Nature-based Carbon Removal: DroneSeed’s Reforestation Model Flashcards
Grant Canary, CEO of DroneSeed, a startup company designed to accelerate reforestation after wildfires, shares his perspective on the landscape of nature-based carbon removal solutions and how DroneSeed has developed a business model to address both climate and financial risk.
We reforest post wildfires. We’re vertically integrated, supplying seed, millions of seedlings, the field operations with the drones, and then carbon offsets to pay for it all.
In the space of carbon removal, there’s technology-based solutions and nature-based solutions, and you’re clearly operating in the nature-based solutions. Can you just give us a thumbnail sketch of what the landscape looks like?
Dec 2022
08/03/24
The economy of nature-based systems is always moving carbon around. So how do we create the storage places for it to capture what’s already been emitted into the atmosphere? What we do is we work in post-fire environments. For example, think about biochar (what’s left after a campfire, put it under the soil, carbon that’s stored in the soil improves the soil quality. Then there’s ocean-based reforestation by growing seaweed and then hauling it out to more deep ocean and letting it sink. Seaweed is carbon and it’s dropping down, and so that’s a form of storage. Then there’s planting mangroves, planting rangelands, another form of carbon capture.
I’ll hit one thing because I know it’s going to come up, which is, forest burns, forest regrows. Well, we’re seeing that like glaciers, like coral, natural systems being disrupted by climate change. The size and severity of fires is reducing that probability of natural regrowth from 90% to 60%, to 40%, depending on the ecosystem and the species, the point is it’s declining significantly. The size of the fire used to be that 10,000 acres was a once in a career fire for a firefighter. Now, that’s no longer the case with 100,000 plus acres, a million acres at a time burning.
How do we think about, at a high level, the pros and cons of nature-based solutions versus technology-based solution?
One of them is real obvious, which is cost and quantity. What’s the amount that can be captured? What is the cost point? Direct air carbon capture anywhere from $1,500, $2,000 upwards. There’s also how much of a tonnage is it going to capture, and then there’s also the what’s the space that that takes up. If you imagine millions of tons of anything, could be rocks, could be trees, it takes up a lot of space.
There are these questions: “What’s the permanence? What’s the additionality?” Well, we’re post-fire, and as a part of the methodology we utilize, which is Climate Action Reserves methodology, it competes with Verra and Gold Standard. Was that forest going to regrow? The answer is, in the projects that we do, no.
We are hitting the high severity areas, specifically, and there are checkpoints on how much of the canopy is left after a fire, and which acreages are eligible for projects. A high severity fire torches all the seeds in the soil. It burns several inches down, and it burns all the way up to the tops of the trees where there’s coats. A low severity fire, which is what historically went through, was like crème brûlée, and it left this little burned cap, but then the soil, in our metaphor, is the gooey yellow bits and the seeds are all happy there and ready to pop up. Similarly, it burned the bushy bits of the tree in the middle but left the cones up top to rain down. So with high severity fires, we see that that seed source is being eliminated and it’s being eliminated across 100,000 plus acre areas or million plus acre areas. So that additionality is a significant question.
So you’re targeting these particular types of sites that have low to no feasible on their own regenerative capacity, and that’s where you’re deploying your technology with drones, dropping seeds, using topo maps to try and figure out how much and where to drop the seeds. Is that how that’s working?
Where we come in with the acquisition of Silvaseed, which we bought in 2021, it’s 130 years old, and we’ve expanded to become the largest private seed bank, is we start much earlier in the process. Utilizing the wrong seed decreases the probability of survival and establishment significantly. So it can cause mass mortality events later in the project’s life.
So we start all the way back at how do we make sure there’s plentiful seed and support communities affected by fire. At a very micro level, it’s native, it’s local, and because the supply chain’s been completely overwhelmed by the size and severity of fires, there’s a complete lack of seed. We work with consulting foresters that are local to the communities. They know the sites, they know the contractors. Without us, there’s a contractor that had to lobby state authorities to get access to the seed, had to lobby to get access to nurseries.
With us, we’ve already got the inventory with Silvaseed, and in areas where we’re building and expanding such as this one, we were able to identify, “Here’s where there is mast or plentiful cones on the trees that happens once or twice a decade.” Organize the site access so people don’t just let everybody onto their land. Get people up in the trees, rock climbing up, collecting these cones. Process them at Silvaseed. Get them into seed vessels for our drones, and then get them into the nursery to grow seedlings and then deploy the drones, get them out to site, and then follow up six to eight months later, which is significantly faster than the industry average because we’re utilizing more sophisticated greenhouses and then pay for it all.
