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Welcome to Xero. I am Akshat Rati. This week, troubles with direct air capture. Sometimes it's nice to remind yourself that the solution to climate change is simple. Stop adding greenhouse gases and draw down the excess sitting in the atmosphere. I'm not saying either step is easy, but those are the two steps to meet the goals set under the Paris Agreement.
I know that even trying to meet the first step of cutting carbon pollution seems hard right now, with the US reversing any of the good things it's done on climate policy. But that's not a good reason to stop thinking about how to undo the harm already caused. Because these carbon removal technologies will be needed at scale later in the century. Perhaps drawing down billions of tons of carbon dioxide each year
It could be as large as the oil and gas industry is today. And that means the work on carbon removal technologies must start now and scale up. Today we are going to talk about one of those carbon removal technologies, direct air capture. It involves exposing air to some chemicals that have a special affinity to carbon dioxide. And once the gas has been captured,
typically heating the chemicals to release CO2 as a pure gas, which can be buried deep underground. The chemical is then reused to capture more carbon dioxide. It's an energy-intensive and expensive process, but the more it scales up, the cheaper it will become. There are now more than 100 direct air capture startups. The best funded among them is Climeworks, which was founded in 2009 and has raised nearly $800 million.
But given recent policy changes in the US and the fact that many companies that buy carbon credits from direct air capture startups are rethinking how they meet their climate goals, Climeworks is facing headwinds. The company is laying off staff and has come under attack for not delivering on its bold ambitions.
So this week, I've got Jan Wurzbacher, co-founder and co-CEO of Climeworks, to answer the many questions being raised about the company, its performance and its future.
Jan, welcome to the show. Hi, Akshat. Nice speaking to you. So you and Christoph Kiebal founded Climeworks in 2009. Since then, the company has raised nearly $800 million and it's grown in size to nearly 500 people. What would you class as your three biggest achievements so far? That's correct. We have been scaling direct air capture since 15 years. What we have done
First and foremost, we have shown to the world that direct air capture works and can be done at scale. When we started Climeworks back in 2009, people were asking themselves and us, is direct air capture something that's actually possible because there is so little CO2 in the air?
Over the time we have demonstrated that step by step we are coming out of a phase of extreme growth and scale up. We've built our first plant in Switzerland in 2017 with the first commercial model. So that was for the very first time that CO2 captured from the air was sold to a commercial customer. So we sold the CO2 to a greenhouse and to Coca-Cola to make bubbles in the water.
And we then built our first plant in 2021 and then also the second plant last year in 2024 in Iceland, taking CO2 out of the air and combined that with safe and permanent underground storage. So we put CO2 underground together with our Icelandic partners Carbfrix, where the CO2 mineralizers is turned into stone.
and we're selling the capacity of those plans to our customers. So yeah, all in all, that's something no one has done before. And we've done a few big scale-up steps, and there are more to come. And so let's get to the big news before we get into the scale-up challenges. You're about to announce your first major layoffs, eliminating 106 jobs. Why?
Yeah, as I said, we are coming out of a phase of extreme growth. So we've grown the company, we've doubled in size two times in a row over the past very few years. There was a very intense phase. Now we're entering into a next phase where it's important that we prepare for everything that's coming forward. We need to consolidate a little bit. We need to look at efficiency. When we grew the company over the past couple of years, a lot of
of our growth was targeted towards growing as fast as possible, building as much capacity as we can. We've done a lot of that. We've built the mammoth plant, a 10 times larger plant compared to the orca plant very quickly. Now going forward, in particular in today's market environment, a second aspect that is very important is focus on profitability. How can we make sure that our plants
operating at the lowest costs and that our company is operating at the lowest cost and so this is a phase that is that is following now we are we are focusing on on cost reduction on our technology development and we are continuing to focus on on projects but we will depending we should talk about our future projects in a minute some of them might move on on a slightly
slower timeline, which then allows us to integrate latest technology developments, latest findings. And this will require a little bit of a different or amended setup of our staffing, of the people we have. And this unfortunately requires us to separate from a certain amount of colleagues that have brought us here, which is always a sad thing. But that's part of the journey we are going.
