What’s the first thing you would do after winning a $50 million prize for your promising solution for both carbon removal and soil health?
For Mati Carbon, the answer is: Raise more money.
Last month, the Houston-based startup won the XPRIZE Carbon Removal competition, taking home the $50 million grand prize backed by Elon Musk’s foundation for its “enhanced rock weathering” process that sequesters carbon in soil and improves soil health. This week, Mati secured a new debt facility from JP Morgan to fund its carbon removal projects in India, Zambia and Tanzania.
With the XPRIZE grant funding, Mati Carbon is piloting projects in new geographies; with the debt facility, it will bring proven projects to scale and sell carbon credits to corporate and sovereign buyers.
“We want the risk to be taken on by the grant money, which will fail, and succeed,” Mati Carbon founder Shantanu Agarwal tells ImpactAlpha. “And once that’s done, to bring other funders along to scale up.” The partnership with JP Morgan, he adds, “allows us to have a facility that can be planetary in scale.”
With global carbon emissions still rising, carbon removal is a necessary and potentially lucrative business. Carbon removal credits based on carbon removed from the atmosphere can fetch up to several hundred dollars per ton from eager buyers. Such credits, from activities like forest replanting, are deemed higher quality and fetch higher prices because their impact is both longer lasting and scientifically provable.
That’s in contrast to the carbon avoidance credits available today in the voluntary markets, where corporate buyers have been paying less than $10 per ton to offset their environmental footprints.
Removal credits generated using methods like enhanced rock weathering represent the premium tier of carbon credits. They’ve been proven to sequester carbon for thousands of years, however they represent a small minority of all available credits available.
Co-benefits
Mati Carbon has since 2022 been testing enhanced rock weathering, or ERW, which uses pulverized, mineral-rich rock varieties to replenish degraded soil so that it can sequester carbon naturally. The method is an alternative to engineered forms of carbon sequestration, like direct air capture, which siphons CO2 directly from the atmosphere.
Most methods of carbon capture and removal are fairly early in their development. The advantage that nature-based methods like enhanced rock weathering have over engineered approaches is they’re far less energy intensive and they have significant co-benefits, like restoring soil health.
In Mati Carbon’s case, they also support the livelihoods of low-income and climate-vulnerable farmers. The organization is committed to sharing 50% of proceeds from carbon credit sales with its farmers. The organization’s goal is to develop projects with farmers in 30 to 50 countries in the next five to seven years. It wants to reach 100 million farmers.
“It’s notable that an enterprise working in the Global South, with developmental outcomes at its core, went on to win the top place in the largest-ever XPRIZE,” says Ashish Kumar, a climate finance expert and advisor to Mati Carbon.
“We were perceived as the under-dogs in the top-20 finalists, competing as a nonprofit in a race with large VC-backed enterprises with long-term corporate off-takes,” Kumar adds. The grand prize win validated “our robust, scalable and low-cost pathway for gigaton-scale carbon removal, which simultaneously delivers co-benefits of boosting soil health, smallholder farmer income and climate adaptation.”
Carbon trading
Mati Carbon sold its first batch of credits earlier this year to e-commerce giant Shopify. The organization has proven its technology and launched projects in three countries. It hopes to be operating in six by year end.
“Corporate buyers, including corporates in the US, are continuing to buy in high volumes in commitment to their net-zero goals,” says Agarwal. “The voluntary carbon market is definitely healthy and continuing to grow.”
At the country level, many governments are advancing carbon-related policies and regulations. Japan, for example, is expected to transition its voluntary emissions trading system, GX League, into a compliance-based system next year. Carbon trading “even has bipartisan support in the US,” says Agarwal.
“This is something we can’t avoid,” he says. “Public opinion will drive this further as the climate situation gets worse.”
Climate vulnerability
Agarwal started Mati Carbon three years ago as the next phase of a career he started as an oil and gas engineer. He moved through management consulting and private equity before founding a climate tech startup.
“I had decided back in 2017 that I needed to do something for the climate, to figure out a way to remove carbon at scale so that my children, the next generations, don’t have this problem to deal with,” Agarwal recalls.
Agarwal was a co-founder of Sustaera, a North Carolina-based direct air capture startup that has secured backing from the Breakthrough Energy Ventures and Grantham Trust’s Neglected Climate Opportunities, as well as grant funding from the US Department of Energy.
Sustaera also won a $1 million award for XPRIZE’s $100 million, four-year-long Carbon Removal competition. But Agarwal’s nature-based method took home the big prize.
