McKinsey, Stripe, Alphabet, Shopify, Meta on $925m carbon removal commitment

BY MADUABUCHI EFEGADI

McKinsey Sustainability, part of McKinsey, the global management consulting company, is partnering with Alphabet, Shopify, Meta and Stripe in an eight-year $925 million commitment to accelerate the development of permanent carbon removal technologies by guaranteeing future demand.

The joint effort, called Frontier, is an advanced market commitment (AMC), which aims to expand the global supply of carbon removal, rather than increase competition for the supply that exists today.

McKinsey said its insights have shaped the climate dialogue for more than a decade, and that the partnership is yet another step in its commitment to building a more sustainable future.

Dickon Pinner, McKinsey senior partner, said: “Reaching net zero emissions is key to building environmental resilience and to realising a future that delivers sustainable and inclusive growth. Carbon removals have an essential role to play,” Pinner said, adding that, “Frontier will play a catalytic role in enabling the supply of high-quality carbon removals.”

The partnership comes on the heels of McKinsey’s recently launched McKinsey Platform for Climate Technologies (MPCT), which is part of McKinsey Sustainability. MPCT focuses on helping clients plan, execute and scale net-zero technologies in recognition of this urgent call to action.

“While we have prioritised helping clients achieve net zero emissions, we’re also deeply committed to it ourselves. Last year, we pledged to achieve net-zero climate impact as a firm by 2030,” the American global consulting company said in a statement.

Frontier will both facilitate low-volume pre-purchase agreements for new carbon removal technologies and invest in future tonnes of carbon removal to help scale effective technologies. This AMC model was first effectively used to advance pneumococcal vaccines in an effort to save lives. AMCs can be effective because they send a strong and immediate demand signal, encouraging further innovation and development of new technologies in the space, the consulting company said.

Nigeria, a country yet to take seriously the issue of carbon emissions, going by its president’s announcement at the last COP 26 conference in Glasgow Scotland, of the country intention to embrace energy transition by 2060, could gain immensely from the McKinsey $925 million Frontier deal via the Paystack–Stripe relationship.

Recall that in 2020, Stripe of USA in its bid to expand into the African continent, acquired Paystack, a startup out of Lagos, Nigeria which, like Stripe, provides a quick way to integrate payments. The deal was worth more than $200 million.

Scientists estimate that limiting global warming to 1.5°C would reduce the odds of initiating the most dangerous and irreversible effects of climate change. Recent reports from the intergovernmental panel on climate change (IPCC) make clear that there is currently no pathway to keeping global temperature increases within 1.5°C without removing gigatons of CO2 already present in the atmosphere and ocean.

To reach a pathway to 1.5°C, IPCC models require carbon removals to ramp up from 0.1 gigatons of CO2 today to an average of around 6 gigatons by 2050.

Carbon removals work alongside emissions reduction solutions; they are not a substitute. But at the current pace, the pipeline of carbon removal projects will fall short of the volume of carbon removals the IPPC says is required in 2025 by 80 percent.

While this outlook seems bleak, recent analysis by McKinsey Sustainability for the Coalition for Negative Emissions finds that it’s possible to scale carbon removals sustainably to meet the climate need with a portfolio of approaches. To achieve this will take extraordinary efforts in building new capital projects, developing specialist skills and scaling supply chains. However, once carbon removals are deployed at gigaton scale, the average cost could decrease dramatically, saving anywhere from $4.2 trillion to $8.4 trillion to deploy, as compared to today’s costs.

“What’s more, our analysis shows scaling these efforts could create as many as ten million new jobs by 2050,” McKinsey said.

It’s with this urgency in full view that McKinsey Sustainability has chosen to join the Frontier effort in support of developing carbon removal technology. This move is aligned with our commitment to sustainability and our view that joining forces with leading organisations and creating scalable solutions are necessary steps toward reaching this essential goal. As part of the partnership, McKinsey will also provide pro-bono advisory support to carbon removal startups and businesses taking part in the initiative.

Getting such huge amounts of carbon removed from the atmosphere requires the buy-in of companies and governments. But new technologies tend to be more expensive than established ones, making it challenging to attract enough buyers to help drive those prices down. That’s where an advanced market commitment like Frontier can play a crucial role.

Reaching net zero emissions is key to building environmental resilience and to realising a future that delivers sustainable and inclusive growth. Carbon removals have an essential role to play. Frontier will play a catalytic role in enabling the supply of high-quality carbon removals.