Podcast Summary
Bridging the gap between buyers and sellers in the carbon market: Patch provides transparency and standardization, enabling buyers to make informed decisions based on unique carbon removal solution characteristics
The carbon removal market is evolving, and platforms like Patch are playing a crucial role in connecting buyers and sellers by providing transparency and standardization. Before Patch, the carbon market was dominated by large-scale transactions, with banks and oil and gas companies buying and trading carbon credits as if they were securities, treating every ton as equal. However, this approach overlooks the significant differences in carbon removal methods, their prices, and their long-term impact. Patch challenges this status quo by aggregating and standardizing the presentation of carbon removal data, offering buyers the necessary information to make informed decisions based on the unique characteristics of each carbon removal solution. This new level of transparency is essential as the market for carbon removal continues to grow and become more complex.
Understanding risks and durability of carbon removal projects: Patch ensures transparency and validity in carbon offset market by collecting and surfacing third-party info, maintaining clear boundaries and ethical practices.
Transparency and validation are crucial elements in the carbon offset market. The discussion highlighted the importance of understanding the underlying risks and durability of carbon removal projects. Patch, as a platform, collects and surfaces this information from third parties to ensure buyers have a clear picture. The industry is nascent, and there is no one-size-fits-all standard for comparing different carbon removal projects. However, it is essential to have clear boundaries and incentives in place to maintain trust and ethical business practices as the market grows. Patch prioritizes this by not incentivizing passing off inaccurate information and working with third parties to collect and maintain data.
Understanding Carbon Credits: Consistent Attributes Across Organizations: Platforms like Patch bridge the education gap among buyers by providing transparency and enabling informed decisions based on standardized attributes of carbon credits.
While different organizations like Vinera and Silvera may have varying standards and methods for evaluating carbon credits, the end results and key attributes, such as underlying chemical pathways, geography, price, vintage, durability, additionality, and leakage, remain consistent. The value of a Platform-as-a-Service (PaaS) lies in its ability to present these attributes in a standardized way and adapt to the dynamic market as new standards emerge. However, there is a significant education gap among buyers regarding these concepts, with some focusing primarily on price and others demonstrating sophisticated understanding. The platform, Patch, plays a crucial role in bridging this gap by providing transparency and enabling users to make informed decisions based on comparisons of different solutions. Ultimately, the key to success is effective communication and education around these concepts to help buyers make informed decisions and understand the trade-offs involved.
Connecting buyers and sellers in the carbon marketplace: Patch is a verticalized SaaS solution that connects Fortune 500 organizations with carbon suppliers and provides essential tools for both parties in the carbon marketplace
Patch is playing a significant role in the carbon marketplace by connecting Fortune 500 organizations with carbon suppliers, and providing tools for both parties. Patch's expertise lies in the compensation piece, or the offsets marketplace, but they also passively report on transactions and invest in software and systems to help carbon suppliers scale their businesses. The value for suppliers comes from the collection of functionalities that work together in harmony, making Patch a verticalized SaaS solution tailored to their specific workflows. The carbon marketplace is becoming increasingly important, and Patch's role in connecting buyers and sellers, as well as providing essential tools for both parties, is a key development in the industry.
Seamlessly integrate climate action into business applications: Businesses can enhance user experience, drive loyalty, and acquire new customers by offering climate action solutions through Patch's API, which allows for custom climate action solutions that fit specific business needs and is often transparent to end users.
Patch's ecosystem, which includes its dashboard products and API, enables businesses to offer climate action solutions seamlessly to their end users. The API's feature parity with the dashboard products allows companies to own their user experience and integrate climate action within their applications. This not only enhances the buyer experience but also helps businesses drive loyalty and acquire new customers. The use cases vary widely, from e-commerce platforms like Afterpay integrating climate action within their app to logistics companies automating carbon-neutral shipping through their API. The end user experience can range from selecting carbon offset projects within an app to a business automating back-office processes. The API acts like a Lego brick, allowing companies to build custom climate action solutions that fit their specific needs. Ultimately, this integration is often transparent to the end user, making it an effective way for businesses to offer climate action without disrupting the user experience.
Businesses, investors, and policy makers prioritize sustainability: Millennials and Gen Z drive businesses towards sustainability for differentiation, investors prioritize sustainable companies, and policy incentivizes sustainable practices
Businesses, investors, and even public policy are increasingly recognizing the importance of sustainability in response to changing consumer preferences and the impending effects of climate change. Aflac, as an example, uses Patch's technology to power its carbon removal solutions and highlights this partnership to its customers. This trend is driven by the fact that millennials and Gen Z, who are entering their prime spending and earning years, are becoming more environmentally conscious. As a result, businesses are looking for ways to differentiate themselves by operating sustainably, investors are prioritizing sustainable companies for long-term returns, and public policy is beginning to incentivize sustainable practices through tax credits and other incentives. With over 150 buyers on the platform, ranging from small startups to large corporations and banks, and 50 suppliers representing over 100 Climate Action Projects, Patch is helping facilitate this shift towards sustainability.
