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Robinson Meyer:
Hello, it is Wednesday, June 17, and one of the most interesting experiments in carbon removal announced a big new project this morning. Frontier is a coalition of tech, finance, and fashion companies that provides what’s called an Advanced Market Commitment, or AMC, for carbon removal. It is a very interesting format. It commits to buy carbon removal credits from companies that are still building out their infrastructure, working on their technology, in order to make sure that carbon removal will exist in the future. It’s like a private version of Operation Warp Speed just for carbon removal. Its members include a lot of firms you’ve heard of, Stripe, Google, McKinsey, H&M, JPMorgan Chase, Salesforce, and others. Well, as of this morning, Frontier has raised a new round of more than $900 million to go into the market and keep supporting carbon removal that effectively doubles the amount of money it has on hand. It calls this new round a growth advanced market commitment or growth AMC, but it’s an invented term, but it says it will focus its next stage of buying on just a handful of companies who it thinks have the potential to remove billions of tons of carbon from the atmosphere. And there’s other news too. The AI lab Anthropic, who we haven’t seen a lot of climate commitments from, has now joined Frontier as well, joining Google and Shopify and all those other firms I just listed.
Robinson Meyer:
Now, Frontier, some of you may remember, launched back in 2022. I wrote about them at the time for The Atlantic. At the time, there weren’t a lot of sources of demand for carbon removal. And so when they committed about a billion dollars to do it, it was a big deal. They’ve since used that money to buy just under 2 million tons of carbon removal credits. Since then, as we’ve also covered at Heatmap, a whale in the market has come and gone. I reported earlier this year that Microsoft, which is the world’s largest historic buyer of carbon removal, they bought about 70 million tons of it, paused its purchases. Which is a big deal for the industry. It cuts off the primary source of demand, the primary customer for future carbon removal. So Frontier re-upping at this moment is a really big deal. To discuss that news and more, I’m excited to welcome the head of Frontier, Hannah Bebbington Valori. She was on Frontier’s founding team and joins us from the United Kingdom. We talk about this announcement, the future of carbon removal technology, and how to interpret Anthropic’s membership in the coalition, always a company people want to hear about. I’m Robinson Meyer, the founding executive editor of Heatmap News, and it’s all coming up on Shift Key. Hannah Bebbington Valori, welcome to Shift Key.
Hannah Bebbington Valori:
Ah, thanks for having me.
Robinson Meyer:
So... Today, this morning, Frontier announced a new $900 million raise. Can you just start off by telling us what you’re going to do with it?
Hannah Bebbington Valori:
Yeah. So today we launched what we’re calling the Frontier Growth AMC, which is an additional $900 million committed to bicarbon removal between now and 2040. So the buyers in this AMC are Stripe, Google, Shopify, Salesforce, H&M, and Anthropic. And this funding takes us to about $1.8 billion total committed across both of our AMCs. And I think what is important to note about this is really the question on everyone’s mind in carbon removal today is, is demand going to keep pace with the technology development? And even more than that, is demand going to scale to what the market needs to stabilize global temperatures or sort of gigaton scale, hundreds of billions of dollars a year?
Hannah Bebbington Valori:
So this growth AMC is really designed to, in part, answer that question and bring corporate buyers to market to keep buying carbon removal at scale and at pace. We’re going to, on the supply side, focus on a narrower set of portfolio companies, those who are highest potential, most promising, and sort of ideally get them to commercial scale. And then perhaps even more unique is really on the demand side, we’re thinking about prioritizing projects that have line of sight to robust long-term government-driven demand. So thinking about how do we as corporate buyers use what is still sort of a relatively small amount of money to really catalyze this space and pull forward that policy that is required to get the market to gigaton scale.
Robinson Meyer:
It sounds like as you go through these projects and technologies that you have some candidates already in mind. Are like the companies that will benefit from this purchase already kind of lined up and in the system? Or is this still open to other carbon removal companies?
Hannah Bebbington Valori:
The short answer to that is we’re still totally open. And what we want to do is spend this money most effectively. So on the best ideas, on the best projects, on the best teams. I think, though, the Frontier team has diligenced over 500 carbon removal companies. We have a portfolio of 60 companies today. And so we do know this space relatively well. As we think about the deployment strategy for this growth AMC, it’s really going to be likely a combination of, really high-performing, existing portfolio companies and new companies, larger, longer bets, and sort of across a diversity of pathways. And I should perhaps say that $900 million is at once a small and large number. So it is both a great step forward, meaningful for the carbon removal market, especially in this moment. And there will likely be projects that we cannot buy from who are also great and very high potential. So over the next couple of years.
Robinson Meyer:
Can you give us a sense of the technology landscape as you see it at the moment? Because I think one thing that’s notable about this announcement is that you kind of go through the technologies that you think are going to be able to deliver gigatonscale. And I do think this is something that’s changed from like the beginning of Frontier, and it was more of a wide open space. It seems like you have narrowed in on some of the technological options that will actually be able to remove carbon on the scale that will be necessary to actually meet our alleged global temperature targets. What are those technological options as you see them?
