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Obvious Ventures’ managing director makes his case.
Last month I wrote about potential overhype in the artificial intelligence space, asking a series of investors whether the hubbub around generative AI had current, tangible implications in the climate sphere. What I mostly heard was: Not yet. Many acknowledged that generative AI could plausibly do fundamental scientific research — creating new chemical and molecular formulations that could have broad implications for climate tech and beyond — but most didn’t think we were there yet.
Not everyone shares that perspective. Obvious Ventures, a San Francisco-based venture capital firm that focuses on the three pillars of planetary, human, and economic health, says it wants to invest in what it calls “generative science.” Today.
“While most venture dollars are chasing large language models for enterprise productivity, Obvious is funding large science models trained on chemistry, physics, and biology, to generate new scientific breakthroughs in decarbonization, biotech, materials science, and robotics,” James Joaquin, co-founder of the firm, said in a recent blog post titled “ Generative Science: Our Contrarian View of AI.”
There are some companies pursuing this lofty vision, especially in the pharmaceutical space, and Obvious has even invested in a few of them. But whether “generative science” is currently upending the AI and climate space is debatable. In an interview, Andrew Beebe, managing director at Obvious Ventures, walked me through why he’s so bullish on AI for climate.
“So computational biology and life sciences really, truly have been using machine learning for a long time,” Beebe told me. Of course, having a machine learning model that identifies patterns in reams of data is different from the type of “generative science” that could come up with new drugs, for example — but now one of Obvious Ventures’ earlier investments, Recursion Pharmaceuticals, has partnered with Nvidia to do just that. “That company uses AI to speed the drug discovery process. We have a number of companies where they are using similar concepts for proteomics and genomics, so that experience taught us that there are plenty of use cases where this can really apply,” Beebe told me.
The success of Recursion, which went public in 2021, has helped fuel the firm’s optimistic AI outlook, and it’s since made a number of investments at the intersection of AI and climate. Just a few weeks ago, Obvious led a $30 million round of Series B funding for Zanskar Geothermal & Minerals, which also included cleantech VC Lowercarbon Capital, among others. The company analyzes swaths of geological data to help locate areas with optimal geothermal resources, creating maps and greatly expediting what can be a highly inefficient process.
“Smart geologists will drill 10 exploratory wells and get one to hit,” Beebe told me. Zanskar aims with its software to dramatically improve that hit rate, and though the company hasn’t provided performance metrics, Beebe said that if we could get closer to nine out of 10, “that changes everything. It changes the economics of traditional geothermal.”
The company also pulls in data such as power line capacity and land pricing to make its recommendations, “It will tell you this is where you should drill to be cost effective. Not just this is where the heat is.”
As useful as this is, though, Zanskar’s tech isn’t generative AI — it’s just a great use case for increasingly powerful predictive AI, in which machine learning models analyze patterns in large datasets to make forecasts and recommendations, in this case where to drill. Thus far, it seems, none of Obvious Ventures’ investments in the climate and AI space are yet fulfilling the ultimate promise of “generative science” as Joaquin characterized it. “Generative media has delivered us a printing press that can write its own words,” he wrote, “but generative science will deliver a more consequential lab bench that can create its own novel arrangements of atoms.”
Beebe sees other climate applications for generative AI, however, particularly for the electric grid. “Maybe the mother of all near future generative science in the climate space is just making the grid smart,” he told me. While Obvious hasn’t yet invested in the AI-enabled smart grid space, Beebe is excited about “agentic systems” that will be able to make autonomous decisions based on real-time supply and demand data. “A result of that might be, let’s take power out of this massive Form seasonal battery sitting up in Modesto and move it to Southern California. Let’s take this water and start pumping it up the hill” choices that, today, “are really not automated in any coordinated way across the system,” he said.
Beebe also thinks there’s big AI potential when it comes to battery chemistries and nuclear reactor designs. “I think that AI is going to help basically expand the edge of what is physically or scientifically possible because of the rate of iteration of different designs. They won’t be right every time, but they will help us get closer and closer to the estimate space. We will then feed back in that reinforcement learning and then it will become better next time,” he told me. “And then I think things like fusion reactor designs are further down the line.”
Again, Obvious hasn’t yet invested in companies actually utilizing AI in these ways, but Beebe is confident that the future is near. And some recent research in does provide reason for hope For example, AI research laboratory Google DeepMind collaborated with the Swiss Plasma Center to learn how to better control hydrogen plasma in nuclear fusion reactors, and Microsoft used its own AI platform to discover a battery material that could reduce lithium use by up to 70%.
