Climate Vault launches new carbon reduction venture

Climate Vault's approach to CO2 reduction allows companies to buy and lock up pollution permits in cap-and-trade markets, making it more expensive to generate emissions.

Climate Vault Solutions, a new company that provides market-based services for corporate carbon reduction, launched in June after closing a $9.4 million series A funding round.

The for-profit venture is an evolution of the nonprofit corporation Climate Vault Inc., which was founded in 2020 to bring market-based accountability to carbon reduction.

The Climate Vault approach uses regulated cap-and-trade compliance markets to purchase carbon dioxide permits and retire them, according to Andrew Dailey, co-founder of Climate Vault.

This means the major CO2 emitters that participate in the markets, including utilities and power plants, cannot use them. Since the number of permits is capped, keeping them off the market raises the overall cost of producing CO2 emissions, which reduces the amount of emissions.

The original idea behind Climate Vault was that the concept of the market was needed to address the climate challenge, Dailey said, because markets are highly scalable, highly efficient and closely verifiable.

"[Markets provide] price efficiency, they're super scalable, and the transactions that take place in the market are verifiable," he said. "This can lower CO2 emissions by putting a price tag on carbon and helping organizations reduce their overall footprint in a way that's cost-effective, transparent and verifiable."

Climate Vault Solutions participates in the two cap-and trade markets -- the California Air Resources Board and the Regional Greenhouse Gas Initiative, which includes 12 Eastern U.S. states.

Climate Vault helps organizations calculate their footprint, and then go into these cap-and-trade markets and purchase an equivalent number of tons.
Andrew DaileyCo-founder, Climate Vault

Heavy polluters in these regions must account for their CO2 emissions and purchase permits every year that allow them to pollute, which puts a price on the emissions, Dailey said.

"Climate Vault helps organizations calculate their footprint, and then go into these cap-and-trade markets and purchase an equivalent number of tons," he said. "One permit is 1 metric ton of carbon, so we pull the permits out and retire them, which effectively drives up the cost of CO2."

The newly launched for-profit company builds on the growth of Climate Vault, allowing it to expand quickly and launch more carbon reduction ventures, according to a company spokesperson. The funding allowed Climate Vault to nearly double its size from 18 to 30 full-time employees.

Nonprofit Climate Vault Inc. is based in Chicago, and Climate Vault Solutions will be headquartered in Seattle.

The funding round was led by the Inclusive Capital Partners Foundation, a private foundation based in San Francisco, with additional investment from King Philanthropies, Valor Siren Ventures and ThirdStream Partners.

Climate Vault has partnered with 40 companies from a variety of industries to calculate and reduce their CO2 emissions. According to the company, its partners include Northern Trust Bank, Intuit, Morningstar, T. Rowe Price, Qlik, Vanderbilt University, Cleary Gottlieb, DRW and Eco Plus Coffee.

First step for manufacturers to reduce carbon footprint

Cloud ERP systems provider Rootstock Software has been a Climate Vault partner since 2021.

Rootstock was drawn to Climate Vault's unique approach to CO2 reduction of enabling its partners to buy and lock away the emissions permits in compliance-regulated regions, said David Stephans, CEO of Rootstock.

The ERP provider is also investing in technologies that enable companies to reduce emissions themselves, he said. It will be an important shift for Rootstock's customer base, which includes many midmarket manufacturers.

"Ultimately, that long game is the answer to address this climate challenge by having these companies take on these changes themselves," Stephans said. "We've seen tremendous change happening within our customer bases, as part of ESG initiatives to recognize the challenge and to drive change."

Climate Vault's CO2 reduction approach is reportable and metric-driven, which enables companies to clearly see the impacts of their efforts, he said. Eventually, many of its customers will establish initiatives to remove CO2 emissions, but the Climate Vault permit process allows them to start making a difference immediately.

"The concept of how a customer drives their own environmental change -- like a manufacturer who is a Rootstock customer -- takes on another level," Stephans said. "[Customers] are saying, 'It's going to take us time to control our own emissions and measure our impacts to meet regulatory requirements, and how can we make an impact?' This is a great steppingstone."

Jim O'Donnell is a senior news writer who covers ERP and other enterprise applications for TechTarget Editorial.

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