Startup Series: NCX
Today's guest is Zack Parisa, Co-Founder & CEO of NCX.
NCX, previously known as SilviaTerra, is a forest carbon marketplace. Developed in collaboration with Microsoft, NCX created an AI-powered forest called Basemap to connect American landowners with net-zero companies. For landowners, NCX makes it possible for them to get paid not to cut. For buyers, NCX provides greater transparency for carbon credits that has measurable and immediate impact. Built on a decade of industry-leading expertise, NCX takes a data-driven approach to democratize carbon markets in forests.
In this episode, Zack and I discuss NCX's mission, the company's origin story, and how Zack became climate motivated. We dive into the key phases and staging of NCX, their recent collaboration with Microsoft, and what makes the company unique. We also have a lively discussion about the controversies about carbon credits, why a voluntary market can only get us so far, and what policies would most accelerate NCX's success. It was great to have a conversation with Zack and learn more about NCX.
Enjoy the show!
You can find me on Twitter @jjacobs22 or @mcjpod and email at info@myclimatejourney.co, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded June 11, 2021
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Hello, everyone. This is Jason Jacobs and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help. Today's guest is Zack Parisa, co-founder and CEO of NCX, formerly known as SilviaTerra. Zack is a forester and biometrician by training. He spent the last decade developing cutting-edge tools for precision forest management, which NCX has put to work for some of America's largest land owners.
More recently, NCX collaborated with Microsoft to create Basemap, the first high-resolution forest inventory of the United States. They're using this data to build new markets for natural capital such as carbon, wildlife habitat, and fire risk reduction. I was excited for this one, as NCX has been generating quite a bit of buzz recently coming off their funding announcement from Marc Benioff, Albert Wenger at USV, and a slate of other high profile investors. We talk in this episode about Zack's journey to becoming an entrepreneur, the why behind NCX, the origin story, some of the twists and turns they've taken since the company was founded many years ago at this point, the recent shift in some of the work that they're done with Microsoft and other. But we also have a great discussion about the carbon market, the role of natural solutions, offsets, some of the knocks that people have on offsets, and also just the path forward, what some of the biggest issues are, the best ways to address them and how NCX is working every day to try to help. Zack, welcome to the show.
Zack Parisa: Thanks, Jason. Great to be with you.
Jason Jacobs: I'm excited. Yeah, yeah. I mean, certainly the name SilviaTerra was coming up for quite a while, and then, of course, more recently, NCX and you guys just had some big funding news and making a lot of exciting headway. So, I was really eager to get the opportunity to dig in with you and learn more and to enable our listeners to do the same.
Zack Parisa: Perfect. Yeah. Excited to chat with you and be part of the journey here.
Jason Jacobs: Yeah. And as I mentioned, I'm not normally outside, but I'm doing experiment and doing the recording from my backyard, so if anyone, any of the listeners hear birds chirping or chipmunks chasing each other around or things like that, that's because I am out in nature, which hopefully might become a recurring thing here. So, why don't we take it from the top? What's NCX?
Zack Parisa: Yeah. So, today, NCX is a data-driven forest carbon market that connects land owners of all sizes with pioneering net zero companies. And for land owners, that means putting carbon on the same economic footing as timber. So, just like land owners have financial offers to cut their trees, NCX makes it possible for them to get paid not to cut and to grow more carbon. From buyers, NCX provides greater transparency and knowing that their carbon credits are real and have a measurable, immediate impact.
Jason Jacobs: And how, how did all this come about? What's the origin story for the company or maybe-
Zack Parisa: Oh, man!
Jason Jacobs: ... further back, what's, what's the origin story for you, you know, caring about this area?
Zack Parisa: [laughs] Sure. Oh, man! Okay. So, I'll start with me. So, I ... Let's see. I grew up sort of in this funny place in North Alabama that has both amazing forests and, oddly enough, a NASA installation. They, in the 40s and 50s, they moved a bunch of German scientists there to work on rockets. And so, my dad worked in the space industry for NASA and I, seeing him as an, as an engineer, all I wanted to do was work outside. I saw that and was like, "No. I'm going to do something totally different," and I spent all my time in the woods. As like a first grader, I wanted to study insects. Through, like, most of elementary school, I wanted to be a zoologist, then a geologist for a long time. And then I met a guy who was a family friend and he's a forester and he showed me kind of what forestry was, kind of this confluence of ecology and economics, you know, coming together-
Jason Jacobs: What age was this?