Hannah Bebbington Valori:
I mean, I think what has been really remarkable is the pace of technology development and carbon removal. So when we launched Frontier back in 2022, fewer than 10,000 tons of permanent carbon removal had been done to date. Most of carbon removal was really like an idea in someone’s head or in an academic paper. And we now have hundreds of companies building. We have real world data across most major pathways. And so, yeah, we are so much more opinionated today. We have so much more information about what that gigaton scale portfolio will look like. And at the same time, there are still so, so many questions about realistically how big and how cheap can these technologies get. But sort of with those caveats, we think of this market as having about five pathways that are on a spectrum and the spectrum being of sort of how relatively well understood and sort of well-bounded is this technology. And when I say relatively, everything in carbon removal is still pretty nascent compared to some other climate tech industries, but sort of within carbon removal. So on the one hand, we have things like biomass-based approaches, or often abbreviated to something like bikers, so BECCS and other biomass-based technologies.
Hannah Bebbington Valori:
You know, these are technologies that today are delivering tens of thousands of tons of removal. They’re relatively well understood. We have facilities that are building capacity on the hundreds of thousands of tons. They enjoy a lot of existing policy support. We have many different biomass-based approaches in our portfolio, Vaulted, Charm, Exergi, Hafslund Celsio.
Robinson Meyer:
This kind of ranges from like burning biomass, capturing the carbon, injecting the carbon below the ground, to the Charm approach where you create this bio oil from biological material that’s photosynthesized. And then you would just inject that deep below the ground. Lots of injection of biomaterial, but it kind of ranges from traditional bioenergy to...
Hannah Bebbington Valori:
More experimental like charm. Yeah, bioenergy with carbon capture obviously generating a stream of CO2, and then other biomass approaches, Charm and Vaulted, injecting some form of either bio oil or biomass flurry. This pathway is constrained by the amount of sustainable waste biomass that the world has and can aggregate and access in an economical way. And so we think, while very compelling, so likely to be cheap, likely to have a lot of political support, is going to deliver part of our gigaton scale portfolio. And sort of on this end of the spectrum, I would also put enhanced rock weathering and direct air capture, technologies that are relatively well understood being deployed in the field, but are capped in some way. Enhanced rock weathering, relatively capped in scale at the single digit gigatons, direct air capture likely capped by its total potential cost. So all three potential to be part of the gigaton portfolio, but not a winner takes all technology.
Hannah Bebbington Valori:
On the other hand of the spectrum, we have things like surficial mineralization, ocean alkalinity enhancement. These are technologies that we are super bullish about, have enormous potential, enormous scale potential, could deliver more than 10 gigatons a year at relatively affordable prices, less than $100 a ton, but have relatively less real world data. So these are still more in the conceptual phases. And a lot of the work that we are doing at Frontier is how do we get more startups working on these ideas, testing and refining these ideas in the field so that we can better understand what the true potential is here. So superficial mineralization, taking reactive rock either from waste rock piles at mines or mining it where you find a deposit, exposing that to air, likely piling it on a heat bleach pad. This is something that we think very, very high potential and yet we don’t know enough yet.
Robinson Meyer:
It seems like Frontier is approaching this round a little differently than the first round. I mean, I think when Frontier launched, it was like a classic advanced market commitment. I think the term I used in, I was working at The Atlantic at the time, but it was like buyer of first resort. You were going out into the market. You were supporting a lot of being the first customer for a lot of interesting technologies. What’s interesting over those intervening years is that Frontier has been in the market for a long time. I think you guys have bought, what, 1.8 million tons, maybe around there. Since 2022, an enormous buyer entered the market in the form of Microsoft. It bought 70 million tons, give or take like 5 million on each side. And now, as we recently reported here at Heatmap, it has paused its buying for the moment. And so it kind of was this enormous anchor buyer in the market, but now it’s gone. And so it’s a market that’s gone through a lot of convulsions. There’s a lot of good companies sitting out there that maybe were planning on a customer that has gone away. How is that shaping this round? And how are you thinking about Frontier’s role given that kind of, in some ways, we’re in this weird moment where it’s like we don’t need an advanced market commitment anymore. The market existed, but then the market kind of went away. And so how are you thinking about structuring Frontier’s market activity to support demand through the next several years.
Hannah Bebbington Valori:
Yeah, I think we think a lot about what is the role of the corporate buyer in carbon removal, especially the corporate buyer sort of at the Frontier scale, so buying millions of tons of removal today. And really the way that we answer that question is we think, okay, where does the carbon removal market need to be? Or what is the end goal for carbon removal? And how do we get there? And what needs to happen next to be on the right trajectory to scale. So when we think of carbon removal at gigaton scale, we are really looking at hundreds of billions of dollars of annual procurement spend. And that scale of market is unlikely to be delivered by the voluntary carbon market. That has actually always been true. The voluntary carbon market is sort of unlikely to get to that point. And so then you imagine that this market at gigaton scale is going to have to be government driven. Now, government driven can take a lot of different flavors and form factors. So it doesn’t necessarily mean government pays. What it means is ...
Robinson Meyer:
And this is true of all waste markets. I mean, if you think of carbon removal as a type of waste market, what happens is the government, I mean, we as taxpayers or the public in some kind of broad sense pays to remove the waste, but like the government comes and picks up our trash. For instance, the government does remove the waste from the water. You know, like if you think about this as a form of waste management, then it would be very natural for the government to take it over. Of course, it is different from other forms of waste management. Management, let’s say, in that it’s maybe thermodynamically and scientifically a little more ambitious than trash pickup.
