who approach Carbon Direct are already well-versed in the high level science of carbon removal and storage. I would’ve guessed the opposite, but here’s Julio Friedman (Chief Scientist) on the My Climate Journey podcast (lightly edited for clarity):

One of the things we’ve been pleased with is how sophisticated most of the companies we work with are. They enter with a deep level of understanding about the climate and the science and what’s available. Part of the reason they’ve come to us is because they’ve gone through many tiers of thinking.

A less sophisticated buyer might sign up for $3 per ton carbon credits because they’re cheap and never think again. A more sophisticated client knows that many offsets sold to date are questionable at best. So these companies are making net-zero commitments, learning what they can, and acknowledging they’ll need help to get to zero.

This leads them to look for experts — and who better to hire than the world’s leading collection of carbon removal scientists? 

3. Make science-based carbon removal recommendations

Carbon Direct looks for four things in the carbon removal recommendations they make:

  • Do we know the science?
  • Can we prove it works?
  • For how long can a ton of CO2 be stored?
  • How much does it cost?

If the science is sound, the method works, it stores CO2 for a long time and it’s within a reasonable cost range for the client, they don’t care what the method is. They’re solutions-first.

4. Leverage solution research to make investments

The major flaw in a service-based business model is the linear nature of revenue growth. Service businesses are famously hard to scale. They rely heavily on the quality of talent. And when talent quality is largely based on expertise that takes decades to acquire… there’s an inherent scaling problem.

How do you solve this? Supercharge the growth model through investments with exponential potential. 

What did Goldberg do before Carbon Direct? Invest lots of money in growing assets.

The company is already doing deep research into applied science, projects, and companies who are reliably removing and storing carbon. It’s a small leap to start making investments in companies creating solutions that fill in the carbon capture and storage ecosystem. That’s what they’re doing with their $100M growth stage investment fund.

5. Invest proceeds back into the science-first approach

With a solid reputation that attracts new clients, the firm is set up to have healthy consulting revenue for the next 25+ years. With a portfolio of science-based investments with high growth potential, the firm is set up to have exponential investment returns beginning in the next decade.

What do you do with the proceeds? Plow them back into the thing that got you here in the first place: science. There will be plenty of money to be made for everyone on the team, but it appears as if Goldberg and Friedman care even more about gigaton-scale carbon removal and storage. The more they reinvest the proceeds, the more they’ll be able to influence the overall market to solve the glaring climate problem in front of us.

That’s the flywheel. Now let’s turn to a deeper dive on the advisory and investment sides of the business.

Carbon Direct Advisory: Turning Companies Into Carbon Market Makers

Much of the technology we need to reduce emissions exists. It just hasn’t yet been commercialized and scaled to the point where it becomes effective for every industry. An oil giant like Shell, for example, is going to have a very different objective from an airline like Alaska, which will have a different objective from a market-leading tech company like Shopify. 

Instead of starting with the solution, Carbon Direct stays agnostic on whether they recommend and pursue nature-based or engineering-based solutions to carbon capture, removal, and storage. They let ‌clients guide selection criteria within the bounds of their principles. 

Natural carbon removal solutions include things like:

  • Reforestation, afforestation, and forest management
  • Peatland, marsh, and wetland restoration
  • Plankton, seaweed, and other ocean-based natural solutions
  • Soil management through things like regenerative agriculture

Engineered solutions include things like:

  • Direct air capture
  • Mineralization
  • Enhanced weathering
  • Embodied carbon in things like building materials, concrete, steel, etc

And then there are crossover solutions that involve a bit of both, like:

  • Bioenergy carbon capture and storage (BECCS)
  • Engineered organisms, such as what Living Carbon is doing to engineer trees to capture carbon more rapidly
  • Some ocean methods like that used by Ebb Carbon or SeaChange

What remains consistent regardless of technology is that every recommendation Carbon Direct makes to their clients follows three unwavering qualities: it must be scientifically proven (or at least promising), the amount of CO2 removed must be measurable, and that all storage must be durable. Then it either has to meet the client’s budget or Carbon Direct has to convince a client to spend more per ton than they planned. As Goldberg put it on the My Climate Journey podcast,

Different clients have different perspectives on what they want to do within the programs, whether it’s outright purchases of carbon dioxide removal or thinking through within their supply chain ways that we can use our expertise. It could be on biomass conversion to hydrogen or syngas as a way to change supply chain management, CO2 to diesel for data center powering. Clients have different objectives.