Obvious thinks large language models have a space in the climate tech landscape, as well. Last month, the firm co-led the seed round for Halcyon, a company trying to improve access to energy market data via LLM-enhanced searches. It was founded by ex-Twitter employees alongside Nathaniel Bullard (formerly chief content officer at BloombergNEF and publisher of a renowned-in-niche-energy-circles annual decarbonization report).
“We call it NatGPT internally,” Beebe said. “What they’re really trying to do is build a automated consultative service for energy developers to help them figure out where to site power plants, how to think about where to site transmission lines, how to answer any questions that they have about the vast and complex world of accelerating decarbonization of the grid,” Beebe told me. “It’s all AI-based and effectively LLMs, for the most part.”
In summary, even if Obvious’s current investments aren’t quite yet creating “ the chemicals and molecules” to “help solve humanity’s toughest challenges” in the climate sphere, watch this space.
Editor’s note: This story has been updated to correct statements about Zanskar’s accuracy.
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The buzzy clean energy tax credit marketplace expanded into debt right in the nick of time.
The Inflation Reduction Act opened up a whole new avenue for project financing when it allowed clean energy developers to sell the tax credits that they earned on their projects to any willing buyer on the open market. It also opened up a lucrative fintech opportunity: A digital marketplace where buyers and sellers of these credits could easily transact.
One of the first — and certainly most successful — startups to jump on this opportunity was Crux Climate. But by the time Crux announced its $50 million Series B funding round last month, however, some Congressional Republicans were already considering axing tax credit transferability in their budget proposal. Then last week, the House of Representatives’ Ways and Means committee followed through on this rumored threat, proposing a plan to get rid of transferability for all credits by 2028 (though the details are still in flux). So what’s to become of Crux now?
Everything’s going to be okay, Crux’s co-founder CEO Alfred Johnson told me late last week. In fact, “the business is in great shape,” he said. I was a tad confused. But as Johnson reminded me, the company always planned on being more than a mere tax credit marketplace. The question is whether developers will buy into this vision of Crux as the everything store for project financing.
In March, right before the company announced its Series B, Crux launched a debt marketplace, where developers and manufacturers can access financial tools such as short-term bridge loans, construction financing, and flexible lines of credit to fund the buildout of renewables projects. “The market size for transferable credits is $30 billion per year, while the market size for project finance debt is more than seven-and-half times as big: $230 billion,” Johnson told me.
This new offering may have come just in the nick of time. It’s also likely just the first in a series of platform expansions, some of which are already in the works.
“There are many more multibillion-dollar markets among the thousands of developers, manufacturers, investors, and corporate buyers that make up the market for U.S. energy and manufacturing project finance,” Johnson told me. Playing in all those markets is a lofty goal for a company that was founded just two years ago, but so far Crux has been good at defying expectations. After all, it’s been profitable since its second year, Johnson told me, a rare and rapid rise for an early-stage startup.
Crux shared some exclusive numbers with me that illustrate some ways in which it’s starting to outgrow its roots. For one, Johnson told me that Crux’s revenue for the first one-and-a-half quarters of this year is nearly 10 times higher than for the same period last year. While he wouldn’t reveal what portion of that was comprised of tax credit deals versus debt financing deals, he did say that in the two months since the debt marketplace launched, “lenders have issued $1.3 billion of term sheets.” Those are nonbinding loan offers, $700 million of which have turned into actual deals so far. “It took more than a year for the tax credit market to reach similar throughput," Johnson said.
In the meantime, Crux is by no means giving up on the embattled transferable tax credit marketplace. The company sounded a relatively optimistic note last week as it published a list of takeaways from the Ways and Means Committee’s proposal, stating, “This is the starting point and we anticipate that the final bill will take a more favorable stance on transferability and tax credits.” The company looks like it’s preparing to fight for that outcome, too, as a few months ago it hired new teams of tax lobbyists and brought on Hasan Nazar, former federal policy lead at Tesla, to direct these lobbying efforts.
Johnson said that the debut of Crux’s debt marketplace had developers, manufacturers, and investors rushing to its website in numbers not seen since the company launched. It logged more “inbound interest” on that one day in March than when it announced its Series A and its Series B — that is, more than on both of those days combined.
“We didn’t invest in Crux with the belief that this would be a transferable tax credit business forever,” David Haber, a general partner at Andreessen Horowitz, told me. The venture capital firm led the company’s $18.2 million Series A funding round. “We viewed that as a great wedge product to bootstrap a financial exchange that could help facilitate the types of financial products needed for this ecosystem,” he said. Clay Dumas of Lowercarbon Capital, which led Crux’s Series B, also saw the company as a so-called “wedge” into a “multi-hundred-billion-dollar opportunity to finance energy and advanced manufacturing through debt and a wide range of other products.”