How exactly are the layoffs going to be structured? Like who are the people who will be affected most and how do you come to that decision? It's been a very structured process over the past couple of weeks. We've looked at the company across the board. So it's really across the board. We are rebalancing our workforce where it comes to project execution on the one hand, where it comes to technology improvement on the other hand.
So as I said before, we've done a lot of technology advances, so this is an area where we're doubling down, where on the project execution side, there might be a bit less workforce needed going forward. And so Climeworks has a goal of capturing 1 million tons of carbon dioxide from the air each year by 2030.
As of now, according to the database CDR.FII, you've only delivered some 1,100 tons out of more than 380,000 tons that people have given you orders for, that companies have given you orders for.
you're cutting about 20% of your staff. How exactly is that going to help you scale up the technology, deliver these tons, reach profitability, as you were saying? First of all, if we compare our order book with the deliveries, that is a very normal thing that there is a large order book compared to a smaller number of deliveries because the whole business model of Climeworks goes along the ways that we are operating
closing contracts, off-tech contracts with our customers, which are then used to finance future plans and then captures you too with those plans. Maybe the second question, so you asked about the connection between our number of staff with planned deliveries.
So also here again, like our reduction staff, it is first and foremost a measure to make us ready for the time going forward to be more efficient, in particular with our current operating plants here in Iceland. There are no staff reductions connected in there. So we are continuing to produce to further ramp up the plants, in particular the mammoth plant. And then as we move forward,
There are always two elements that we need to focus on. There is the fast deployment of plans, but then there's also the technology optimization and cost optimization. And as we are focusing to take out more costs as we're going forward, this is then a key other pillar that we need for the sustainable financings.
Let's take the plants that you do have in order and the growth plans you had in place before this decision was made. You completed ORCA in 2021, and it has the capacity to capture 4,000 tons every year. But your own data shows that it's never captured more than 1,000 tons in any year. Why?
Let's take a closer look at the data. First and foremost, we need to distinguish between three numbers. The first is the nameplate capacity that we've always communicated as 4,000 tonnes, which is really the maximum capacity the plant could do compared to the top speed of a car. If you have a top speed of a car, that's not the speed at which you're driving on average, even if you're driving on the highway.
Then you have the actually captured amounts of tons of CO2 and then you have the actual CDR delivered, so carbon dioxide removal delivered to customers, which also accounts for grey emissions and other losses on the way. So these three numbers need to be looked at all together. The numbers that you can see publicly in the certification database of PURO, which is by the way in the DAC space,
the only instance so far globally we have where you can really transparently see what has been produced and what is done, which is also something you asked about big achievements, something we're quite proud of because you can really find it all there. So those numbers refer to the CDR and not to the CO2 capture. So that's maybe the first difference.
And the second thing is, if you look at the plant, there's two things you can compare. You have the actual ability of the plant to deliver, to show its performance, and then you have the number of tons that is actually produced throughout the whole year. If we look at the tons CO2 captured here,
that we could achieve with the Orca plant. Overall, over not a whole year, but over shorter timeframes, say a month, then those numbers are actually much higher. So the best month of the Orca plant showed an annualized capacity of 2,500 tons captured.
So that is much closer than to this nameplate capacity. If we look even at the best week, we would go up to 2,900 tons. What Orca is not yet is not a plant which can consistently deliver this performance throughout the whole year. There are several reasons for it.
If you look at the sorbent material, for example, that is used for the plant, that is the one which has been installed in 2021. It's been purchased in 2019. So the technology of that sorbent material dates back to 2017 and 2018. In the meantime, we have made much more and developed much more efficient sorbent materials, up to five times more stable materials. So it is a material which is actually running in the plant for four years, which is very
even better than we ever thought. So it has, so to say, degraded over time, over four years, and it is still working. But from the start, it hasn't been the best material we have today. It has been in there for several years, and we have not decided to substantially invest into that plant to squeeze out the last thousand tons, if you say.