Hannah Bebbington Valori:
Yeah. There’s a stat actually that we love that the world spends $1.4 trillion on waste management. And so as we think about hundreds of billions spent on carbon removal, it’s not unprecedented. It’s large, but we can see a path.
Hannah Bebbington Valori:
If we’re moving to government-driven demand, what that looks like to us is sort of likely one of three things. One is we have compliance markets or emissions trading schemes of some form. So really, corporates are paying for carbon removal to neutralize their residual emissions, but they are mandated to do so.
Hannah Bebbington Valori:
We can write carbon removal into existing industrial regs. So, for example, we could mandate that wastewater treatment plants use limestone to manage their pH, which actually might be better and easier and cheaper than existing chemicals that are used today. Or you could imagine direct funding of removal activity, and that could be direct procurement, direct buying of tons, and it could be things like tax credits and subsidies and so on. But the government can’t use taxpayer dollars to pay for stuff that is unproven or very risky. And similarly, it can’t mandate the use of technology that’s super expensive. And so before we get to that government-driven future, we really need to de-risk the technology. We need to pull it to commercial scale. And we need to make sure that it’s affordable and predictable and reliable. And that is the role of corporate buyers. So this is a long-winded way of answering your question. But really, we think of this growth AMC as saying, OK, what can we as corporate buyers do to pull that future into being? So to ensure that we are de-risking the most promising technologies, we are helping those technologies go to scale, and we are actively partnering with governments around the world to make sure that we are setting up this baton pass or even a public-private partnership whereby there is sustained and robust long-term demand for these projects once our off-take agreements expire.
Robinson Meyer:
And so what does that mean from a project buyer standpoint? How does that actually change how you’ll relate to companies or work with companies during this new phase?
Hannah Bebbington Valori:
Yeah, there’s a few different ways that this can look like. In short, it looks like we’re prioritizing projects that have line of sight to government driven demand or who we think that in buying from that project, we make it more likely that a jurisdiction gets excited about policy and carbon removal. So to give you a couple of examples, a great example of a project we’ve already done where we would love to do more like this is like the Stockholm Exergi facilities. Stockholm Exergi has a bioenergy facility in downtown Stockholm. It delivers most of the district heat to the city. They are installing a carbon capture retrofit to capture the carbon emissions off of that facility and injecting in the North Sea. Frontier and Microsoft were some of the original offtakers of this project. And in being an offtaker, we also allowed Exergi to qualify and then to win, an award from the Swedish state aid auction, which is filling out the rest of their offtake stack and sort of ensuring that this project is viable and can get built. A perfect example of a public-private partnership making a carbon removal project happen and paving the way for more of those types of projects to get built in places like Sweden and around that area.
Hannah Bebbington Valori:
If we could find more projects like that, so more projects where we either have a direct link to policy, where we can buy from a project, get that project FID, and in doing so get the local jurisdiction really excited about bringing more of that economic activity to their jurisdiction. Those are the types of things that we really want to see.
Robinson Meyer:
Does that mean basically not prioritizing projects in the United States because the U.S. is not a primary supporter of carbon removal technology at the moment?
Hannah Bebbington Valori:
This is everyone’s favorite question. In short, no, I think. So A, there are existing carbon removal policies that persist today in the U.S. Carbon removal has fortunately enjoyed quite a bit of bipartisan support. So things like 45Q is another great example of government-driven demand. 45Q pays for the injection of CO2 underground. So already not disqualifying. And I think for sure, if we could imagine a world of either expanding 45Q or having a more tech neutral tax credit, which has been considered in the past, that is like the type of direction of travel we would love to see for U.S. policy. And then I think more broadly, if you work in carbon removal, you are like inherently an optimistic and long-term thinking person. Otherwise, you would go crazy. And I think we really believe that sort of in the long arc of the future, the U.S. will be a meaningful player in building a carbon removal market.
Robinson Meyer:
I hope so too. And so one of the other big pieces of news that came out of this round is that Anthropic is joining Frontier. It’s quite interesting because I think this is really the first big climate program that Anthropic has joined. Unlike, say, Apple or Microsoft, they don’t have really notable public corporate climate. Can you give us any detail about the size of their contribution to Frontier or kind of what they mean as a coalition member?
Hannah Bebbington Valori:
Yeah, I mean, we’re just thrilled to have Anthropic in the group. It represents a couple of different things to us. So one is carbon removal is a really important part of any corporate climate program. And really like any national climate program. The reason why we care about carbon removal is because IPCC experts talk about how the world is going to stabilize global temperatures and the need to both radically reduce the emissions we emit and proactively scale a portfolio of permanent carbon removal technologies, because otherwise we’re not going to get to zero without both of those efforts. And so to us, someone like Anthropic signing up to Frontier is indicative of how organizations are thinking about building their overall climate programs, which is that carbon removal should be a pillar of the work that you do. I also think part of this and part of what is true of anyone who joins Frontier is like a love of sort of lowercase-f frontier technology and an optimism about the way that technology can help advance the world. And folks who join Frontier and who buy from these, really nascent emerging technology companies are really making a bet on human ingenuity and our ability to sort of create the world that we want to see in the future. And so we’re stoked. We’re stoked to have Anthropic on board.
Robinson Meyer:
But you can’t give us dollar amount.
Hannah Bebbington Valori:
I can’t give you dollar amounts. And actually, we, as a rule, don’t give anyone’s dollar amount. So this is not specific to Anthropic. But yeah, we keep it kosher with a top line number.
