Zachary Bogue, co-manager of Data Collective LLC, speaks at the Future of Innovation: Spotlight on Artificial Intelligence conference in San Francisco, California, U.S., Thursday, June 22, 2017. The market for technology d artificial intelligence further generates more than $60 billion in productivity gains for American businesses each year.
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The Silicon Valley venture capital firm DCVC invests in all kinds of climate tech companies including geothermal energy, aerial methane imaging, advanced nuclear fission reactors, fabrics made from mycelium, wastewater filtration technology – just to name a few.
But there is a category in the climate technology landscape that Zachary Boguea co-founder of DCVC does not invest in: Carbon offsets.
“We really don’t buy into or like seeing companies using carbon offsets,” Bogue told CNBC in a late September interview at the Palo Alto office. “We don’t look at companies that need to use carbon offsets to make their business model work.”
A carbon offset is a certificate or voucher that a business or organization purchases that represents the reduction of one metric ton, or 2,205 pounds, of carbon dioxide emissions. If a business or organization is unable to eliminate greenhouse gas emissions in its operations, it can purchase a carbon offset to offset its emissions.
“There have been studies out there that up to 90% of carbon offsets are completely ineffective – had no impact – which is a tragedy of our times, as the big Fortune 500 companies are paying millions of dollars for these carbon offsets, and continue to emit in the meantime,” Bogue told CNBC. “And those offsets actually have no impact.”
The effectiveness of a carbon offset is a controversial issue, but at least a white paper published in April 2021 by the Finnish non-profit organization and startup Compensate for found that 90% of carbon capture projects were ineffective. Compensate has both a nonprofit advocacy arm and a company that sells what it considers to be high-quality carbon offsets. For the white paper, Compensate analyzed more than 100 nature-based carbon offsets certified by third-party verifiers in space.
Of the carbon offsets that Compensate considered a failure, 52% were guilty of what Compensate called “additionality” – for example, offset credits sold to protect trees that were never at risk of being cut down. Another 16% of the analyzed Compensate projects were considered a failure because their permanence was considered at risk. For example, coastal mangrove restoration projects in Bangladesh were compromised when floods devastated the country, Compensate said.
Likewise, Bogue said of local projects in California.
“There were forests north of here that were on carbon offsets where someone paid millions of dollars not to cut down the forest and – whether it’s legit or not, we can leave that out. – because those forests burned down,” Bogue said. . “So they actually released the carbon that the company was paying for not releasing and the company emitted.”
DCVC does not invest in companies that use carbon offsets at this time, but that’s not an indictment against the idea.
“To be clear, I want them to exist,” Bogue told CNBC. “I want there to be a carbon tax, I want carbon credits, carbon offsets.”
But there isn’t enough transparency or accountability in the industry, Bogue said. Proper advocacy for the industry would require an agency similar to the U.S. Food and Drug Administration (FDA), according to Bogue.
“There’s a very defined, rigorous process that you have to go through to take a molecule from discovery until you dose it to a human: you have to prove it’s effective, you have to prove it’s not is not toxic,” Bogue said. . “I would argue that the CO2 reduction imperative is as important to human health as getting small molecules into our bodies. Period.”
Until then, the industry is too uncertain to be a safe place for the money DCVC invests on behalf of its sponsors, which are like university endowments and hospitals.
“It has to be rigorous, and apples to apples and, and verifiable and documentable,” Bogue said. “It’s just not where it is today. It’s where we need to go, but it’s also why don’t you think it’s investable.”