So analogies are helpful, you know, that there's a top speed to a car and a car usually doesn't run at top speed. But you also know when you buy a car, you want to be able to run that car at the top speed when you want it. Has it ever run at the nameplate capacity of 4,000 tons? So it has run at a capacity of 2,900 tons per year.
So that is about 75% of the top speed of the nameplate capacity. If we would equip the plant with the latest solvent material, we would get much closer even to the 4,000 tons potentially reaching that value. So experimentation is important. This was your first multi-thousand ton plant. You've tried a few things. Obviously, technology improves. That's a good thing.
That's one reason because of all the order book you started building Mammoth that's supposed to have a nameplaint capacity again of 36,000 tons annually. You started operation on the plant first operations in 2024. How much does it capture today and when will it capture 36,000 tons each year?
So, as you said correctly, the Mammoth plant was started last year and that means we are still fully in the ramp-up phase today. If we quickly draw the comparison to Orca, so for Orca we had a ramp-up phase of around three years, which brought it then to those numbers that we spoke about a minute ago. And for Mammoth we are in the midst of this ramp-up phase. What does that mean concretely?
It concretely means that as we speak, the plant itself, so all the process engineering components, also the central plant components where we get the heat from the geothermal power plant, the storage of the CO2, compression of the CO2, CO2 treatment, all of that is fully up and running. And we actually had availabilities of those parts of the plant of more than 95%.
When it comes to the actual modules that capture CO2 and that contain the sorbent material, we have chosen to take a step-by-step approach and actually benefit from the fact that the plant contains modules. So far, the first 18 modules out of 72 modules are up and running. So that means we don't have the full range of modules installed.
And as we move through the ramp-up phase, we will install more and more of them. We would ideally have liked to be further down the road today, but then if we compare it to Orca, if we look at this three-year phase, that is a similar phase that we currently, or a similar period of time that we currently assume for the mammoth plant to apply here. And so you said you wanted to be further ahead than you are. What has held you back?
That's a very good question and there are a few points. Maybe first and foremost from Orca to Mammoth we obviously incorporated some design improvements, some design upgrades and changes on the design so we incorporated learnings.
However, while it's a second of its kind, it's not a tenth of its kind. And what we learned during the first ramp up that some of these design changes that we made from Orca to Mammoth required further iterations. So I can give you one example to make it tangible. At Orca, we figured out like...
One crucial element of the plant is a mechanical element that is actually a door that closes the chambers where we have disorbitant material in there. So we first absorb CO2, then we close the chamber, heat it up and take out the CO2. So that is a mechanical element that needs to travel every other hour from chamber to chamber and seal it in ice and snow and storm in the summer in any weather we have.
And in this element, there is one sensor that controls the movement of the door and that was placed at a position where it was very hard to maintain. So it created a lot of overhead to replace it, to maintain the sensor. So we changed that design from Orca to Mammoth to position it at a different place where it is much easier accessible.
Now unfortunately it turned out that at this new location, and that is something we hadn't foreseen during the design, the sensor is much more exposed to steam and then in the winter steam combined with cold means ice. So we had a lot of icing there. Sounds like a trivial topic and if you listen to this you might think: "Okay, that sounds easy, why don't they fix it within a week?"
The issue is, if you have several modules, it's not one sensor, but it's many, many of these sensors. If you make changes, you always need to be aware that if you change something, you might come up with new findings, as it happened this time. So after finding this, we always need to go through a loop of changes
a design upgrade, then a validation of the new design, and then a rollout. So you need to combine all of these things. So you need to design it, you need to bring it in the field, make sure that now it works much better, and then activate the supply chain that you can buy the new parts, install them, and so on and so on. And this is one example out of several ones where from Orca to Mammoth, we made changes, but not all of those changes only, they didn't only improve what they were supposed to improve, but also introduced new challenges. And this is what we're working on.
We'll be back with more of my conversation with Jan Wurzbacher after this short break. And hey, if you're enjoying this episode, please rate and review the show on Apple Podcasts and Spotify. Your feedback really matters and helps new listeners discover the show. Thank you. This is an iHeart Podcast.