We pay for all of that with carbon offsets, and that wouldn’t be possible otherwise, and that’s because for a lot of these sites, there used to be mills and things that would be able to process timber trees that are cut and then that revenue source then paid for the reforestation. Well, a lot of those mills have since been shut down due to environmental regulations or offshoring of jobs. Then the trees themselves just were consumed in a fire. So where’s the money going to come from to reforest the average of 7.5 million acres that burn each year? That’s the 10-year average in the US. So that’s really where carbon offsets come in. For the first time in 2019, there was a methodology created by the Climate Action Reserve to provide funding utilizing offsets for this, and that’s what we do.
You’ve mentioned seeds and seedlings and drones. So help me understand the process. So are the drones dropping seeds? Are they dropping seedlings? What’s the difference between seeds and seedlings? What’s the role of greenhouses here?
Seedlings are small baby trees grown in a greenhouse. I think Charlie Brown Christmas tree size. For seeds, we’ve manufactured a seed vessel that we then drop with a drone and it contains that seed that we’ve collected. It’s about the size of a hockey puck. It has natural fibers that help it soak up moisture, retain it for the seed because lack of water kills trees, and then also deter predation.
You’re planting seeds and seedlings hoping for the collection to yield enough growth? Yes, very much so. We plant manually in areas that we can access. When I was originally getting started, what’s some of the biggest difficulties is site access, in some cases, really steep area. So in the areas where those areas are really, really good for drone utilization, and then there’s biological advantages for the rest of the site, and then there’s the follow up with seedlings, and yes, we do do that manually.
So just to give a sense, a picture of this, how big is a drone? What’s the wingspan, for example?
It’s about eight feet in diameter. It’s a hexacopter, has six props. If you stand it up on end, it’s taller than I am, and carries about a 57-pound payload. So it’s definitely bigger than anything that most people are familiar with. The process goes through in three steps. Step one, go out there with a small aircraft, utilize LIDAR, utilize multi-spectral imaging. LIDAR is like a little laser, shoots out about 800,000 points per second. It’s what self-driving cars are utilizing to sense other cars around them in some cases. That creates a 3D terrain map.
Step two: We process it and then we remove out all of the areas that we don’t think a tree’s going to grow really well. So some of these would be really simple like don’t plant it on the gravel road. This helps us create flight paths and it helps us remove out rock phases, any existing vegetation that survived a fire, for example, like blackberry patches. We want to remove those out, to save the seeds.
Then we follow up with the third step, which is come out to site. We’re the first and only FA-approved for that heavy lift, so more than 57 pounds of payload, 118 pounds all up weight, utilizing beyond visual line of sight, and then flying multiple aircraft per pilot. We’re approved everywhere west of Colorado. We’re approved in Canada. Where we basically fly 2-5 aircraft at a time, they go out, they execute these pre-programmed missions, they drop these seed vessels in places where they’ll have a higher probability of establishing.
For some of our projects, we take entire semi-trucks full of pallets of seed vessels, pack them in, and then into the drones, and then they go up, one, two, three, four, five, and go out, execute their mission and come back. Got about an 8-18-minute flight time.
How do you then know how much a biomass is being developed, how much carbon you can take credit for?
There’s a couple of monitoring, reporting, and verification methods. The very first one is to wait and see what the establishment is. So you do the seed vessels, you come back with the seedlings, and then a minimum of a year later, a third party under Climate Action Reserves methodology comes out and does what has been done for decades in forestry, which is just random plots. They call it a couple meters in diameter and they measure how many trees or little baby trees have grown up.
Why after a year? because it’s got to go through a summer. It’s got to go through a dry season. Lack of water is a thing that kills trees. This is in response and evolution and growth of carbon methodologies. There have been examples where people have paid for a bunch of trees to be planted, and they’d get a bunch of good press like, “Great. We’ve got all these trees growing,” and then a year later they’re all dead. They were the wrong trees, they weren’t from the right seed zones. Maybe there’s a whole bunch of root causes.
In some cases, it’s just really bad luck. There was a heat dome and electrical cables were melting and other things were happening and seedlings didn’t survive. So it’s a minimum of a year later, and what happens over that year is the tree survives by connecting with the hydrology of the site, so sending roots down as fast as possible. and then that allows them to survive even in dry conditions. So they get those measurements. Climate Action Reserve utilizes those same measurements–it’s very conservative–of how many tons will be captured over the next 100 years by that site.