Robinson Meyer:
Well, can I can I just push a little further and say, I do think there are people who are going to see Anthropic join and say, Anthropic, complicated company, because on the one hand, I think it’s been the most If there’s any company, I think, that’s kind of pledged most among the frontier AI labs to uphold, let’s say, liberal democratic values, I think Anthropic obviously has to be top of the list. At the same time, they’ve partnered with xAI. They seem to be using a lot of compute at this Colossus Data Center, which is particularly carbon intensive in Tennessee. I think there are people who say carbon removal is kind of a delayist technology. It allows companies to keep emitting fossil fuels, to keep burning carbon and kind of promising to clean it up later, but not doing anything to reduce emissions in the near term. And Anthropic would be a great maybe example of this. What would be your response to that? Yeah.
Hannah Bebbington Valori:
Well, I think my response to that would be a couple of things. One is the moral hazard around carbon removal has really not come to fruition. This concept that companies buy carbon removal as kind of a way to get out of corporate climate commitments or other climate activity is like really not borne out in the data for a couple of reasons. One, the people who care about carbon removal are the people who care about the climate. And so those folks are often building broader programs that include carbon removal and other things. Two, these are all voluntary activities today. And I think they’re very, very expensive ones at that. So buying carbon removal today costs hundreds of dollars a ton. Like it is not, if you wanted a sort of get out of jail free card, Frontier and carbon removal is not that. There are many other ways to have a climate program or maybe have a broader sort of civic responsibility program that are much cheaper than what we do.
Hannah Bebbington Valori:
And I think this is borne out sort of generally in the data, like how much money we spend on carbon removal versus how much money we spend on decarbonization efforts. Rightly so is a fraction. And so the world as it stands is not replacing carbon removal with other decarbonization activities. Rather, buying carbon removal today is recognizing that this market will not turn on like a light switch in 2050 when we want it if we don’t invest today. And so folks who buy carbon removal now are really sort of playing that long game thinking into the future about what we want to exist and investing today to make that happen.
Hannah Bebbington Valori:
And then, you know, the other way to answer this question is like we should hold folks’ feet to the fire on this. So people who buy carbon removal, honestly, people who don’t buy carbon removal should be thinking about decarbonizing their emissions.
Robinson Meyer:
Where is OpenAI? They should be a Frontier …
Hannah Bebbington Valori:
Totally. You can call them and tell them that. We should be banging on the doors of these companies and many other companies to be asking them, what are you doing to decarbonize? And that is not just Anthropic. That is everyone.
Robinson Meyer:
You have this particular purge at Frontier into carbon removal. And as we’ve kind of been dancing about in this conversation, it’s been a tough year for carbon removal. I think the removal of Microsoft as a major corporate buyer is really devastating for some companies. And we were already expecting, I think, some kind of retraction or carbon removal recession. To some degree, climate tech’s been in a broader recession, I think, for the past two years. But this is really going to deepen and continue it for carbon removal. But you have a particular view of the industry at Frontier because lots of people come to you for money and they are pretty open book when they come to you for money and you learn a lot about their projects so what do you see in carbon removal that you feel like people haven’t realized yet or that nobody else sees about the industry like when you see other discussions of carbon removal. What do you think people are missing at the moment?
Hannah Bebbington Valori:
So, it’s true that the demand question keeps me up at night. It’s why we set out to raise this growth AMC, was to make sure that we are doing all that we can to put this market on track to scale. So, I do not, like, I do think that is a headline that you mentioned, and it is a headline that is so real. And so, I don’t want anything I’m about to say to sort of contradict that. I think the thing that people miss or perhaps undersell or under-celebrate is the technology progress is insane.
Hannah Bebbington Valori:
That we have gone from a space that really had a handful of companies, no deliveries, no third-party registry, no protocols, very little demand-side legislation in basically only one country, to so much more than that. So, you know, we have tens of thousands of tons being delivered. We have large scale facilities being built. We’ve like crossed approaches off the list, which in and of itself is amazing. And such as what an efficient way to spend money is in a very short period of time to be able to say there are a few things that we don’t want to concentrate our efforts on anymore and start to narrow our focus. I think the 2020s are really about technology development and shaking the trees to say, if we’re going to get to gigaton scale by 2050, we need to as quickly as possible learn what works and what doesn’t work and double down and make those decisions quickly and decisively. And I think we under-celebrate how far we’ve come along that journey in a relatively short period of time, honestly, with a relatively small amount of money.
Hannah Bebbington Valori:
Especially for some of the projects that don’t have a Microsoft offtake, we’re looking at quite an efficient use of capital.
Robinson Meyer:
Well, can you give an example of how the technology has come along in a way that people may not understand?
Hannah Bebbington Valori:
Yeah. So when we did, Frontier buyers were the first buyers to do a commercial scale purchase of enhanced rock weathering. And our first deal was Lithos. It was our biggest offtake agreement at the time, 60 million. When we did that deal, there was no protocol to measure the amount of weathering that was happening and the amount of carbon removal that was being generated by the practice. And so when we did that deal, it was like a big risk to write an offtake agreement with a fixed price and a fixed volume and a fixed delivery schedule for something that didn’t have a well-studied weathering curve and didn’t have a protocol for measurement. Today, we have multiple enhanced rock weathering companies who are delivering on isometric, on a third-party registry with an approved protocol. We have a much more robust data set for what those weathering curves look like. We have a much greater understanding of what the uncertainties are in the carbon removal drawdown process and how to quantify the enhanced rock weathering. And I think we’re getting on the order of tens of thousands of tons delivered this year from those contracts. And so it’s an example of a field that was really like an idea in 2022 and is now reaching a commercial scale technology. That’s like a five-year lifetime.