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And so if you are to reach your target of 1 million tons of capture every year by 2030, the plant that would have made it possible is the Cypress plant in Louisiana. Now under former US President Joe Biden, the government was ready to offer billions of dollars of support to such plants, yours and a few others. Of course, you had to do a lot of your own work because you needed to make the technology work, you needed to bring in your investment matching dollars
But right now with President Trump, it's clear that the administration is pushing back on lots and lots of climate policies. Specifically when it comes to supporting direct air capture, the latest reporting is unclear on whether the Trump administration wants to proceed with supporting these plants or rescind its support altogether. Would it be right that because of this plant and the rapid growth that you were anticipating and now that may be delayed or cancelled,
you are having to make these layoffs so that you can sustain the funding that you have raised so far for a little bit longer and ensure that a scale up, if not in Louisiana, somewhere else could happen. Yeah. So, well...
Several questions to start with. It is correct that for the US project there is currently not a 100% certainty how the Department of Energy will move forward with that project. We are in close exchange. The project moves on, so we are continuing our front-end engineering design together with our EPC partner.
But we have to wait how the administration decides to move on with that project. We are prepared to move forward with that project, but we also need to consider the scenario that there are changes or that the administration will not move forward with the project.
That said, we haven't been sitting and waiting in the meantime, so we do have a pipeline of further sites and further project opportunities with which we can move forward. That is anyway our plan, so we need future further projects beyond the Cyprus plant. And if there was a change on the Cyprus project, a more fundamental change,
we can switch one of the other projects in the pipeline to the first priority or to the first in the lane. So there are project options in other ones in North America, that includes Canada, there are options in Europe, in Middle East, we have a project development ongoing currently, so there are several options that we are moving forward with. If we look at the timeline on the other hand, that's what you asked as well about, it is currently clear that
Independent of any decision made by the administration, by the Department of Energy, there will be a certain delay for sure compared to the original timeline with the Cyprus plan, because some parts haven't been moved forward during the last months of unclarity. That is, well, that means...
There is a delay, which is not great on the one hand, but on the other hand, this is also a good opportunity to move forward. And this is one of the reasons why I spoke before about a bit of an adjustment of our priorities. And that relates then also to the certain restructuring we are doing within the company. And these other projects, what is the scale of these projects? How do you prioritize them if Cyprus doesn't come through?
So those projects would look at similar sizes of a plant, so nameplate capacity in the range of 200,000 tons per year plus with certain flexibility.
There is not a single number one plant right now. There is a development in the Kingdom of Saudi Arabia where a lot is going on. There is a lot of interest there. There is developments ongoing in Europe, in Canada.
We are really pushing all these project developments forward. That's the nature of big infrastructure projects. In order to make an infrastructure project materialize, there are a lot of boxes that need to be ticked. Some of the boxes you can tick early on, other boxes need more time to tick on. That's why we always do need these portfolios. There are a few runner-ups, about a handful of other projects.
and we'll move we're moving them forward and depending on where eventually we'll have the best conditions both in terms of financing funding energy costs and storage this is then the one which will be prioritized and so to continue operating are you going to have to raise money soon and how much we are raising we are continuing to raise money and
Once that has happened, we were happy to announce that. We're continuing to raise money and at the same time, our current efficiency measures also make sure that we extend our sustainable funding of the company as long as possible. How long is the current funding going to last? What is your runway?
Yeah, we don't publish numbers on our runway currently. But what I can say is that we are very stably financed and we continue to have very strong commitment from our existing investors also to move forward with funding. And one of the things that you have offered, which is also a pioneering move, is that anyone could go to your website and buy carbon removal credits. I can go on your website, pay 800 pounds and get a promise from Climeworks that you will capture one ton of carbon dioxide for me.
How many people have signed up to buy carbon removal? We have a total number between between 15 and 20,000 roughly. And in the frequently asked questions, it says that Climeworks will deliver on the promise within six years.