So they’re forecasting after year one by taking samples across the area, plugging into the algorithms that have been developed by forestry companies and academics over the years trying to predict timber growth, and giving some estimates of how much carbon will be embedded in the trees in 100 years. How much does this estimate depend on weather patterns? How precise do those estimates turn out to be?
The initial establishment is what really is the key factor there. So that’s how they’ve sorted out for that one year. For the hundred years, there’s a big difference between what occurs or what is credited for a hundred years. There’s a nationally accredited land trust that is funded to monitor for a hundred years. They are funded as a part of the project setup cost, just like a university, with an endowment. It gets invested in the stock market. It returns a percentage each year. That pays for an annual site report and a site visit usually every about five years.
This is a really stringent methodology to have these easements (access to land). It gives a lot of assurance to the offset purchasers that their offsets are going to be maintained and captured, and that tonnage capture is going to occur. There’s somebody monitoring, and we see a really big role for satellite tasking to be making that process even more cost effective. Can we avoid the drive out in the truck and instead just be like, “Yup, 20 years in, there’s a lot of trees. We could see them on the satellite photos.” So that’s an example of what that looks like over time.
Just to be clear, so the first part here of the story is you’re selling these offsets based on a forecast, a forecast that’s been tuned over the past decades by forestry companies and academics about given this amount of density of seedlings or saplings by this point, how much carbon is going to be embedded in this forest in 10 years or in 100 years. You set up a mechanism for 100 years based on an endowment model to measure and assess the reality against this forecast.
What if your forecast is too conservative or not conservative enough? Forest is one idea or blight or other development or someone comes in and, I don’t know, illegally harvests the land, which maybe is less likely to occur in the US but more likely in other countries. There’s a bunch of different perturbations that might occur over that time. So what’s the mechanism then? If you’ve taken the money from the purchaser, they’ve claimed based on this forecast that we’re going to reduce this much carbon. The question is what happens when that forecast is wrong?
No offsets get issued until Climate Action Reserve is like, “Yup, trees are alive and well and happy, and this is the species, this is the density.” We’ve got the second, which is for our projects, there’s an easement placed on the property. That is, to your question there, why do we have assurance that that’s not going to get cut. There’s somebody who holds a right to make sure that there isn’t any cuttings. It really benefits from having that conservation easement because you can assume that no one’s going to cut this, because there is a group that’s funded to monitor to make sure.
Now, can you do selective thinning for forest health? Yes. Can you have eco lodges and other things? Yes. As long as you have a minimum quantity of trees breaker specified by the project, you can do those things. Can you have elk habitat and hunting trips and mountain biking? Yes. You can do all those things. So it’s not that the land can’t be used. It’s very much, and the landowner gets a tax benefit from the easement, but you gotta have this minimum quantity trees breaker and a lot of landowners want that.
Then the third one is, “Okay. What if there’s a reversal? What if there’s ice? What if there’s fire? What if there’s beetles? What if there’s other things?” One is that there is an insurance buffer pool. So every offset project, as a part of getting set up, so Shopify, so others when they buy offsets, they’ve got assurance that this tonnage is going to be removed. Every project contributes a portion of offsets to a pool, and just like medical, just like auto insurance, if there is a reversal like a fire and our project saves a hundred thousand tons, it’s fully consumed, all of the trees are burned up, then the offsets are retired from that pool that’s contributed to by other projects.
The followup question to that is, “Well, but climate change, Grant, you’ve told me that it’s getting worse and worse, fires are getting larger and more severe. What happens if we see more fire?” Well, just with like other insurance mechanisms, premiums go up. So there’s more projects contributing into the pool that go forward in the future. We’re seeing a really significant increase in price in carbon offsets. So we see the same thing where that would likely be offset by the increasing price due to the lack of offsets in the system.
For our projects, we utilize 8 species that is good for fire. Different species have different evolved mechanisms for dealing with fire. Ponderosa pine is my favorite one to cite. It’s like a crash bumper on a car. The bark is designed to burn for a little bit. So it slows down fire and that’s good for maintaining it more of a low severity fire than a high severity.
Then we utilize a seed that has a much wider genetic band. So because we collect from the wild with Silvaseed and we’re not doing orchard seeds, which are seeds that have been bred over time to grow straight, grow fat, grow tall. We’re collecting from the full spectrum of trees, and so all the arguments around GMO for susceptibility to insects and other things apply here, which is that our trees are broader genetics, more survival, regardless of whether it’s ice or fire or insects.