Zack Parisa: 13, so 13 and, for me, that was it. I loved the idea of forestry. I loved sort of diving into all the different aspects that make forest communities work in and with our broader social community. Yeah, and, and I thought it was going to be a great path. I could work outside all the time. And went to undergrad for, for forestry and loved it but started taking more of a quantitative bend, really seeing that with kind of these, at the time, emerging technology and we're talking about like early 2000s, you know, LIDAR, remote sensing, you know, being able to use computational tools to assess imagery and be able to look at the forest through this broader lens was really exciting to me to be able to bring that information to bear on making better management decisions for forests and for, you know, forest-based communities was thrilling. I wanted to save the rain forest. That was, like, my big drive and so I wound up working for about a year in Brazil, working in Bolivia, study in Chile. And then, in grad school at Yale, working in Armenia and focusing on this idea that we can manage forests for these, like a full suite of benefits, all of the things that we know forests are valuable for beyond just timber. So, things like carbon, things like groundwater infiltration, flash flood prevention, wildlife habitat.
So, anyway, that was the, the genesis for me. I was really focused on helping people balance those decisions across the forested landscape, but what was lacking in all of those instances was information to be able to make those acre-by-acre, hectare-by-hectare type trade-offs. That's kind of a critical piece when talking about managing forests. If you're managing just for timber, you're probably not attending to all of those wildlife needs. If you're managing just for carbon, you're possibly missing some other things with those blinders on. And so, to understand those trade-offs, to understand those trade-offs over time, needed better information.
So, I wound up focusing all my research attention on use of satellite imagery and ground measurements to produce really high resolution, high, high-accuracy information about forests and to bring that information into the conversation about management and that's ... So, that's a long-winded way of saying that's how we started a company 11 years ago. So, long, kind of a, in the grand scheme of, of startups, I think I've, I've heard on other podcast a kind of a longer run, but that's where this started.
Jason Jacobs: So, it started as, as grad school work that then evolved into a company.
Zack Parisa: Exactly. You know, I thought I wanted to go onto become a researcher, a professor, and, and that would be the greatest contribution, but when I actually went out and talked with people that were managing forests in some of those places that I worked, both in the US and abroad, asking what journals they were reading, because I thought that's where I could, that's where I should publish, so they can put it to work. Pretty much everybody said, "You know, we're not reading the journals so much. We'd love if there was just a tool. We're busy. Like, we gotta, we gotta make something happen here."
And so, that was the origin of the company. I met my co-founder Max. He was computer science at Yale. I was wrapping up my grad work in forestry, you know, remote sensing stats. And so, we built this company to create better information to drive better decisions in forests and always with this idea that we could use that data to create markets like what NCX or the Natural Capital Exchange has become.
Jason Jacobs: Uh-huh [affirmative]. And so, when you started realizing that there was a gap in information about forests, what was the initial thought in terms of how that could be a business?
Zack Parisa: Right. Well, so, you know, the work that I had been doing, it was mostly, you know, it was with rural communities. You know, for grad work, it was rural communities in Armenia and it was driven by philanthropic dollars. You should do that work, but I'd also worked a bit with companies in the United States and I knew that they were using that same type of information to drive their normal management decisions, you know, when they cut, where they cut, how they harvest trees to produce things like lumber that produce houses and, and paper that, you know, that we write on.
Seeing that as kind of the, you know, that was the first kind of foothold and, you know, through grad work, I had been working a lot with, you know, there was, there were high hopes for carbon markets early on. You know, sort of early, mid 2000s and it was like we had a first pulse and it, it sort of, it waned a little bit, interest in, in carbon markets waned a bit and so we were focused on just building outs the tools so, you know, recognizing that this is a real critical need for society and we were going to be ready when the markets were ready and here we are.
Jason Jacobs: Uh-huh [affirmative]. And so, given that, I think you said the company started around 2012 and we're here in 2021. Certainly, we're, we're not going to go through kind of day by day and week by week with the play by play but with the benefit of hindsight, what are the key phases that the company's been through so far and maybe just talk about some of those twists and turns and then come back around, we can come back around to where we are today.