Carbon Direct Advisory By the Numbers

Carbon Direct doesn’t publish client numbers, but some insight can be gained from public statements. As of November 2020, Carbon Direct had 10 clients responsible for 650 million tons of emissions per year. Early in 2021, they had 13. As of Q4 2021, a LinkedIn post by the company stated “we represent dozens of companies in a multitude of sectors, including tech, transportation, energy, pharmaceuticals, & finance.”

The only three confirmed clients I can find across all of their public content are Microsoft, Shopify, and Alaska Airlines. And these three companies have been very public in communicating their priorities and commitments to following through on their priorities:

In addition to these three, I have a hunch they have been asked to passively consult with Stripe, have at least one oil and gas client, and certainly have a mining client based on a podcast interview with Goldberg. All of that is speculative, but based on insights and hints from my research.

My guess is that the clients who have not talked about their partnership publicly are emissions “heavy hitters” and are much less capable of generating positive brand positioning from their efforts. Instead, they’re likely trying to stay out in front of policy enforcement and derisk future financial returns for their investors. 

The Opportunity and Risk of Carbon Advisory

All signs point to the opportunity in the decarbonization advisory market being massive over the next decade and beyond — a market in which Carbon Direct is already primed to thrive. 

But opportunities inevitably bring risks, primarily in staffing for both science and client delivery. While Carbon Direct has already amassed perhaps the largest private sector science team in decarbonization, many scientists remain deeply skeptical of the private sector. Others don’t have the right expertise for Carbon Direct’s specific brand of work. The question is: how many more scientists are available to help scale their work? How many more are needed?

On the other side will be the need for a growing number of client delivery staff. These people will need to combine the classic skills of consultants with a rigorous ability to research, understand, and communicate the science behind the solutions they recommend.

The science bottleneck will be harder to solve than the client delivery bottleneck, but both will be real. Goldberg seems to anticipate this, as the company recently announced two software hires (product and engineering) in an effort to productize the knowledge the firm has worked so hard to build. Whether the platform becomes a self-service tool that can scale to thousands of companies or remains proprietary and in-house will be fascinating to see play out.

Carbon Direct Investment Management: Investing in Carbon Pioneers

Meanwhile, the firm has opened up a new revenue driver to decouple linear client advisory growth and overall financial returns of the business. 

Combined with the inevitable desire to run a profitable and rapidly growing business, Carbon Direct made the insightful move to raise a $100 million fund from institutional investors. The fund will invest in growth-stage climate technologies that have passed the R&D phase and are ready to scale in commercialization. These companies are largely de-risked and have reached the transition period between classic early-stage venture capital and funding rounds typically fueled by private equity, debt, and public markets.

Here’s how Julio Friedman described the company’s investment thesis on the My Climate Journey podcast:

We need big wins across the entire ecosystem. So if somebody came to us and said, hey, here’s a $120 billion check, how would you invest it? We wouldn’t put it all into one thing. We’d put it into a handful of things across the ecosystem that we all think has the highest validity and has the highest chance of success. […] That’s the work, the climate Counter-Strike requires an offensive on every level and on every front. And what we’re just trying to say is, well, we can be the pick and shovel company for that.

That’s what they’re doing — only with $100M instead of $120B. The fund will invest in about 10 companies at an average deal value of $10M. The fund will have a 10-year time horizon — more patient than typical venture capital, but still a reasonable timeframe.

A Timeline of Investments

Here is a timeline of investments in 2021, the first year the fund was operational:

  • January 2021 — CarbonCure — a company developing decarbonization strategies for the cement industry, especially through embodied carbon
  • February 2021 – Svante — $75M round led by Temasek — a company making nano-filters to capture unavoidable emissions in industries like cement and chemicals
  • July 2021 – Twelve — $57M led by Capricorn and Carbon Direct — their first lead investment in a company working to transform captured CO2 into critical chemicals to create products like shoes, laundry detergent, and car parts
  • September 2021 — Solugen — $350M led by GIC and Baillie Gifford — a company turning biomass into chemicals
  • September 2021 — Calix — $17.7M exclusively from Carbon Direct — yet another company decarbonizing cement, this time in Australia
  • October 2021 — Clean Energy Systems — $15M led by Carbon Direct — a company converting biomass waste into permanent storage of CO2
  • October 2021 — Sunfire — a company using electrolysis to produce green hydrogen or syngas, which can then be used in difficult-to-decarbonize industries like cement and steel

