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  • Writer's pictureAlex Brown

Bottoms-Up Decarbonization: A Rapidly Developing Opportunity

As public awareness and acceptance of the human causation of climate change grows, we as a society are rapidly shifting from defining the problem to searching for the solution. In the business world, the ongoing “SPAC attack” shot ClimateTech to the forefront of investors’ consciousness, with 20 electric vehicle SPACs completed or announced in the last year and a half alone. The most recent iteration of the Green New Deal – presented and popularized by AOC, Bernie, Markey, and Co. – captured the imaginations of millions of American citizens, concretely articulating a reasonably thoughtful, aggressive legislative approach to fighting climate change.

What’s notable about the most recent news on fighting climate change is that there’s a growing acknowledgement that the many tools we have at our disposal could get us most of, if not all the way there.

Electric vehicles and renewable energy are sure to be a critical component of the decarbonization solution. Green hydrogen, carbon capture, and heavy industrial decarbonization technologies will play a part as well. But all of these pieces of the puzzle — either now or when they were in their infancy — require top-down regulatory help to incentivize their commercialization, so long as businesses and consumers are making the near-term economically rational decision. The solar ITC, EV tax credits, renewable portfolio standards, and Q45 carbon capture tax credits have all played instrumental roles in flipping the economic equation for these technologies. The famous McKinsey abatement cost curve, shown below, illustrates that the majority of carbon abatement technologies are net cost positive, and if we want these solutions to reach the scale required to make a dent in climate change, we are still going to need massive help in the form of stimulus, standards, creation of market structures, and more. While the early days of the Biden administration have demonstrated a fresh commitment from the government to solve climate change, I for one am not optimistic that our governments will be able to solve the problem on their own. 

Luckily, it appears that we do not need to rely solely on regulation and market structures to decarbonize. Indeed, there has been a growing movement among companies, consumers, and investors to evaluate and reduce their carbon footprint, even if it does not benefit (or even harms) their direct economic interests — what Keyframe is calling a “bottoms-up” decarbonization effort. What was once relegated to the wonky (carbon offsets for air travel and renewable energy ESCOs come to mind) has moved to the mainstream.

On the consumer side, you need look no further than look at a Whole Foods parking lot (shout out to my former hometown of Berkeley, CA!), with shoppers returning to their EVs, reusable totes chock full of sustainably-grown produce. Sure, some may point to the health benefits of organic foods or the “coolness” factor of a Tesla, but this enormous shift in consumer behavior is likely driven at least partially by a growing concern of climate impact at the individual level.

On the business side, we have quite a few examples, but one particularly interesting case is Stripe. In August 2019, the fintech giant announced a commitment to spend at least $1 million per year on carbon sequestration and in May 2020 announced its first carbon negative purchases. For a company still being funded by venture capitalists, the commitment is significant. Among the projects chosen was one that we at Keyframe will be following closely: the CarbonCure cement decarbonization project in Halifax, Canada. 


In the investment management world we live in, we have seen first-hand the rapidly growing interest in climate technologies – the aforementioned SPAC attack, seemingly daily announcements of new ESG-oriented funds, and traditionally-generalist VCs publicly announcing a climate focus. But the most telling sign comes from the largest asset manager in the world: in 2020 Blackrock announced that it would be putting climate change central in its investment strategy going forward. Earlier this year, in his annual letter to CEOs, Larry Fink asked companies “to disclose a plan for how their business model will be compatible with a net zero economy.” To be sure, the largest asset manager in the world – and the largest shareholder for many public companies – has considerable sway over the business world.

Where do we go next? In each of the examples above, the “market participant” who is making the decision to decarbonize is likely receiving significant external “marketing” benefits: the consumer who buys an electric vehicle is able to project their values to the world in a tangible and visible way; Stripe may get extra business from partners who share the climate change mission; and investors on the whole are not artificially limiting their investable universe out of the kindness of their heart… But what about circumstances where the marketing benefit to the consumer is inherently limited? After all, much of the energy supply chain is commoditized, making it more difficult to extract these sorts of external benefits. And according to my business school classes, the more commoditized a good or service, the more likely buyers are going to be focused exclusively on price. 

However, we at Keyframe can imagine a not-too-distant future where climate-related market decisions become much less price elastic. As younger people — the ones who are, by definition, most likely to face the impacts of climate change — age into buying roles, it shouldn’t be a surprise if consumer behavior changes. Even “green” commodities such as electricity and fuel may be able to enjoy price premia over their “brown” counterparts. An NREL study from way back in 1999 found that consumers would be willing, on average, to pay $5-10 per month more for clean electricity. For context, in the US, at ~16-17 metric tons per person per year of emissions and using a $50/ton total social cost of carbon, the monthly social cost of our carbon emissions is $70/person/month, roughly equal to the average monthly cell phone bill.

As climate change inevitably gains greater mindshare in business and consumers, it stands to reason that we might actually be able to make a real dent with bottoms-up decarbonization. In such a world, a whole host of technologies and products could step into the spotlight: blockchain technology to track green electrons and gallons of fuel; platforms that allow people and companies to broadcast their green consumption and policies; trackers that use various behavioral data streams to track personal GHG emissions and integrate with health and fitness apps. The first and second derivative impacts are unimaginably expansive.

In any case, the “solution” to climate change will necessarily be piecemeal, and regulatory change is the best route to a decarbonization path that is the most efficient and equitable. But we at Keyframe also believe that conquering climate change will require bottoms-up decarbonization and the resulting shift in private market behavior will unlock a whole slew of business models and market structures.

What do you think? What else is unlocked in a world of bottoms-up decarbonization? We’d love to hear from you! You can reach me at



The views expressed here are those of the individual Keyframe Capital personnel quoted and are not the views of Keyframe Capital or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by Keyframe Capital. While taken from sources believed to be reliable, Keyframe has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation.

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