Zack Parisa: Sure. So, yeah. I started actually so 2010 was right where we, where Max and I started and we, we were coming off of just like basic research, right, and transitioning from basic research to a product that is functional to help guide management decisions in forest is itself a journey. You know, we were taking this core algorithm and we're testing it out in different forest types with clients and so we, you know, we were fully bootstrapped. We're just going, sitting down with people, hearing what their information issues are and starting to work with them on it.
So, learning how this worked in different forests, learning how, how to use and leverage different sensors, how to make it economically feasible so really, we were trying to drive value for these, you know, for these clients and that, that's a journey in and of itself. But then, about seven years ago, we started using that same type of data to inform kind of existing, you know, kind of early nascent carbon markets at the time. So, you know, the compliance market in, in California and voluntary forest carbon markets and we were trying to, you know, we were working with project developers to use that information to make those projects more streamlined, more efficient and we saw so much opportunity for improvement, not only with the way that those methodologies, those projects worked for land owners, but also how the measurements can be brought, brought up to better inform some of the aspects that underlie quality in carbon, in carbon credits and that's been sort of, what did I say? You have seven years, so it's, it's been a while working through some of that stuff and getting those ideas down on, on paper and now, now down on acres with landowners.
Jason Jacobs: And, NCX aside, what do the carbon markets look like at that time and compare and contrast that to what they look like today.
Zack Parisa: Sure. So, at that time, really early, it's, you know, it's incredible that the people of California made the commitment that they did to mitigating carbon, to dealing with climate change in a very constructive way, but it was brand new. I mean, people hadn't, you know, up until the time, you know, just a few, not so many years ago, there hadn't been payments for landowners to grow more carbon on their land and that was sort of like any new, new innovation. You know, the first airplane was, it's exiting. It was zero to one, and there were lots of things that landowners needed to learn, lots of things that professionals like us needed to think about and learn how to integrate that carbon into measurements, into, into management and lots of things we have to learn, you know, or, or needed to sort of understand about how to, how to work effectively with forest-based carbon credits overall, so that was, yeah, it was just a really exciting process to take part in and it was exceptional kind of pioneering work. So, yeah. It was wild.
Jason Jacobs: And so, what have the different incarnations of the company been? Did you go to market with an offering at that time and did you retrench and come with something different or was it several years of R&D? Like, what does the journey look like so far?
Zack Parisa: Sure. So, you know, initially, it was, it was adapting kind of the technology that we working with to facilitate the work we were, we were supporting on carbon credits overall in these forest carbon markets. And so it was just working, working within the community, kind of talking with lots of different parties about what was working well, you know, what could be improved.
But, you know, in that process, you know, while, on one hand, we were working on the carbon credit origination side, we were supporting a lot of, a lot of folks that were doing that [inaudible 00:13:56] work, we were also working with a lot of the forest, sort of large forest landowners and those were the only ones that could really, you know, could really participate in those programs at the time.
The cost of measurements and, and the cost of going through verification were really high. It took a long time, and so it excluded a lot of small land owners. We also saw that, you know, since we supported those, those larger landowners on their normal business-as-usual management, we were helping them with their inventories. We were helping them with their growth in yields that are projecting what the forest could become in the future and then helping them make the economic decisions about what management decisions to, to make, what to cut and where. We saw that, again, that there were opportunities for not only the measurements to improve but the overall programs to evolve and better address business as usual, better address, actually incentivizing people to change the way that they manage forests so that they, it would accumulate more, more carbon on the landscape.
So, that was, you know, going through that process, I mean, were, gosh, years, right? So, looking at different opportunities, talking with a lot of economists with, with climate scientists over the last four plus years, trying to think through what an effective process could work to include all of those small landowners to get better measurements not only of the stocks, you know, what is in a forest today, but critically what the business as usual is likely to be for each, you know, for each landowner.
And that, yeah, that was the, that was the drive of our business here up until, you know, about, gosh, two-and-a-half years ago, started working with Microsoft to take what we had been doing for data on a project-to-project basis. You know, we were working, you know, a few million acres at a time to map forests down to the acre, you know, number of trees by size and species.
Jason Jacobs: And you were charging landowners at that time? That was the initial go-to-market?