Lastly, much lower density of target, meaning that we’re looking for temperate conifers 130, 200 trees per acre. That is very different than what you’d see with private forest, where you’re trying to optimize 300, 400 trees per acre. our forests, much lower density, that’s much better for fire. So we expect fire to be a part of the project life cycle. We expect the trees to survive because of genetics, lower density, multiple species. That is a big value.
Let me take you back to the insurance question. So if you have home insurance and you have a dramatic fire, in some cases, you can take the money and go build a house somewhere else or you can rebuild the house. So in this case, that analogy in my mind is someone pays you for an offset based on an ex ante credit and the projection of how much carbon will actually be sequestered, and fire blows through there in year five. So the insurance kicks in. Is there an option of whether to reimburse the person who purchased the offset in the first place and say, “Here’s your money back. It didn’t pan out,” or is it all about making good on the contract, ensuring that, “We will indeed offset the amount that we said we’re going to offset. We’re just going to do it somewhere else”?
It’s really about providing assurance that the carbon was captured. So if that’s coming out of the offset pool, for a lot of buyers out there, what they’re looking for, if I could speak for them, is, “I want assurance that this tonnage is going to be captured over time here.” Ideally, it would be from this project. However, if it’s not, it would be coming from somewhere else in the same methodology. Just to be very clear, the methodology does not overlap into oceans or others. It’s just reforestation. It’s just within Climate Action Reserve, who maintains this insurance pool.
It’s not a pool of money, it’s a pool of offsets. So say a project was like, “Hey, over a hundred years, there’s going to be a hundred thousand tons that are going to be captured, but out of that we’re going to take 20,000 of those,” or there’s a percentage, and that’s going to go into the offset pool. So that way, we have a hundred projects that do that, all of a sudden there’s a lot of offsets in that pool and we then look at it and say, “Okay. Great. Well, one project suffered a fire. Great. Well, then let’s retire that quantity for that project out of that pool.”
This is how other insurance mechanisms work with auto and health and otherwise. You’re not in an accident for 10 years and all of a sudden you do have an accident, you’ve got to make that withdrawal. There’s a reason there’s that money available is because everybody else who’s not having an accident for 10 years is paying premiums.
Yes, but here, it’s a little bit different because you’re actually creating a buffer stock of inventory from day one. If I give you money to say, “I’d like to invest in a hundred thousand carbon credits,” you’re going to take the money and actually plant enough so that there’s not just a hundred thousand but also some buffer, which is a pooled buffer, which then gets allocated to the person whose forest doesn’t work out as one had anticipated. So it’s a little bit different than a financial payout. It’s actually a buffer inventory.
Yes, it’s a buffer. Let’s make no mistake about it. Climate Action Reserve is the party here. It’s not a trust in DroneSeed. It’s trust in the methodology, and this is why Verra and Gold Standard and Climate Action Reserve are the high quality offset brands is they’ll say, “Your project, we think it’ll capture a hundred thousand tons over the next a hundred years, but we’re only going to even issue you this many tons, say 80,000, 90,000, whatever the number, because we are taking the rest and putting it into that buffer pool.”
It provides the landowners a source of capital that they would not otherwise have to be able to reforest. Nearly every offset you or I or anybody else has ever heard of has been in protecting existing trees. So trees that are fully mature, put an easement on it, can’t cut them down, and that’s the captured ton, if you will.
We want to protect existing trees. However, that meant that if you wanted to do reforestation, you had to wait 25 years before you could get, “Great. Now, the trees are growing, can I have my offsets under those prior methodologies?” That means you would have competed with 25 years of compounded interest, and that meant that virtually nobody did it. The compounded interest is a very difficult bar to clear as far as making the project economically viable. So this forecast is really what does that in a big way.
Could you talk a little bit about the customers that you are serving and how you differentiate yourself from other nature-based solutions that engage in carbon removal? What’s the pitch?
Buying carbon offsets is really good business. Otherwise, businesses just wouldn’t do it. There are different motivations, but ultimately, it boils down to recruiting talent, winning customers, lower costs, managing government regulatory, and getting paid. Your business offer is more competitive if you are a more sustainable company. People want to work at a place that’s going to make the future a brighter place so that your offer is more competitive there. Winning customers as well. People don’t feel guilty about what they’re buying. The branding has to talk about the future
What people may be less familiar with is Shopify. Shopify allows people to set up a website, do the payment processing to sell things online. They offer carbon neutral shipping to all of their customers. Now, how does that work? They analyze your shipping at the end of the month, and then they’ve done all of the hard work to source high quality removal offsets from people like us. You can pay for different tiers of nature-based and tech-based. So that differentiates them from other payment processors, other points of sale technology. They have a feature that makes them better and more attractive to their users.