Not all investors felt as confident that companies built around tax credit transferability could become a one-stop financing shop, however. As of now, most of Crux’s direct competitors — such as Basis Climate, Reunion Infrastructure, and Common Forge — haven’t expanded into other parts of the climate capital stack.
“We know the fundamental risk that a stroke of the pen can have in any of these sort of marketplaces,” Juan Muldoon, a partner at the climate software VC firm Energize Capital, told me. Thus far, Energize has not funded any tax credit-based marketplace, diligence platform, or underwriting tool. “We wanted to wait for signs of resilience and more complete platforms, more complete business models, versus solving for things that might be more transient in value,” Muldoon said. Last week’s committee proposals validate Energize’s core investment strategy, he added — supporting nimble software companies that can withstand political headwinds and change tacks quickly.
Crux certainly hopes that expanding into the debt market will put any fears of its potential transience to rest. After all, Johnson told me, “all parts of the capital stack are opaque, illiquid, bespoke and manual.” That includes not only transferable tax credits, but also debt and equity financing. “These are private transactions that require a ton of documentation, models, advisory lawyers. But it doesn't have to be as bad as it is,” he said.
But if the transferable tax credits do indeed disappear, many renewable energy developers may be forced to return to one of the most opaque funding mechanisms of all: tax equity financing, which Crux is not currently set up to facilitate. As my colleague Emily Pontecorvo recently explained, prior to the passage of the IRA, renewable energy developers who wanted to liquidate their tax credits had to partner with tax equity investors — usually banks — who would give them cash in exchange for an equity stake in their clean energy project and the benefits of their tax credits. But forming these types of partnerships is both legally complicated and costly, and thus not a viable option for many smaller developers.
Presumably, Crux could shake up and simplify this space, too. And while it’s made no official commitments to a tax equity product, the company’s website has been reconfigured to advertise it as the go-to platform to “source new opportunities for lending, equity, and tax credit transfers,” as it commits to “financing the future of energy.”
Crux has its work cut out for it, though, as often the more complex the financial transaction, the more customized it must be. “The competitors are offline advisors for the most part,” Haber told me. Thus, standardizing and digitizing as many esoteric and project specific elements of the capital stack as possible is going to be, as he put it, “their opportunity and their challenge.”
Johnson says Crux is up for it. “It’s never going to be, you know, one click buy it on Amazon. That’s a ridiculous and implausible concept for deals of this size and importance. But these negotiations and transactions can be so much better.” Efficiency, at the very least, seems to be something we can all get behind. So as the partisan fighting over tax credits and transferability commences and the clean energy incentives start to fall, maybe at least this one climate tech darling can weather the storm.
Direct air capture isn’t doing everything its advocates promised — yet. That doesn’t make it a scam.
Two events last week thrust direct air capture carbon removal into the spotlight — one promising, though controversial for some, the other mendacious and ill-informed.
On Friday, Occidental announced a potential $500 million joint venture investment from Adnoc’s XRG, the lower-carbon investment wing for the United Arab Emirates state-run oil company in Oxy’s South Texas DAC Hub project. The facility is part of the $3.5 billion federal DAC hubs program created through the Infrastructure Investment and Jobs Act. Although the DAC hubs program has strong bipartisan support, it has faced relative uncertainty under the new administration, calling into question American leadership on the future of the industry.
Earlier in the week, Climeworks, another major DAC hubs award winner, announced a reduction in force, due in part to “pending clarity for our next plant in the U.S.” Coupled with this news, a sensationalized exposé by Icelandic news outlet Heimildin detailed challenges with the first two Climeworks facilities, including commentary that called both the company and the technology a “scam” and the “Theranos of the energy industry.”
DAC has never been entirely welcome among climate advocates. To a certain extent, its critics are right: The process of pulling carbon directly out of the ambient air and storing it permanently underground is both energy- and capital-intensive, and it has obvious utility for the oil and gas industry, which has seized on DAC’s potential to erase past emissions as a way to argue that the transition away from fossil energy isn’t actually necessary.
But these critics start to lose the thread when they call the technology a “fig leaf” for oil and gas or an “expensive, dangerous distraction,” and most egregiously when they point to the lack of actual carbon dioxide removed using the technology as an argument against future deployments.