SEC scrutiny of net zero claims: Companies making net zero claims face increased regulatory scrutiny, potentially misleading investors. Price is a significant factor in the evolving carbon market, but the cheapest solution may not always be the best one due to the complexity of carbon reduction.
As the SEC begins to evaluate climate disclosures, companies making net zero claims to attract ESG dollars are under increased scrutiny for potential misleading of investors. This regulatory aspect is important to note, as it adds consequences to these statements or actions, making the market not purely voluntary. In the evolving marketplace approach of Patch, cost will be a significant factor, but the cheapest solution may not always be the best one due to the vast variability in carbon pricing. While some predict the cost to be between $50 to $200 per ton, the current range on Patch is much wider, from $15 to $1,000 per ton. Price is not the only factor, as carbon should not be viewed as a commodity but rather a complex solution with various aspects to consider.
Factors influencing carbon credit prices: Understanding factors like technology, vintage, geography, durability, and third-party evaluations is crucial for buyers to make informed carbon credit purchases and align with their climate strategy.
The price of carbon credits is influenced by various factors such as technology type, vintage, geography, and durability. These factors can significantly impact the availability and cost of credits, making it essential for buyers to align their purchases with their climate strategy. For instance, those focused on agriculture might prioritize credits related to farming, while those focused on national excellence may prefer credits from their country. The spectrum of carbon credits ranges from affordable options like greenhouse gas destruction (around $15 per ton) to more expensive solutions like direct air capture ($1,000 per ton). Durability is another crucial factor, with credits evaluated by third parties to ensure that the carbon remains sequestered for a specified period. Patch, the platform discussed, does not evaluate the durability itself but requires third-party evaluations for projects to be listed. This focus on transparency helps buyers make informed decisions based on reliable data.
Secure and reliable carbon removal investment platform: Patch offers a secure investment platform with stringent onboarding, consequences for rule-breaking suppliers, and tools for informed decision-making, making money through take rates and platform fees.
Patch provides a more secure and reliable platform for buyers to invest in carbon removal solutions compared to traditional brokers, due to its stringent onboarding process and indemnities. Patch acts as a safeguard for buyers by imposing consequences for rule-breaking suppliers. Moreover, Patch's platform helps buyers make informed decisions by differentiating between established, low-risk technologies and newer, high-risk ones. Patch makes money through take rates for buyers and a platform fee, which may vary depending on the features and usage. The overall business model is expected to remain consistent, but the magnitude of the take rate and platform fee may change based on the client size. However, there is a risk that if the cost of carbon removal technologies significantly decreases, Patch's revenue growth could be impacted due to the take rate model.
Companies prioritize net zero goals over carbon credit budgets: Companies focus on removing required carbon, cost per ton influences spending, and the carbon removal industry's growth presents opportunities for companies like Patch to simplify market complexities with software solutions.
Companies buying carbon credits are focused on achieving their net zero goals rather than setting a fixed budget. They determine how much to spend based on the amount of carbon they need to remove, and the cost per ton plays a significant role in their decision-making. The expectation is that as the cost of carbon removal technologies decreases, buyers will shift their spending towards these technologies. Patch, a carbon removal company, stands to benefit from this trend due to its focus on serving customers with lower budgets. The carbon removal industry as a whole is still in its early stages, with significant growth potential. Patch aims to simplify the complexities of this growing market by providing software solutions for both buyers and sellers to navigate the carbon market and ensure regulatory compliance.
Financing Carbon Removal Solutions: Insurance and financial instruments like carbon credits and hedging bets on specific technologies can help corporations and investors mitigate financial risks associated with investing in carbon removal R&D, facilitating industry growth
The growing market for carbon removal solutions presents numerous opportunities for innovation, but addressing the financial risks associated with investing in these technologies is crucial for accelerating progress. Insurance and financial instruments, such as carbon credits or hedging bets on specific technologies, could make it less daunting for corporations and investors to take on R&D risk and support emerging companies. The evolution of financial engineering and the involvement of infrastructure funds could play a significant role in facilitating the growth of the carbon removal industry.
Early signs of a large and growing community in carbon removal technology: Historically, large groups of people tackling a problem have led to solutions. The speaker sees optimism in the growing community of talented individuals in carbon removal technology, emphasizing the importance of infrastructure development and the renewed excitement from established companies and under-resourced researchers.
The early signs of a large and growing community of talented individuals working on carbon removal technology gives reason for optimism about the future of this field. Despite the challenges and long-term nature of the problem, the speaker believes that the alignment and focus of a large group of people has historically led to solutions. The speaker also highlights the importance of infrastructure development alongside the development of carbon removal solutions. The speaker's optimism stems from the renewed excitement and influx of talent from established companies, as well as the under-resourced researchers who have been working in the field for decades. The speaker compares this situation to historical examples where large groups of people have come together to tackle a problem and ultimately found a solution. The speaker concludes by emphasizing the importance of this initial cohort in attracting more talent and building the necessary infrastructure for carbon removal technology.
