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Why companies are rushing to lock corn and timber underground

by SuperiorInvest

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BlackRock's Larry Fink published his annual letter to investors yesterday, days after news that investment funds in red states had withdrawn $13.3 billion from the world's largest asset manager. Although withdrawals total about 0.1 percent of BlackRock's assets under management, Fink was at pains to emphasize that he is not a green zealot. Instead, he urges “energy pragmatism.” Read our colleague Brooke Masters' full summary here.

Meanwhile, in today's newsletter we look at a new push to put agricultural waste to profitable use. Much-publicized efforts to produce biofuels from it in the 2010s didn't really take off. Now, startups want to use this waste in systems to permanently remove carbon dioxide from the atmosphere.

As we noted in a recent issue, carbon removal will be a crucial part of the global push to achieve net zero emissions, according to the Intergovernmental Panel on Climate Change. But for biomass-based schemes to play a major role, they will require close monitoring of land management in remote regions. As the proverb says, the mountains are high and the emperor is far away.

Thank you for reading.

carbon removal

What will the next biomass fever be like?

Biomass has had many false dawns. As we enter another boom period, the new wave of entrants, many of which have close ties to the technology sector, have converged on a new use case: carbon dioxide removal.

Instead of processing corn, wood or other plant matter into a value-added product, these startups are racing to build businesses that lock them in from emitting greenhouse gases.

Frontier, a coalition of technology companies that pay a premium to accelerate promising carbon solutions, has backed several of the startups, including Charm Industrial, founded in 2018.

Crops like corn draw carbon from the atmosphere as they grow, but then release much of it after harvesting, as the stalks and husks, for example, remain in the field and decompose. Charm uses portable pyrolyzers (essentially oxygen-free ovens) to convert this waste into a carbon-rich “bio-oil.”

Charm's original plan was to use this oil to produce hydrogen, co-founder and CEO Peter Reinhardt told me, but that application turned out to be “economically uninteresting.” Instead, Charm has developed a method to store bio-oil underground, where it will remain sequestered for at least 10,000 years, according to the company.

The United States has more than 100,000 abandoned oil and gas wells, many of which leak toxic chemicals. Charm's idea is to pump bio-oil into those wells for long-term storage and sell the corresponding carbon credits to corporate buyers. Bio-oil is corrosive, so in addition to applying for permits, Reinhardt told me, the company has had to overcome engineering hurdles.

Still, Charm's system is up and running, albeit in modest volumes. In the three years after it began storing bio-oil in 2020, Charm says, it sequestered about 6,400 tons of carbon dioxide equivalent, roughly equal to the annual emissions of 430 U.S. residents. Frontier, at least, is sold: Last year, the technology initiative signed a long-term purchase agreement worth $53 million to buy Charm credits.

Growing responsibly

There are potential risks to the biomass rush, said David Keith, a climate scientist and policy expert at the University of Chicago who founded rival carbon removal company Carbon Engineering. Keith argued that paying for corn waste increases the profitability of growing corn, which could incentivize greater production of the crop, with negative environmental effects.

Beginning in 2005, U.S. biofuels policy catalyzed a major expansion of corn cultivation that drove changes in land use, leading to impacts such as soil erosion and phosphorus runoff, according to a 2022 paper published in the scientific journal PNAS. The study found that reduced cropland retirement rates and increased application of nitrogen fertilizers increased carbon emissions.

A previous article specifically looked at the impact of corn stover (i.e., the remains of the corn harvest) and found that harvesting stover could make growing corn more profitable. In turn, that could intensify corn growing practices, with impacts on soil and fertilizer use.

Isometric, a carbon removal standard and registry that Charm works with, aims to address that issue in its guidelines. For example, he says Charm shouldn't get corn byproducts from the same field two years in a row. This is to avoid encouraging farmers to change crop rotation practices, in ways that could harm soil health.

I asked Reinhardt if he is concerned that the basic economics of paying for waste could drive a change in land use. “Not on the scale we are on now. There are much bigger drivers of [crop] rotations,” he told me. “There is something de minimis, incremental impact.

Charm's impacts may be minimal in this early phase, but Frontier's goal is to help promising technologies get off the ground. If companies like Charm grow substantially, they could put upward pressure on an increasingly tight market, according to Rudy Kahsar, who heads the carbon removal team at climate consultancy RMI.

Plant-based carbon removal companies “were competing with each other for the same biomass,” Kahsar said. Experts disagree on exactly how much global biomass consumption would be sustainable, without harming biodiversity and soil carbon stocks. But, he said, “we are hitting that” level.

The International Energy Agency has said that the maximum sustainable level of biomass consumption, which does not include biomass consumed as food, is about 102 exajoules per year. The IEA projects that the world will approach that level by 2040, even without including biomass production used for carbon removal.

A stacked bar chart of biomass use by sector.  It shows that the world is rapidly approaching the limits of sustainable biomass consumption even before it is used for carbon removal.

Plants in high demand

Carbon sequestration companies are not the only ones fighting to get plants for clean technology projects. A new generation of startups, such as Houston-based Solugen, are attempting to make petrochemicals from plants, replacing fossil inputs to the refining process, such as propane and ethane, with plant feedstocks such as corn sugar. .

In the western US, there is also a growing effort to use wood from forest clearing (removing trees and brush to reduce the risk of wildfires) as a feedstock for carbon removal. Charm had already tapped into this “wildfire fuel reduction” industry, Reinhardt said, using wood harvested from forests for carbon sequestration.

Kodama Systems, another Frontier-backed startup that has raised money from Bill Gates' Breakthrough Energy Ventures, makes safe forest management a central part of its sales pitch. The company plans to store wood harvested from California forests in vaults designed to contain greenhouse gases.

Part of Kodama's argument is that it is developing technology to automate the most repetitive parts of thinning operations, making the human workforce more productive as demand for forest management grows.

However, as with farming, the test of the business will be whether it can expand responsibly. More companies were competing for a limited supply of biomass, Kahsar said. “Maybe some additional waste can be found to be converted into bio-oil and sequestered in Kansas,” he added. “But if you try to scale up any of those approaches, you're probably going to run into raw material challenges.”

smart reading

Iceland plans to plant more corn and rein in its bitcoin miners, Andy Bounds and Alice Hancock report, as the government aims to reduce dependence on food imports and unleash its supply of renewable electricity from energy-hungry cryptocurrency groups.

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