climate tech Archives - Semilla Climate Capital

The book, “Material World,” written by Ed Conway and published in 2023 by Knopf, discusses the six raw materials that shape modern civilization.

Reading the book got me to wonder if there are climate tech investment opportunities that address the unintended consequences of the transition to renewable energy.

To slow down global warming, it is imperative that we transition from petroleum-sourced energy to renewable energy. But what are the down sides of that transition and do they create investment opportunities?

An illustration.

According to Ed Conway, “Between 1900 and today, the quantity of stone one needed to move and process to produce a single ton of copper rose from 50 tons to 800 tons.” [Due to the depletion of ore which is richer in copper]. “The flip side of getting ever more effective at mining even poorer copper ores is that we displace even more mass of the planet. …. Between 2004 and 2016 Chilean miners increased annual copper production by 2.6% , yet the amount of ore they had to dig out of the ground to produce this marginal increase in refining rose by 75%.”

The renewable energy transition requires lots of copper. Quoting Mr. Conway again, “Between 2020 and 2050, the share of our primary power coming from electricity is forecast to rise from about 20% to 50%. All of a sudden copper becomes the backbone of well everything. … A battery powered bus will require nearly half a ton of copper as motors and circuitry and large slabs busbars as they’re called, capable of carrying even more current than conventional wires. …. Solar needs roughly 7 times as much copper as conventional power stations while the offshore wind needs needing about 10 times as much copper to generate the same amount of power. ….. The real question is how much more of this blasting and digging of ore will people tolerate.”

The photo shows an open-pit copper mine in Chile.

The Semilla Climate Capital Fund is interested in finding and learning about under recognized and underfunded investment opportunities that mitigate the unintended consequences of the shift to renewable energy.

Carbon credits are part of the overall solution for reducing CO2 in the atmosphere and have attracted significant interest from investors and companies.

When considering investing in a carbon-credit related startup company, it may be helpful to consider the following Pros and Cons.

Pros

The world must find ways to slow global warming.
Startups developing carbon reduction products may find that their customers can benefit by selling credits generated when using the company’s products. This may incrementally lower the sales friction encountered by the startup.
A startup can directly deploy carbon reduction technology and benefit from selling credits. For example, the startup can own and operate wind or solar power generation facilities or can own and operate systems that capture and utilize the methane gas that is emitted from waste disposal sites, coal mines, or livestock farms.

Cons

Thinking big picture, carbon credits are an indirect approach to reducing carbon entering the atmosphere, and most often don’t reduce CO2 at the source, where the CO2 is most concentrated. And the purchasing of carbon credits allows buyers to avoid reducing or eliminating their own emissions and may be motivated more by a need for greenwashing marketing campaigns than a financial commitment to slowing global warming.
If the company’s primary mission is to sell carbon credits, consider that carbon credits are unregulated and vary widely in quality and impact. There is no standard way to measure, verify, and certify the emissions reductions or removals that carbon credits represent. Some carbon credits may be based on dubious or fraudulent projects that do not actually reduce or remove greenhouse gases from the atmosphere.
Carbon credit marketplace startups face the same challenge that every marketplace startup faces, namely, achieving a balance of supply and demand, and having to be equally successful with two disparate marketing campaigns.
A carbon credit selling startup may be creating credits planting monocultures of trees, which are inherently damaging to the environment by decreasing biodiversity has negative impacts on soil quality, water availability, and wildlife habitat, thereby reducing the resilience and adaptability of forests to climate change and natural disasters. Insect and bird populations around the world are plummeting precipitously in part due to the destruction of the biodiverse habitats that they depend upon. Read more

Investing to Mitigate the Unintended Consequences of Renewable Energy

The Pros and Cons of investing in carbon-credit related startup companies