Robinson Meyer:
We previously touched on this, but of course, at the moment, the U.S. has been trying to spin up a carbon removal purchasing program for a little while. Congress has authorized it. The Trump administration has seemingly sat on it at the Energy Department. We do have a tax credit called 45Q that subsidizes the direct air capture of carbon dioxide from the atmosphere and its injection underground, but it doesn’t subsidize any other form of carbon removal. So it doesn’t, for instance, help enhance rock weathering or ocean alkalinity enhancement or any other alternative form of carbon removal technology, but look, there’s midterms later this year. There’s a presidential election in two years. Money’s, I think, going to be a little harder to come by than it was in 2021 during the first year of the Biden administration. Is there a policy that you think would be most important for the U.S. to adopt to support carbon removal technology going forward? Like what’s number one on your wish list?
Hannah Bebbington Valori:
Well, number one is actually a policy that has already been proposed and sort of since been shelved. But I believe it was Senator Bennet and Senator Murkowski put up a tech neutral tax credit. So basically taking the concept of 45Q, paying some portion of the costs of carbon removal from one technology and expanding that to cover a much, much wider swath of technologies. Something like that which has already been conceived of and sort of rolled around in the administration would be amazing for guaranteeing a price for carbon removal in the U.S. And for doing that across a variety of technologies and the other benefit of guaranteeing a floor price here is that you can really incentivize many different technologies to start to race to that price. What you can do then is you can sort of build a competition or sort of an arena of innovation, right, where folks are really saying, we want to get down to this price, both so that we can be competitive in the market, but also, you know, perhaps so that we can win or take all in the U.S., if you will. It’s not the only policy that would work in the U.S. And I think one thing that’s really important to stress about carbon removal policy is I think some people get fixated on certain ideas, a carbon tax, a compliance market, contracts for difference, an auction, a tax credit,
Hannah Bebbington Valori:
capex subsidies. Honestly, all of it is great. All of it works. And we’re probably going to see different form factors in different jurisdictions, kind of based on like what the ideological preferences in those countries.
Robinson Meyer:
Fantastic. Well, I think there’s so much more to talk about, but we’re going to have to leave it there. Hannah Bebbington Valori, thanks so much for joining us on Shift Key.
Hannah Bebbington Valori:
Yeah, thanks for having me.
Robinson Meyer:
And that will do it for this episode and this week of Shift Key. We’ll be back next week with at least one new episode. We have a run of amazing guests coming up, I have to say. Before you go, though, I just want to say, I don’t know if you subscribe to Heatmap Daily, which is Heatmap’s afternoon newsletter. It comes out every weekday. But if you don’t, you really, really should. I have taken over writing that newsletter. It’s really just me. I write it every afternoon. And it’s a place where I can share my analysis or observation or thoughts or reporting on the energy and climate and decarbonization news of the day. I’m having a lot of fun writing it. Honestly, a lot more fun than I thought I would. It’s become just a really cool space. And if you don’t follow it, I really recommend you should. Because if you listen to this show and you’ve made it this far in the podcast, you should be following this newsletter. You should subscribe. So we’ll stick a link in the show notes. You can find the link really easily too if you just go to heatmap.news. But we’ll take a look in the show notes, subscribe, Just go do it now. You’ll enjoy the newsletter. You’ll have fun. It’s free. I write it. That should be self-recommending if you’ve made it this far in the podcast. And thank you for doing that. Shift Key is a production of Heatmap News. Our editors are Jillian Goodman and Nico Lauricella. Multimedia editing and audio engineering is by Jacob Lambert and by Nick Woodbury. Our music is by Adam Kromelow. Thanks so much for listening. Enjoy the long weekend of you here in the U.S. And see you next week.
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The EV maker appears to be poised to start construction on its second factory.
Rivian’s stock fell 18% on Monday, but it’s hard to imagine the company’s executives are too upset. Why? Because the automaker seems to be on the verge of starting work on its long-awaited second factory, 45 miles east of downtown Atlanta.
Let’s do some reading between the lines. Rivian has had a great few weeks. The EV maker announced last week that it is on track to sell about 3,000 more cars this year than expected, and its stock has been on a tear, rising more than 37% from close on June 25 to close on Monday.
The company’s CEO, RJ Scaringe, evidently decided it was time to capitalize on the run-up. The company announced on Monday evening that it would offer another 75 million shares of its stock this week, diluting existing investors. That raise would be used to fund “general corporate purposes,” according to a federal filing, including “the funding of certain equity contributions” related to an Energy Department loan.
Back in April, the company came to new terms with the Department of Energy’s in-house bank over a nearly $6.6 billion loan to build its new Georgia factory, which is supposed to manufacture the company’s new line of cheaper R2 SUV and R3 crossovers. That federal loan — initially negotiated in the Biden administration’s final days — was downsized to $4.5 billion under the new Trump-era terms, but also rewritten to let the automaker draw more money from the deal faster. (Rivian is already making the R2 at its existing factory in Normal, Illinois, but the Georgia factory should have about 40% more capacity than that plant.)