How many tons have you delivered to individuals, not to your corporate buyers? To individuals, so far, we have delivered a bit north of 400 tons. So far, if you go to the public registry, the Pura one we spoke about before, you will find a lower number at the order of 150 tons. This is due to the fact that
Some of the deliveries have actually happened before we have started our collaboration with Puro, and that was certified by a separate certifier that was DNV, actually. So it's cool to have a consumer product for carbon removal, but as you know, in this age, people want to click and then get delivery.
I know you warned that it might take six years, but that to some people is an awfully long time. And clearly some people have forgotten that there was this fine print at all and are going on social media and calling Climeworks a scam. So what do you have to say to sort of individuals who want to support this idea and this technology?
First of all, I think it's quite clear that Climeworks is not a scam. We are building direct air capture plants. They are operating and they are standing here. Everyone can come here and look at them. And we have the only worldwide transparent registry with an independent third-party certifier that shows how many tons are captured. So I think that part is a very easy one.
It's operating, it's working, and a third party is looking at it and counting the tons. And the other thing is, if you have tens of thousands of customers, unfortunately, there will always be a few ones which are unhappy or, as you said, might not be happy with the fine print or haven't read it. We are doing our best to engage with them and to answer any open questions
Also, always good to get feedback. If things were not clear, we can always work and try and improve this. Well, in the spirit of feedback, when I go to the website and I hit buy, the buy button is high up on the page. I follow the steps and I can make the payment immediately.
But to find out that the delivery will be made in six years, it does not show up on any of those steps. I have to go back to the front page, actually go into the questions underneath and the frequently asked questions, go through all the questions and find the question that says six years to delivery.
So you could be making that much easier if you had that in the flow of purchasing the carbon removal. Oh, good. Thanks. Good feedback. Always good to consider. Thank you.
The other criticism that has been lobbed at Climeworks is that you state in your sustainability report that the company currently produces more emissions in its operations than it captures in its machines. Now, that's understandable for a startup that's scaling up. You'll have executives flying around the world to make these deals, whether it's in the Middle East or in Canada or in Iceland.
You'll have emissions from the steel and the cement that will be needed to build these plants from running the chemicals. But you've been at it for 15 years. Do you see why some people are frustrated with the lack of progress? You know, they would think a carbon removal company should get to the point of at least being fully carbon neutral when it's operating.
Let's look at other technologies and how long it takes for them to scale up. If you look at major technologies like chip technologies or solar PV, wind farms, you will find out that scaling up a completely new technology and industrialize it and bring it to a scale where it is deployed at hundreds of millions or billions of dollars volumes
That takes typically rather 20 to 30 years than 5 to 10 years. That's, I think, the important part that we need to consider here. If you speak about own emissions being carbon neutral, I think it's very important to distinguish between
corporate emissions, like executives flying around the world to a minimum extent, but that's important if you want to scale, and then related to our plans. Before you mentioned both in one sentence, everything that is related to our plans, that is accounted for, and that is actually one reason for the difference between the nameplate capacity and the actual delivered carbon dioxide removal capacity.
Company carbon dioxide emissions are small and an absolute value. So we're talking about a few thousand tons here per year. So it is not the number we should be bothered about because everything we are doing is targeted and only makes sense if we're scaling it to millions of tons and eventually billions of tons. So we need to make sure that we focus and set the right priorities.
Once we are reaching those levels that we will be reaching by 2030, the corporate CO2 emissions will not be worth a sentence because they are in the rounding difference of the whole carbon flowing through the company, if you like. When you founded the company in 2009, you were one of less than a handful of startups that was doing this. Now, according to CDR.fii,
there are 140 direct air capture startups. Now, Robert Hoagland, who's the co-founder of CDR.FII, said that he expects that many of these startups
startups will fail, perhaps this year, perhaps next year, given the macro circumstances, given the US pulling out of the Paris Agreement, pushing back on climate policy, making companies that are taking climate action to stop taking climate action, to stop buying carbon credits, to not really focus on carbon removal. He fully expects that these companies will fail. Not all of them, but many of them.
And he thinks that perhaps for the market that is coming, there might be as many as five companies with the best technologies that survive. How do you ensure that Climeworks is one of them?