The last one is real estate. Companies that are building buildings, they should be doing all of the things that eliminate the source of emissions with their HVAC systems, with use of low flow water. U.S. Green Building council, others do a great job with this, but inevitably, there’s going to be some emissions and that’s where offsets play a role.
Builders get paid on both ends by building net zero buildings. So that comes in the form of green bonds, where the interest rate is slightly lower because it’s a net zero building. You also get a higher tenant rate because you’ve got tenants that want to have low carbon buildings. So by having a net zero building, they’re willing to pay a premium on the tenant rate.
Inevitably, there’s going to be some emissions that occur from transport or other things, and money should be spent on decarbonization, but there’s some emerging thought or practice that 5% or 10% or some portion should then be in offsets, and that’s where we come in. We capture that tonnage elsewhere in the form of trees, and then there are other forms, such as direct air carbon capture.
What we do by being at a much lower price point and higher volume, and you could see anywhere for us right now anywhere from $25 up to $40 based on volume, we can provide a lot of the volume so that you can buy 70% from us, 20% from some other source like oceans or direct air carbon capture, et cetera. All of a sudden, that hit to the bottom line is much lower, and that’s a really important value feature. If you’re paying $1,500 a ton for your direct air and it’s all direct air carbon capture, that’s incredibly expensive. It’s a huge hit to your EBITDA. You could see $230 per ton price point by 2030. So that would be a huge hit to companies.
Let’s talk about the companies, your company, other companies that you’re competing with. Where are they all getting capital from? There’s loan programs out there through Department of Energy and other federal programs. There’s VC money floating around. There’s endowment money floating around. What’s a common source for DroneSeed and for its competitors?
We’ve got investors coming from the VC space. We’ve got Alexis Ohanian, founder of Reddit, 776, Social Capital, Jay Zaveri there, Marc Benioff, the family office there, DBL, a couple of others. 2015, when we got started, investors were not interested in hearing about Cleantech, “Cleantech 1.0 had died. Don’t talk to me about it, but we’re very interested in automation, we’re interested in drones.” So that’s where we really focused on and built out and developed our offerings.
What we learned and evolved was, if there’s not enough seed, it doesn’t really help to have a deployment mechanism for it. So that’s why we bought Silvaseed in 2021. So now, we’re expanding that and utilizing more technology to be vertically integrated. So for us,** it’s really been venture capital, and that provides a source by being for-profit. We have a sustainable source of capital**.
Some of our listeners are likely contemplating a career and business in climate change and maybe even in nature-based carbon removal. What advice do you have? What resources should they consult? How should they think about getting into this field or learning more about it?
The things that were really helpful for me were Eric Ries’ Lean Startup and Hard Thing About Hard Things. Lean Startup is really the process of going through the ideation,. There’s a lot of ideas that can be thought of and like, “It would be cool if …” Then there’s got to be like, “Well, who would be the competitor in that space that would take you out?”
Hard Thing About Hard Things, really helpful in like, “Here’s all the ups and downs in being a startup founder,” and that was really instructive. Most books are in management or take a famous company like Google, divide it into four quadrants, add other companies, and you end up with some methodology around how to build a company,” and they were like, “This is not that book. This is how screwed things up,” and in some cases was able to fix it. I think that that was a helpful launch point for that book.
I think for folks that are maybe not necessarily looking to be a founder but looking to be a part of climate tech, please, please come join us. We absolutely need you. Accounting, not necessarily thought of as the innovative field. There’s a whole heyday of accounting that’s happening for human resource professionals, HR. Recruiting of people is a big deal for UX, for policy. There’s a whole climate tech field that can be accessed. So please come over.
The resources for that, Climate Draft is one. Climate Base is another. These are job boards and communities. There’s 776, one of our investors, has climate fellows. It’s a website for oil and gas professionals that want to come join the other side and get into geothermal or whatever. It matches up whatever your career is in oil and gas. into what might be renewable.
And my Climate Journey. My Climate journey is more of a community. There’s a podcast for certain, and it’s got a lot of stories that are similar to mine, but it’s also got a Slack community that allows people helping people. Call it the help desk, if you will, which is like maybe you have a question that’s not covered by a job board. That gives access to direct people of what their journey has been, and that’s really helpful and powerful as well. I’ll end on one last note, which is Ministry for the Future. Kim Stanley Robinson, known for his sci-fi, won nearly every award, but painted a beautiful picture of what does a bright future look like.