As part of any Energy Department loan — as in any project finance transaction — borrowers have to hold a certain amount of cash in escrow and reserve accounts to secure against a deal failing. Now Rivian can fund that money without tapping its cash on hand further. The new share offering is supposed to price this evening, suggesting that despite today’s slide, the company could raise more than $1 billion from the sale. Rivian’s stock is now trading roughly where it stood a month ago.
The upshot of all of this: With the loan secured, serious building efforts could finally start soon on the automaker’s second factory. (The automaker technically broke ground in September, but has yet to begin meaningful construction.)
“We’re setting up to go vertical in the second half of this year (a.k.a. steel sticking out of the ground) but we have said previously that we expect to draw on the loan for the first time by early 2027,” Peebles Squire, a Rivian spokesman, told me in an email. “Factory timeline is production of vehicles to begin in late 2028.”
(Energy Department loans work on a reimbursement basis, so the automaker will need to begin spending on the factory before it can claim the money.)
Though Rivian is among the most successful of the U.S. electric vehicle startups, it wasn’t completely clear after President Trump took office whether the automaker would survive its trek through the valley of death. It’s still not certain, of course. But positive reviews for the R2, a $6 billion deal with Volkswagen, and its significant Sun Belt factory nearing construction all augur well for the country’s most famous EV startup not run by Elon Musk.
“It’s got nothing to do with technology. It’s nothing to do with execution capability. It’s purely due to access to capital.”
Ever since Trump reentered the White House, Europe has been a safe haven for U.S. climate tech companies fleeing an increasingly hostile policy environment. Through strong carbon pricing and stable regulations, the bloc has created demand for still-experimental technologies such as green hydrogen, thermal energy storage, low-carbon building materials, and sustainable fuels.
And yet at the same time, Europe has struggled to finance many of its own climate tech startups as they enter the capital-intensive scale-up phase. What gives?
The problem is not a lack of startups or capital. European firms raised $61 billion for climate-focused funds last year, far outpacing those in the U.S., which brought in $37 billion, according to Sightline Climate. The problem is that almost all of that European money flows to infrastructure and private equity investors backing more mature technologies. Early-stage startups also enjoy relatively strong backing, but the market starves the growth-stage middle.
The issue is both cultural and structural: Most of the bloc’s investors are unaccustomed to making the high-risk, high-reward bets required to scale climate tech. They also often can’t access tools like loan and equity guarantees, which remain limited in Europe, nor are there the institutional limited partners and growth-stage co-investors that could help de-risk those investments.
“It’s got nothing to do with technology. It’s nothing to do with execution capability. It’s purely due to access to capital,” Craig Douglas, a founding partner at the Berlin-based multi-stage venture firm World Fund, told me. That means companies that have outgrown early-stage financing but are still considered too small or too risky for larger institutional investors often either shutter or seek capital abroad. Logically, if given the chance, most startups choose the latter.
“You’re allowing U.S. investors to cherry pick European assets,” Douglas told me. The result? “European technologies and European companies that are successful end up enriching American pension funds rather than European pension funds.”
Ioannis Ioannou, an associate professor of strategy and entrepreneurship at the London Business School, told me that the consequences extend beyond the purely financial, emphasizing that Europe runs a strategic risk by relying on foreign capital for its climate tech scale-up. “It means you lose the supply chains. You lose the skills. You lose the fine manufacturing capabilities. You lose the so-called green jobs.”
Douglas and the other specialists in European climate finance I spoke with emphasized that the ever-ominous “missing middle” funding gap is particularly pronounced in Europe. A report Douglas co-authored earlier this year, aptly titled “The Series B Funding Gap In European Climate Tech,” quantifies the problem. While 25% of U.S. climate tech companies that raised a seed round from 2010 to 2020 had moved on to secure a Series B by the first half of last year — regardless of what country the capital came from — only 15% of European companies were able to do the same. That has created a growing backlog of startups stuck in a financing limbo: The lineup of European companies looking to raise a Series B grew from 220 in 2020 to 533 in the first half of last year.
While smaller climate tech funds in Europe and the U.S. have raised similar amounts of funding for early-stage startups — $18.5 billion in Europe versus $20.2 billion in the U.S. from 2020 through the first half of 2025 — the gap at the larger end of the market is stark. The U.S closed 29 funds of at least $500 million or more, compared with just 11 in Europe. These larger funds are the ones capable of writing the $25 million to $100 million checks companies desperately need to commercialize and scale. As Douglas’ report notes, fewer than 20% of European climate funds are pursuing a growth strategy, with over 70% making early-stage investments only.
“When we raised World Fund One, we were the largest [debut] climate fund in Europe, and we’re a €300 million fund. That’s nuts,” Douglas told me. World Fund aims to help companies “reach growth-investor readiness” by supporting startups from their seed through Series B, a model Douglas would like to see replicated throughout the region. “We need another 20 World Funds out there in the market to start filling this capital shortfall,” he told me. The firm announced last February that it’s raising a second, €500 million fund, but that’s yet to close.