Zack Parisa: Mm-hmm [affirmative]. Exactly. That, that's what the business was. I mean, we were, we were developing data and, and developing data that was valuable to those landowners and, you know, and efficient processes that they would support their management of these forests and we wanted to scale that up to the US. That was the only way, you know, to have complete, wall-to-wall coverage with that kind of information updated every year, we saw as really critical, sort of on the critical path to making these markets available to everyone. And it was about the time that Microsoft was starting up their AI for Earth program and we were really lucky. We're really grateful to, to have had the opportunity to work with them. We brought our algorithms and sort of our experience working in all the different forest types. They, they gave us, you know, support through computational power. I mean, they, you know, pretty much let us go on, on Azure stack. And so we took what we had been doing and scaled it up to, to the US and that was a couple of years ago now, I think 2018.
Jason Jacobs: And when you say, "Scaled it up to the US," so you were helping landowners in one part of the world and essentially you took that same model and brought it to the US or at that point was there also a transition in the business model for the company?
Zack Parisa: Well, so most of our work was focused in the US or with US-based large landowners, so sort of a large companies, NGOs, you know, state institutions that manage large tracks of forest. We were supporting them on their providing information and, you know, and helping them plan their management. With this work with Microsoft, we were taking the algorithms that we had been running on a project-to-project basis as a business and we scaled it up to the continental US.
Now, even really with a, with a buyer in mind for that data except that, you know, we believed that information not only could be helpful for people driving down costs of that kind of information can be helpful for all landowners but critically that it could help underpin these markets in forest benefits like carbon, like water yield, like fire risk reduction, and like wildlife habitat, and that's, that's was where we always wanted to take at the time, you know, SilviaTerra and, for us, that idea, that market was, was the Natural Capital Exchange. That's what we're now completely [crosstalk 00:17:45].
Jason Jacobs: Got it. So, when you say, "Scaled to the US," it wasn't a, a shift in geographic focus, it was a shift from landowner to landowner to everything, essentially.
Zack Parisa: Exactly. Exactly. Yeah.
Jason Jacobs: Yeah. Yeah. Got it. And, at that time, there wasn't a business model in mind. It was just like, "We think this is important and we're going to partner with Microsoft and we're going to build it and then we're going to figure out how to apply it once we got it"?
Zack Parisa: You know, it ... Effectively, like, we saw, we saw the potential for the Natural Capital Exchange. We saw the potential just for getting information to landowners over, overall. It turns out the 40% of the forests in the US are owned by small, private landowners and, of those, only about 10% have any meaningful information data about their forest to help inform these decisions. And that, that's a critical ecosystem and, and there's so much benefit that could be provided through not only helping inform them about the opportunity on, on their land but also bringing markets to bear and incentivizing them to make management decisions that benefit all of us in society.
So, that was always like sort of the inkling. That was like, that was the driving, motivating force behind advancing the work that way, but it was a bit of a stretch. I mean, we, we weren't certain at the time that it was, A, you know, going to work, or, B, that there was going to be a market there to support it.
Jason Jacobs: And how much scale did you have on the customer side when you were going landowner to landowner and how have the company been funded prior to the shift?
Zack Parisa: You know, at that time, we were working with 20 of the top 25 forest landowners in the, in the United States by size. We were working with a lot of NGOs and a lot of government, you know, managers of, of forests. And so, it was a business. It was an operating business, but in effect, it was almost despite our efforts to, to sort of productize the data that we were working on with each individual. It was more or less a consulting business and so for us, we had a bit of a springboard. You know, we were profitable at the time but just so.
Jason Jacobs: And how big was the team?
Zack Parisa: Maybe eight people, eight, nine people.
Jason Jacobs: Mm-hmm [affirmative]. And bootstrap didn't raise no outside capital at that point?
Zack Parisa: Very little. Just some, some folks within the industry that were kind of strategic advisors.
Jason Jacobs: Uh-huh [affirmative]. And the shift was to go from, uh, essentially a consulting business small client to small client to, at that point, you mentioned that you have this exchange in mind. Can you talk a little bit about what the initial vision was for, for the exchange and, and also how that's evolved as you've been pushing it forward?
Zack Parisa: Yeah, absolutely. So, the idea with the exchange really kind of started with this idea that the information, the, the measurements really matter in these kinds of markets. You know, forest carbon is really different than something like timber. You know, with timber, it's kind of easy. You cut down a tree. You roll it across the, the scale at a mill and you measure it by the ton. And so, the mill knows that they got what they paid for. The landowner knows that they got a fair, fair shake and, and there's a physical thing that you can point to and say, like, "Yep. It's all good. We got it."