The gap in investments between February and July 2021 suggests one of two things to me: 

  1. Some of their investments are behind the scenes and won’t be announced publicly. This seems unlikely, as funding rounds are great marketing opportunities for most funds.
  2. They had immediate conviction on the need to decarbonize cement, which led to their first two investments. But they hadn’t built good systems for generating deal flow, so they spent five months building out a team and creating deal flow. This seems more likely.

It’s hard to know for sure, but I’d bet strongly that Carbon Direct has deployed anywhere from 60-100% of the first fund in these seven deals. I’d expect another 2-4 deals during the first half of 2022 to close out the fund, assuming they haven’t already deployed all of their capital. I’d also bet on Goldberg raising a second fund in mid-late 2022 — something that may already be happening in the background.

Zooming out, it’s fascinating to see the “shovels and pickaxes” analogy playing out in their investments. Three of the seven deals are in cement — an industry, alongside chemicals and steel, that has proven famously hard to decarbonize. Two more deals are in chemicals, with another tangential to the industry. And then they have green hydrogen and biomass waste conversion as well.

All of these technologies will power the kinds of projects that Carbon Direct’s advisory business will recommend to their advisory clients — a web of solutions that will inevitably power a carbon negative economy over the next fifty years.

Can the fund successfully pick winners?

So my questions are:

  • Can Carbon Direct successfully pick enough winners amongst what will surely be a growing number of players who enter these markets over the next decade?
  • How much money can Goldberg raise from his investment banking contacts and their contacts?

The first question seems a foregone conclusion given the stage they’ve chosen to play at. The earlier the stage, the more risk and higher potential returns. At the growth stage, where Carbon Direct has chosen to play, the risk will be lower and so will their potential returns (compared to, say, seed stage). 

The real measure will be whether they can beat the wider market by a margin significant enough to fuel fundraising. If so, given Goldberg’s background plus the amount of noise coming from institutions like BlackRock about decarbonization, I don’t think capital will be hard to come by. 

So success boils down to whether enough founders will start enough companies that make it to the point of commercialization. At that point, it’s all about deal flow for Carbon Direct. I’d bet on a strong bull run in the overall decarbonization market — and I’d bet on that bull run fueling excellent returns for Carbon Direct thanks to their science-first approach and stage of investment. 

Will Carbon Direct be a key player in one of the biggest capital shifts of all time?

In his 2022 letter to CEOs, Larry Fink of BlackRock said, “I believe the decarbonizing of the global economy is going to create the greatest investment opportunity of our lifetime.”

I agree. I’d take it even a step further. 

Imagine getting to live through the reinvention of every industry on Earth over a 50-year period and seeing humanity collectively triumph over our own past ecological mistakes in the process.

It would be one of the greatest eras to live through in history.

That’s what I believe is about to happen between now and 2100. I think that’s the same bet Jonathan Goldberg has made in starting Carbon Direct. 

My lingering question is not whether Carbon Direct will be a player in the coming era of decarbonization. It’s whether they’ll be perhaps the biggest player in the movement. 

I’m excited to find out.

Here are four actions you can take after reading this essay:

  1. Consider joining the team at Carbon Direct; as of February 2022, they are especially focused on building out their science and software teams.
  2. If you lead a growth stage climate tech company (especially decarbonization infrastructure), consider reaching out to Carbon Direct for your next fundraising round
  3. If you lead an established company, set a net-zero commitment date and hire Carbon Direct to help you remove any carbon you can’t eliminate from your operations.
  4. If you are an institutional investor, consider proactively offering to invest in Carbon Direct’s next growth stage fund.

Thanks to James Clear, Jimmy Forbes, Kieran Tie, Nicole Brooks, and Ryan Delk for giving feedback on early versions of this essay. Featured photo by Steven Kamenar on Unsplash.

Learn more about Carbon Direct:

Research sources and further reading:

Disclaimers: Nothing in this essay should be taken as financial advice. This essay was not sponsored or requested by Carbon Direct. I did not speak to anyone on the Carbon Direct team in the process of writing or editing this essay.