It’s “Climate Week” next week, and New York City will be full of climate advocates, entrepreneurs, and investors. Three groups who often talk about atmospheric carbon emissions AMOUNTS, but rarely before have talked about the “time value of carbon”.
The urgency of the climate crisis is now clear. This summer, we’ve been witness to poignant signals from the climate crisis – skies choking us with an eerie orange hue over New York City and the eastern states, fires unfurling from Maui to Norway’s Arctic circle, unprecedented floods inundating Vermont, and global temperature records shattered. It’s clear there is no longer time to waste in addressing climate change.
Within this climate of urgency emerges a concept demanding our attention – the time value of carbon. This is best illustrated with a hypothetical comparison: Let’s say an investor could bet on a technological innovation that won’t have any impact for 10 years but then results in 100 million tons of carbon reduction. Let’s say the investor could alternatively bet on immediately-ready, low-tech green projects that would have 10 million tons of reduction impact per year. Over the next decade both projects result in 100 million total tons of reduction. But the immediate, low-tech approach is demonstrably better for the planet, as with the “10 years and then a breakthrough” approach you are meanwhile adding in 10 years’ worth of additional 10m/yr impact each year while you waited for the breakthough.
The answer, of course, is “do both!” The point here isn’t to say that breakthroughs aren’t worth investing into. But this simplistic example does highlight that there is indeed a time value of carbon. A ton of carbon reduced today is worth more than a ton of carbon reduced in a century. More immediate reductions are obviously more valuable than later, equivalent reductions.
This time value of carbon concept isn’t hypothetical, however. This is a real-world challenge. Clearly what’s needed is to accelerate the adoption of established technologies, financial innovations, and software solutions. These efforts may seem boring because they’re not “moon shot” efforts to discover radical technological breakthroughs like tabletop fusion reactors or such, but they can still tackle large-scale climate mitigation – spanning from electrifying all aspects of life to decarbonizing molecule and energy production, prioritizing ecosystem services solutions, reestablishing ocean health, and solving the pressing issue of plastic waste.
Those “moon shot” technological efforts have gained a popular moniker among investors: “DeepTech”.
Well, enter “ScaleTech”.
ScaleTech acknowledges that investing in swiftly scalable technologies, innovations, and solutions is not solely about addressing the climate crisis; it’s also straighter path to potentially achieving attractive near-term financial returns. For large, institutional climate investors needing to show early positive financial results from their efforts to divert capital into this area, that can perhaps be even more important than the time value of carbon.
Viewing the universe of climate solutions through the lens of “what’s ready to scale TODAY?” unveils a realm of investment possibilities. Think of the potential exponential growth in renewable energy scaling, grid modernization, energy storage solutions, and the electric vehicle revolution. These domains contribute not only to climate mitigation but also hold substantial economic potential. By investing in companies driving the adoption of these technologies, investors can position themselves at the forefront of transformative change. Embracing the principles of the time value of carbon and ScaleTech equips investors with a robust framework for navigating today’s intricate economy while positioning themselves to capitalize on significant market shifts.
We need both DeepTech and ScaleTech investors. But too often the impactfulness of the time value of carbon, and the financial attractiveness of existing high-growth market opportunities, get much less talked-about than they should by venture and tech investors, and thus the entrepreneurs, journalists, and policymakers who take their cues from such investors. And thus ScaleTech has somewhat languished in terms of getting attention and investment dollars, versus DeepTech.
This coming Climate Week I expect that to change. Expect to hear a lot more about ScaleTech going forward.