There is a scientific consensus behind the need for carbon dioxide removal that these critiques dance around. As the United Nations Intergovernmental Panel on Climate Change lays out in its most recent scientific report, “CDR is required to limit warming to 1.5 [degrees Celsius],” and is “part of all modeled scenarios that limit warming to 2 [degrees] by 2100.” Even when critics recognize the need for permanent CDR, they frequently fail to provide any plausible pathway to gigaton scale. The fact is that DAC doesn’t have an established, liquid market, like electricity, steel, cement, or any other commodity. That any one DAC business is struggling as it attempts to scale is not an indictment of the company, but rather an illustration of the challenge it is taking on to commercialize a first-of-a-kind technologies that naturally has first-of-a-kind issues while also building a brand new market for the crucial climate service it provides. Don’t hate the player, hate the game.
The commercial model for the nascent CDR industry is largely the sale of carbon removal credits for delivery in future years. This isn’t unique to CDR — it’s even analogous to the power purchase agreements that scaled renewable energy. Futures contracts are standard practice, and certainly not indicative of a “scam.”
DAC’s high energy needs are frequently cited as a reason for concern among skeptics. As the Princeton Net Zero America study notes, however, the total energy needed to reduce emissions in a net-zero system without DAC increases because we would need more power to produce e-fuels. (Jesse Jenkins, one of the leaders of the Net Zero America study, is also a co-host of Heatmap’s Shift Key podcast.) This criticism also fails to take into account the reduction in energy intensity that companies are already achieving by various means. That group includes Climeworks, which has introduced more efficient sorbents; Heirloom, which is working on deploying passive mineralization; and Holocene, which was recently acquired by Oxy and employs the low regeneration temperature solvents.
The costs and efficiency of DAC today, just like the cost and efficiency of solar 20 years ago, are likely to improve significantly in the future as the technology and market become more efficient and reliable. Early DAC deployments may have a relatively high cost now, but even today, DAC is cost-competitive with emissions mitigation in aviation.
The industry currently stands at a precipice. Will DAC cross the chasm from pilot facilities to meaningful deployment? Or fall off the hype wagon into the dustbin of cool ideas that were always 10 years away? Beneath the innuendo and false claims, the reporting from Reykjavik shows what everyone in DAC knew — that it has a messy, non-linear path to scale. That does not disprove the argument that it is also a necessary technology that is not only valuable to remove emissions, but also is drawing billions in investment, and driving local economic development.
And there is plenty of good news. The XRG joint venture with Adnoc shows that a sophisticated strategic investor views American DAC as promising. (The local South Texas community is excited, too.) The Oxy Stratos facility in West Texas has already brought thousands of new construction jobs, and will bring hundreds of more permanent jobs to the heart of oil country — a new industry to make use of their unique and valuable skill sets. Project Bantam, a multi-modal operation that was the largest in the U.S. when it launched last summer, is operating in Oklahoma.
The Heimildin story was written to be a salacious takedown, and DAC opponents wasted no time in saying, “We told you so.” The issue with that reaction is the story isn’t unique to Climeworks, or even to DAC. The same story could have been written 20 years ago about solar and batteries. It could be written tomorrow about advanced geothermal or long-duration energy storage. It is the boring, mundane outcome of trying to build a difficult technology with the policy and business hand we are dealt.
The road to DAC at scale will be scattered with bumps, failed projects, and folded companies. We should be cheering these folks on, not taking shots from the cheap, increasingly warm seats.
On budget negotiations, Climeworks, and a decline in shale
Current conditions: The chance of tornadoes continues through Tuesday in the Great Plains, Midwest, and South after weekend storms in the central U.S. killed at least 27 • The uncontained 18,000-acre Greer Fire in eastern Arizona is now encroaching on the towns of Greer, South Fork, and Eagar • No tropical cyclones have formed anywhere in the Northern Hemisphere yet this year. The average by May 19 is 3.5.
Late Sunday evening, lawmakers on the House Budget Committee reconvened to advance the reconciliation bill in a rare weekend vote. The package had initially failed to progress in a vote on Friday after Republican hardliners, including members of the House Freedom Caucus, expressed concerns that it did not go far enough to reduce the nation’s budget deficit. Though the package is still under negotiation — the four holdouts from Friday voted “present” to express their continued dissatisfaction — Politico reports that “Republican leaders put their commitments to the GOP holdouts in writing.” Per Punchbowl, that included House Speaker Mike Johnson proposing “a quicker phase-out of clean energy tax credits that were put into law as part of the 2022 Inflation Reduction Act. Republican leaders tentatively agreed to cut off all credits by 2028.”
