NCX CEO Zack Parisa(L) talks here about forests with forester Jon Lindsay and landowner John Ross (R) in Savannah, Tennessee.
Photo courtesy NCX
A project started by a college couple who met a dozen years ago to study forestry at Yale has turned into a fast-growing startup with the backing of Salesforce leader Marc Benioff. who sits on its board of directors.
NCX co-founders Zack Parisa and Max Nova used satellite imagery and machine learning software to generate a high-resolution image of forest inventory in the United States, which they first sold to federal agencies like the United States Forest Service and conservation groups like The Nature Conservatory.
Now they are taking that expertise and using it to fight climate change by facilitating the market for carbon offsets – a sort of voucher representing a certain amount of carbon dioxide that is either absorbed or not emitted into the atmosphere. A company can claim to be “net zero” even if it still emits greenhouse gas emissions, as long as it has paid enough carbon offsets to offset the remaining emissions.
Trees absorb carbon dioxide. If landowners pledge to keep trees alive instead of cutting them down to sell them for timber, they can sell the resulting carbon offsets to companies looking to meet their net-zero goals. NCX’s software helps landowners map the trees on their property so they can account for the amount of carbon dioxide they are absorbing, giving companies more confidence that the carbon offsets they buy are legit.
In addition to making tree software, NCX has created a marketplace where it gathers forest owners with companies seeking to purchase the resulting carbon credits. NCX then earns money by collecting a percentage of the purchase price of the carbon offsets.
“Our job as a company is to help ensure that every landowner in the United States can sell the carbon from their forests to help meet this skyrocketing demand,” Nova told CNBC on Monday. .
The voluntary carbon offset market is unregulated and has been abused by companies looking for easy PR gain, in a form of “greenwashing”.
Parisa thinks precise measurement can help solve this problem.
“The way we design and measure forest carbon projects has not always lived up to potential or intentions – many have failed to deliver real climate impact,” CEO wrote in a blog post in May. “A bit like the ‘horseless carriage’ or the cell phone, we can’t stop at our first designs. It is time for forest carbon projects to do the same. »
On Wednesday, NCX announced that it had raised $50 million from a number of investors, including Benioff’s investment fund, Time Ventures and JP Morgan Asset Management. It will use this money, part of the total $74.4 million raised, to expand outside of the United States and to develop software management tools for other natural resources besides trees.
“We called the company Natural Capital Exchange, not Forest Carbon Exchange, because there are all sorts of things we more or less want in the woods: we want more carbon, less forest fires, more habitats for animals, less erosion. And so carbon for us is really step one,” Nova said.
The company is also hiring quickly. Last year, the team grew from 10 to 50 people and plans to have 100 employees by the end of 2022.
Where NCX works with landowners to get them to farm their land for carbon credits.
Photo courtesy NCX
The voluntary carbon market is relatively small, but growing rapidly. In 2021, the voluntary carbon footprint the offset market has exceeded $1 billionaccording to data published in November by the association environmental financial organization Forest Trends & Ecosystem Marketplace. That’s a significant increase from $473 million in 2020, up from $320 million in 2019.
Parisa and Nova began their evolution into the carbon offset market in 2018, when they were accepted into Microsoft’s AI for Earth program. NCX worked with Microsoft’s Planetary Computer to prototype and create Basemap, a high-resolution forest inventory of the United States.
Thanks to this, NCX was able to launch a pilot program in Pennsylvania give landowners a way to get paid for not harvesting timber on the land they own.
Prior to the introduction of NCX software, only four of the approximately 19,000 landowners in McKean County, Pennsylvania, which make up only 5% of the county’s total area, were paid not to cut down their forests. Small landowners usually had to count trees manually, on foot in the woods, which made their involvement too costly.
Since then, NCX has grown its business and currently serves 2,470 landowners with a collective 4.3 million acres in 39 states.
“Basically we show up to landowners and say, ‘Hey guys, you heard like chopping down trees for money?’ And they say, ‘Yeah.’ And we say, “How about not cutting down trees for money and growing them for carbon? And they say, ‘How much money are you talking about?’ »
The money can vary a lot, depending on the species, age and number of trees on a listed property. Generally, though, if a landowner could earn $10,000 for cutting down their trees for a timber harvest, they could receive a payment of around $600 a year to keep their trees growing, NCX told CNBC. . At this rate, it would take about 17 years of payments to break even.
A satellite image of the NCX showing the carbon dioxide equivalent (CO2e) per acre.
At the other end of the transactions, NCX sells the resulting carbon offsets to Microsoft (which is also an investor), Rubicon, Incyte and Patch, to name a few. (Although Benioff’s company is an investor, Salesforce is not a customer.)
Customers commit to buying a carbon credit for one year, during which time landowners postpone timber harvesting on their land. The deal is built on trust, but taking satellite imagery measurements early in the year and year-end gives owners and buyers confidence. The company’s measurement approach attracted early interest from Verra, a non-profit organization that measures and sets standards for the voluntary carbon offset market, and certification of the organization could one day serve as further validation for his approach.
“We say all the time that metrics make the markets,” Nova told CNBC. “That’s the basis for making these markets work, and we do that through this satellite measurement of every acre every year. »
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Marc Benioff backs NCX, start-ups using satellites to count trees – Reuters