One of the primary reasons European growth-stage investors have less capital to deploy comes down to the structure of European financial markets, which remain heavily reliant on bank lending rather than higher-risk equity investments. As a result, institutional investors like pension funds, insurers, and endowments never built the habit of investing in venture capital, which shows up when comparing the LP bases across the two regions: In the U.S., about 72% of VC funding comes from private institutional investors, compared with just 30% in Europe. Public money, much of it from the European Investment Fund, helps bridge the gap, but it simply cannot match the scale of private institutions.
Pension funds are a telling case. They’re among the largest sources of venture capital in the U.S., allocating nearly 2% of their assets to VC. But in the EU, they allot just 0.018% — roughly 100 times less. And because the U.S. also has far more money sitting in pension funds than Europe does, this makes the gap in actual dollars reaching startups wider still. Without that deep pool of institutional funding, Europe struggles to support the $500 million- to $1 billion-plus funds that would have the wherewithal to lead growth-stage rounds.
The result is a self-reinforcing cycle. Large growth funds require large institutional backers, but precisely because European pension funds and other institutional investors haven’t stepped up, the venture market remains too small to absorb the kinds of $100 million-plus commitments pension investors managing billions of dollars typically want to make. “They don’t see [venture] as an asset class that they can invest in,” Douglas told me. “But the reason that it doesn’t exist is because they’re not investing themselves in that asset class.”
If there’s one thing I learned from my reporting, it’s that white these problems run deep, Europe is hardly standing still. Policymakers and investors are well aware of the disconnect and are now experimenting with strategies to close the scale-up gap and affirm the region’s position as a leader in climate innovation.
To attract more institutional investment, for example, a growing number of initiatives aim to create “funds of funds” and other government-backed structures that pool money from pension funds, insurers, banks, foundations, and other large investors. The fund-of-funds structure lets an institution make a single, large commitment; then, intermediary asset managers break that capital into smaller chunks and invest it across multiple venture funds. This gives large-ticket investors the scale and diversification they want without requiring them to conduct due diligence on dozens of small venture funds; venture managers, in turn, gain access to much larger pools of capital.
Germany’s Wachstumsfonds Deutschland, for example, is a €1 billion fund-of-funds backed by more than 20 investors — including insurers, pension funds, and large family offices — that invests across the German and broader European VC ecosystem, with a focus on growth-stage capital. The EU’s European Tech Champions Initiative follows a similar model. The European Investment Bank and six member-states launched the initiative in 2023 with €3.9 billion to back regional growth-stage VC funds. Now it’s raising a second tranche of money — targeting €15 billion — and is bringing in private institutional capital for the first time.
Europe’s member states have also pushed institutional investors toward coordinated capital commitments in recent years, with France’s Tibi initiative serving as the model. Launched in 2019, it tasks the French government with vetting venture and growth funds, with those that qualify becoming eligible for backing from initiative’s signatories, primarily insurers and some pension funds. The program has attracted about €31 billion in commitments to date. Germany adopted a similar approach with its WIN initiative, which has now secured €12 billion in pledges from more than 30 major corporations — including Deutsche Bank, BlackRock, and Henkel — to invest in the country’s venture ecosystem by 2030.
The Irish Venture Capital Association has proposed a similar model, while Tibi’s founder — the economist Philippe Tibi himself — has been on a tour essentially pitching the idea across the bloc. But Ioannou isn’t convinced that creating country-specific Tibi-style commitments is the most efficient way for the region to scale climate tech.
“I’m not sure that fragmentation will actually solve the problem,” he told me. “Maybe it will be better if all that capital came into one larger fund, whereby the scale-ups wouldn’t have to deal with country level fragmentation, regulations, jurisdictions, legal, and all that kind of stuff.”
That’s the idea behind the new €5 billion pan-EU Scaleup Europe Fund, which is designed to invest directly in European deep-tech startups — climate tech very much included — rather than through venture funds. Announced last year, the fund has already secured roughly €2.5 billion in capital commitments from both the European Commission and private institutional investors, with a second fundraising round planned for the second half of this year. EQT, Europe’s largest private-markets investor, will manage the funds, ultimately deciding which growth-stage companies to back.
“Everything happened so quickly, from agreeing to it to executing on it to allocating it,” Douglas told me. “In effect, it happened in less than a year, which in the European context is crazy.”
The idea is to replicate what the combination of U.S. federal support and deep private capital markets has accomplished, Dimitri Colin, a policy officer at the cleantech policy and advocacy group Cleantech for Europe, told me. “The whole idea is to bring what worked in the U.S. into European public financing policies,” he said. Colin extolled the virtues of the Biden-era Loan Programs Office, as well as the efficacy of other Inflation Reduction Act-fueled efforts such as generous production tax credits when it comes to derisking investment in first-of-a-kind tech.
In our interview as well as in a recent report, Colin argued that EU funding should move from prioritizing grants to loan and equity guarantees in its forthcoming budget for the years 2028 through 2034. That’s because guarantees have proven far more effective than government grants at bringing private investors into climate tech, Colin told me. According to his report, every euro of grants or equity capital channeled through the VC arm of the European Innovation Council yields about €3 in additional investment. That’s nothing to scoff at, but it pales in comparison with InvestEU, the bloc’s €26.2 billion investment guarantee program. Every euro of guarantees from the latter attracts nearly €14.80 in private follow-on capital.