We’ve been closely following what such cuts — such as erasing the electric vehicle tax credit and others for energy efficiency, heat pumps, and rooftop solar, as well as deep cuts to clean energy programs — would do to the IRA. As things stand, Johnson has “a bruising negotiation ahead” as conservatives and moderate Republicans, especially those from states that have been significant beneficiaries of the economic and job-creating upsides of the IRA, remain at odds. The House Rules Committee will hold its hearing on the package on Wednesday morning at 1 a.m. — not a typo — with Republican leadership “warning us that they won’t send members home for the Memorial Day recess until the House passes the reconciliation bill,” Punchbowl writes.
The Mammoth carbon removal plant.John Moore/Getty Images
The Swiss carbon removal company Climeworks allegedly fails to capture enough carbon even to offset its own emissions, an investigation by the Icelandic newspaper Heimildin found. According to the report, since Climeworks began operations in Iceland, “it has captured a maximum of 1,000 tons of CO2 in one year” — not enough to offset its emissions of 1,700 tons of CO2 in 2023. Climeworks operates two plants in Iceland: Orca and the recently opened Mammoth, which together have captured 2,400 tons of CO2, per the report. The goal is for Mammoth to capture more than 36,000 tons per year by the time it is fully installed later in 2025.
Last week, we covered in AM that Climeworks is preparing for significant cuts to its workforce. While the company confirmed those reports, its founder, Jan Wurzbacher, pushed back on Heimildin’s investigation on LinkedIn, writing that Orca and Mammoth have together captured 1,058 tons of net CO2, explaining that “the difference between theoretical and actual output is due to various factors such as planned and unplanned down-times, weather, filtering losses” and additionally, that Mammoth is “still under ramp-up.” In a fact-check on Twitter, Jack Andreasen Cavanaugh, formerly of Breakthrough Energy, added that “operational challenges are to be expected with scale up of any technology, let alone one as nascent and challenging as DAC,” but that Heimildin’s report also “clearly shows the challenges of scaling a necessary climate technology that doesn’t have a market.”
Despite his calls to “drill, baby, drill,” President Trump “is set to preside over a decline in shale production,” with U.S. oil executives warning that the industry is at a “tipping point,”The Wall Street Journal reports. Though crude oil production is expected to increase slightly in 2025, S&P Global Commodities Insights expects production to dip by 13.33 million barrels a day next year, or about 1%.
Trump’s tariffs and OPEC’s recent decision to accelerate oil production are expected to add to the decline in U.S. oil. Production in the Permian Basin was already slowing, and with oil prices around $62.49 a barrel — well below the $85 benchmark one driller said would “encourage new drilling” — many companies are “reluctant to drill through low prices,” the Journal adds. Oil and gas production in the U.S. emits more than 6 million tons of methane per year, Stanford researchers have found, with nearly 10% of the total methane volume produced in the New Mexico portion of the Permian Basin alone going straight into the atmosphere.
The offshore wind industry is preparing to take a “more aggressive approach” in response to the Trump administration’s nearly all-out halt of permits, the Financial Times reports. While the industry had initially “opted for a passive approach” to then-candidate Donald Trump’s rhetoric on the campaign trail, FT notes that companies and industry groups have since increased spending — especially in light of the administration’s decision to cancel Equinor’s Empire Wind project south of Long Island. “The only way out is through,” Liz Burdock, the chief executive of the Oceanic Network, said at an offshore wind conference last week, adding: “It’s time we respond with strength.”
The Tesla Cybertruck is no longer the best-selling electric pickup truck in the United States, InsideEVs reports. Despite selling 39,000 Cybertrucks in 2024, Tesla has seen a company-wide slowdown as CEO Elon Musk’s popularity has cratered with his involvement in the Trump administration’s federal layoffs and program cancellations. In the first quarter of 2025, Tesla registered 7,126 Cybertrucks — falling behind the Ford F-150, which had 7,913 registrations, followed in turn by the Chevrolet Silverado EV in third place, then the GMC Sierra EV, and the Rivian R1T. At the same time, “celebrations aren’t exactly welcome,” InsideEVs writes, “seeing how even the best-selling EV truck in the U.S. has struggled to move over 7,000 units in three months.”
Electric and biodiesel-powered ambulances in New York City have brought the city’s alternative-powered vehicles to 21,500, or more than 75% of the entire fleet. Fire Commissioner Robert Tucker said the next goal was to “eventually rush to emergencies in electric fire trucks,” Gothamist reports.