Mechanized removal, Agarwals believes, is still years away from scalability. “It requires a lot of energy,” he says. Until there is sufficient excess renewable energy to power direct air capture, “there’s no point using a machine that has to be powered by fossil fuels to remove carbon.”
After visiting a number of small farms in 2021, Agarwal shifted his focus from mechanized removal to nature-based. The farmers he met had lost crops to changing weather patterns and natural disasters; some were forced into migrant labor to pay off debt.
“I was shocked by their climate vulnerability,” he says. “There’s a huge sector of the population for whom climate change is not the future, it’s now.”
As Agarwal was speaking to ImpactAlpha, he had just closed out a day “digging for rocks” on a scouting visit in central Vietnam. There, farmers grow rice, maize and sugar cane on plots of land half an acre to seven acres in size.
“This part of the country is full of small farmers where their productivity is lower, where they’re growing a smaller number of crops,” than farmers in Vietnam’s lush Mekong Valley in the north, Agarwal says. “These are the most vulnerable people in the country.”
Tropical tech
Mati Carbon’s technology and approach to carbon capture works only in warm, tropical zones. That still leaves plenty of places to experiment: Agarwal estimates there are anywhere between 50 and 75 countries where ERW could work and support smallholder farmers.
“Priority number one is we select a location where ERW can work. Next we pick where the highest climate vulnerability is,” explains Agarwal.
The company has done an extensive analysis of zones that have the types of rocks it requires, and a secondary analysis of locations that intersect with smallholder farmers.
“And the number we came up with is stupendous: 200 million farmers,” Agarwal says. Factoring in their families, Mati Carbon estimates that a billion people could be impacted by enhanced rock weathering and carbon trading. “One in eight people in the world could benefit.”
Each new agroecology zone Mati Carbon identifies requires considerable – and costly – experimentation and modification of its approach, however. What works in the humid rice paddies in central India needs to be adapted for a more arid environment in southern Zambia, says Agarwal. “It takes two to three years of science to become a commercially viable pathway that can be scaled in a new country or agroecology zone.”
Risk guarantee
Each of the XPRIZE finalists removed 1,000 tons of carbon in the competition’s final year. Mati has committed its $50 million winnings to setting up and experimenting in new geographies. To accomplish the reach and social impact that he wants, Agarwal is set on raising $500 million in grants.
Mati Carbon’s grant-raising ambitions need to be matched with other kinds of capital for the model to scale. That’s what the debt facility with JP Morgan will help accomplish. As Mati Carbon identifies suitable and financially-viable sites, the debt will finance growth and replicability.
The partners didn’t disclose the size of the debt facility, which will grow over time.
“This work is actively helping to decarbonize the globe, grow local economies and build a more sustainable future,” said JP Morgan’s Kelly Belcher in a statement.
The partners used a traditional and familiar lending model: a fixed-term loan. The Schmidt Family Foundation provided a risk guarantee to seal the bank’s support.
“This collaboration demonstrates how innovative approaches – in technology and in finance – can drive both climate impact and economic opportunity,” said Schmidt’s Patrick McGrath.
Farmers first
Agarwal envisions growth through a franchise model, using technology licensed from its nonprofit. Each franchise could raise both debt and equity as needed, he says, but Mati Carbon’s technology will remain housed in a nonprofit entity that will not raise equity. Each social enterprise offshoot will be required to commit to sharing 50% of its carbon credit proceeds with farmers.
“I started this with a specific purpose: this is for the farmer first, and carbon removal second. And because of that mission, I did not take on equity because as soon as I did, I would be betrothed to the idea that I need to make a return for the investor,” Agarwal shares.
Shortly after launching Mati Carbon, he recalls, the venture had equity offers, including from impact investors.
“But I was in private equity, I knew the trade, and it always comes down to the return,” he says. “It would have forced my hand to go after the fastest way to scale up. I realized that if I wanted to do this for the farmer, I needed to figure out a different way to do it.”
That commitment to impact inadvertently strengthened the business case for investing in the most vulnerable farmers.
“We found that the most destitute farmers typically have the most degraded soils, and that’s where ERW happens the fastest, which means faster creation of carbon credits,” Agarwal explains.
Having the financial flexibility to test where its technology is suitable is what ultimately allows Mati Carbon to commercialize.
“The reason I’m on the ground right now myself is to figure out where to go, to look at the rock, to have conversations with farmers. But once the technology is proven, we want third parties to take it and scale it,” Agarwal says.
“Private capital needs to come in for a planetary-level solution,” he adds. “Because only then can we reach 100 million farmers.”