That's a very good question. First and foremost, Climeworks knows the industry and the art of scaling up direct air capture best. We are around since 15 years, we are around 500 people who are working on this and we are by far the best funded startup and scale up in the area of direct air capture. And we will continue to be and we will continue to fund and to grow at a large scale. That's number one.
Secondly, as we move forward, that's very important, we have never stopped at developing technology. Some people have asked us, "Hey, you have developed your core technology 10 years back, is this now outdated?" But that's not the case at all. As we spoke before, we've invested a lot out of 500 people, 150 people are working in R&D.
About 30 people are material scientists and chemists working on new materials, improving our materials. So there is a lot of R&D happening. There is no comparable workforce on direct air capture technology development in the universe. So nowhere else is that amount of funds and resources invested anywhere.
into further advancing technology. So we are doing this, we are moving forward and we are also screening the market. So as we move forward, we have purchased a different technology, a different company in the past. We are looking out for new developments. We have a very clear picture about everything that is happening out there.
We have a lot of good contacts to many players in the industry and we might see going forward also some consolidation in this area, some mergers, some M&A activities. And we are ready for this market. There will certainly happen a consolidation. It is impossible to move forward with 150 different companies. That's a very natural thing to happen in the new industry.
going forward with something like a handful of players is something that I see very realistic. If you think of what it takes to scale up direct air capture technology or any similar technology, it will require at least a billion, if not several billion, to scale that up, and 150 players will not be able to fund that. But we are in a position to first develop everything at the forefront in-house,
But then also make sure that if there are any new developments, let this be new materials, to just give one example, to have our hands on this, enter the right partnerships, which we are doing as we're speaking. We have several partnerships in the areas of solvent materials to make sure that Climeworks is always staying at the forefront where we are today.
One of the decisions you've made in these 15 years is you have not taken on money from the oil and gas industry, which some other competitors in the direct air capture space have done.
You continue to raise money and we do know that climate tech investing in general has become more difficult. It's not just because of Trump. There was a peak in 2021, 22, and then it's been declining. Funding going specifically to direct air capture companies is also falling globally and more so in the US than other places.
Do you anticipate changing your policy and taking money from an oil and gas company who continue to be very profitable? And one of your competitors, Carbon Engineering, was sold to an oil company, Oxy, and is now building a large-scale plant as a result of having the balance sheet of a large oil company?
Look, the very simple answer here is the energy industry and in particular the oil and gas industry does definitely have an important role to play in this domain. We are speaking about taking billions of tons of CO2 out of the atmosphere
and putting them safely and permanently underground. And there is one industry who has done this for the past 100 years and more. So drilling holes in the ground and taking stuff out and drilling holes in the ground and putting stuff down is very similar to this. So that industry will have a role to play. So far...
We've been always looking very generally independent of in particular oil and gas majors. We've been carefully evaluating whether a strategic investment into Climeworks makes sense because by taking in a strategic investor on board
You are creating great opportunities, but you're also closing other doors. And this is an evaluation that we will continue to do going forward. So there is no reason to exclude anything. There is no reason to go simply in one direction going forward. There will be certainly links with that industry, but there is no strict yes or no decision in any direction. We need to make sure to figure out what is needed to scale this industry, which
which resources do we have, which partners and players do we have, and where does it make sense to enter into alliances, and where does it more make sense to stay independent? We've answered that in the past, in the way that staying independent is the more successful path. That doesn't mean that that will always be the case in the future. Thank you, Jan. Thank you, Akshay. Thank you for listening to Zero. And now for the sound of the week.
That's the sound of carbon dioxide leaving soda water. If you like this episode, please take a moment to rate and review the show on Apple Podcasts or Spotify. Share this episode with a friend or with someone who likes science fiction.
This episode was produced by Somersadi, Moses Andim, and Robert Williams. Bloomberg's head of podcasts is Sage Bauman, and head of talk is Brendan Newnham. Our theme music is composed by Wonderly. Special thanks to Coco Liu, Michelle Ma, Brian Kahn, and Siobhan Wagner. I'm Akshat Rathee, back soon.