“The main idea behind the whole budget should be to focus on the leverage effect,” Colin told me, referring to how much additional private funding government backing generates. “How can the little public money that we have in Europe — because the fiscal environment is, of course, very constrained — more easily mobilize private money? That’s what the LPO did well.”
Colin also wants to change the EU’s public funding rules to make it easier to subsidize ongoing operational expenses for early-stage cleantech facilities, similar in effect to U.S. production tax credits. Currently, European policymakers often structure public support for these projects as capex grants paid out after construction is complete. This type of support is more difficult for private investors to underwrite since it doesn’t directly improve the plant’s ongoing operating economics, one of the risks investors care about most.
Getting these financing structures right is a matter of life or death for many of Europe’s most promising climate tech industries. Douglas points to batteries, critical minerals, semiconductors, and green molecules as sectors with the technological readiness to scale domestically — but not yet the capital. “One of the major risks in every sector we know is who’s going to be there, who’s going to be able to go with us on that journey to make sure the company has the capital to be successful,” he told me. Still, he sees reason for optimism. Because if there’s one thing that can be said about the E.U. at this moment, it’s that “they’re definitely taking it seriously.”
“The perfect solution doesn’t exist,” Colin told me. “We need to align the funding models, we need public de-risking tools, but we need also a true industrial strategy, China has done that, the US has done that with the IRA,” he explained. Now it’s Europe’s turn.
Not going to lie, I didn’t see this coming.
Tesla just finished its strongest showing in years. In the second quarter of 2026, the company sold about 480,000 vehicles around the world — well over stock market projections of about 400,000 EVs. Tesla’s sales mark a full 25% year-over-year increase from the second quarter of last year.
If you’re surprised by this news, you’re not alone. Sales of Elon Musk’s EVs had been trending downward over the past few years following a series of self-inflicted wounds. The Cybertruck was a bomb. Tesla appeared to be interested only in building the self-driving cars and autonomous robots of the future, not the electric vehicles of today. Musk’s associations with President Trump and off-putting online politics alienated potential customers everywhere.
Yet here we are. So what happened?
European gas prices, for one thing. Tesla sales actually continued to fall in the U.S., where the electric car market as a whole still hasn’t recovered from tariffs confusion, the loss of federal subsidies, and other chaotic conditions over the past year. Tesla’s rally came instead from China and, interestingly, Europe: Registrations rose 39% in Denmark, 56% in Sweden, and 43% in Portugal and Italy.
It wasn’t so long ago that Musk’s politics had reportedly cratered interest in his cars in those countries. But European gas prices, which are typically much higher than those in the U.S., have also soared because of oil shocks related to the Iran War. EV interest, then, is up — so high that lots of buyers are willing to look past the personality of Tesla’s chief. (It doesn’t hurt that Tesla introduced less-expensive versions of both Model 3 and Model Y, with remarkably cheap leases and loans, to Europe this year to help overcome its struggles there.)
In China, meanwhile, Tesla has had something else up its sleeve to buoy sales. We’ve repeatedly noted the contraction of the company’s EV lineup: With the failure of the Cybertruck as well as the outright cancellation of the older and slow-selling Model S and Model X — the electric cars that pushed Tesla into the mainstream in the 2010s — the brand gets nearly all of its sales (more than 97% in Q2) from just two cars, the Model 3 sedan and Model Y crossover. And there are no signs it has an all-new mass-market car coming soon.
Instead, Tesla cobbled one together by making a new version of an existing car. In China, Musk has been selling the Model Y L, a version of his crossover with its platform stretched out by 6 inches to cram in an extra row of seats. (Tesla has offered a seven-seat version of its ordinary Model Y, but the two little seats in the back had just 25 inches of legroom compared to the 31 inches in this new version.) As a three-row SUV, the longer Model Y lets Tesla compete in a space that it vacated when it killed off the giant, expensive, gullwing-doored Model X. And as of last week, Model Y L is available in the U.S. Tesla hopes the vehicle can lead to a reversal of its sinking fortunes here, where its EV sales shrank by 20% in the second quarter.
Truthfully, the car is a bit of a kluge. Rear seats often require a compromise on comfort and space. In the case of the Model Y L, Jalopnik notes that even with the 6 inches added to the wheelbase, Tesla’s signature sloping roof doesn’t leave much headroom for the occupants of the way-back. Boxier EVs that were built to be three rows to begin with, like the Hyundai Ioniq 9, Kia EV9, and Rivian R1S, are more pleasant for the fifth and sixth passengers. Nevertheless, those who wanted a bigger Tesla at a starting price of around $60,000 can now get one, and that counts.
Model Y L is also a testament to the power of the platform. Yes, building a new vehicle from the ground up would have provided Tesla with a better all-around vehicle than what it got by hacking the Model Y. But the modified Model Y was much faster and cheaper to deliver, providing an entry into a popular segment of the car market just at the moment Tesla needed to right the ship.
Doing more with less, like creating a three-row EV on the platform of your two-row car, looks primed to become a big part of the future of electric vehicles. That’s particularly true when it comes to growing adoption in America, where legacy automakers and startups alike are trying to simplify manufacturing to bring down costs. The solution to get to market for a company like Honda was simply to borrow General Motors’ EV platform and build its first EV on top of it. Rivian has said it has no plans to sell a pickup truck on its new R2 platform the way it has with its original vehicle, but it absolutely could — and arguably should — if market conditions suddenly made such an EV pickup a hot item.