With forest carbon, the benefit is happening out in the woods, same with, you know, wildlife habitats, same with increasing water yield. And so, the deliveries, since it's happening sort of in place, it's verifiable really through measurements. So, the measurements are, what, sort of underpinned the delivery of that product to a buyer. And so, to increase things like transparency and certainty on the buyer side, certainty on the seller side, we need to have great information to clarify that for, for all parties.
And the other piece that was started our journey down, down the NCX path was this recognition that high-transaction cost were really kind of limiting participation in these markets. So, only the largest forest landowners could participate and it was, it was keeping out those 40% that I mentioned before. If it takes two years and $200,000 to participate, but they don't even stand to make that much. They can't economically, you know, with reasonably participate.
So, we wanted something that could help bring these markets to those landowners so that those landowners could bring this benefit to society at large and, and then, finally it was contract-length. So, at the time, in our, most of the contracts that, that folks work on with, with forest carbon are pretty long term. It's, you know, it's 40 years, it's a hundred years, and those kind of, you know, multigenerational, long-term contracts don't work well economically or really ecologically for, you know, for these communities or whether we're talking about forest communities or the forest-based communities themselves.
And so, we took a long, hard look with, with the number of climate science folks and economists and, and started working with ton-year accounting to develop one-year contracts that could, on the margin, incentivize landowners to grow incrementally older, more carbon-dense, carbon-rich forests and, yeah, and use data to drive those markets to verify, you know, measurements at the start, measurements at the end and to pay for performance for those landowners. And that was, those sort of differences, those kind of critical differences and evolutions in the product and the market were things that we, we saw an opportunity to put forward, so NCX started really with, has started with that one, with that first contract.
Jason Jacobs: Uh-huh [affirmative]. And when you say, "Contract," and you say, "Buying and selling," buying and selling what?
Zack Parisa: So, additional carbon. So, effectively how this works is every year, we're, you know, we're measuring the content of carbon on each forested acre, the number of trees by size and species and estimating the business-as-usual harvesting scenario for each landowner. So, if any landowner in the US as of now can click on their parcel and I'm talking about the lower 48 but they can click on their parcel and we're assessing that property, assessing what they're likely to harvest and we're making it possible for them to state a price at which they would be willing to reduce the amount of timber harvest that they conduct that might have otherwise conducted in this coming year. That deferral of harvest creates additional carbon room along the landscape and translates to carbon credits through those measurements that can then be made available to, you know, pioneering net zero companies like, like Microsoft.
Jason Jacobs: So, the pitch, then, to a landowner is, "Hey, you have this land." Is it exclusively for people that are cutting down their forest for timber or is for anyone that owns land that has trees on it?
Zack Parisa: So, in the contract terms, we're pretty explicit that they would be open to solicitation for timber harvest, so, you know, lands that are already under easement that prevent harvesting or even lands that, while they might be willing to harvest, it's not economically feasible for them to do so. Those wouldn't have credits available for, for the landowners to put on the market. Does that make sense?
Jason Jacobs: So, it's people that are actively deforesting?
Zack Parisa: Yes. So, landowners that are likely to, to undertake harvesting activities, absolutely.
Jason Jacobs: Okay. And the pitch to them is, "Hey, we've got a better way where you can make more money than you make with your deforestation." Or what do you say or what does the copy say or, you know, what's the message to them? What's the value proposition for, for why they should change their activities?
Zack Parisa: Sure. So, it turns out, for, for each of these landowners, there's different levels of profitability for them to grow and cut down trees and send to them to a mill. And so, at the margins, some of these landowners aren't making very much at all for cutting down trees and selling them, rolling them off the property. So, for even just small marginal payments, they would be willing to wait a little bit and the, a couple things happen.
So, when they wait, those trees are still growing, so they're accruing biological growth and for the landowner, that means, you know, and they're also transitioning perhaps to higher product costs. And so, for the landowner, there's not only the payment, but also the biological growth benefit that they're getting. So, perhaps next year, they'll choose to cut or perhaps society values carbon growing in the forest more and, you know, it still makes sense for them to continue growing it for, for carbon.
Jason Jacobs: Uh-huh [affirmative]. So, you say, if you wait, you can earn money and that money can be better and it can leave the trees growing such that even if you decide to cut, later you're going to make more money?
Zack Parisa: So, for the landowner, yeah. For many landowners, it's the economic proposition of growing trees as they invest at the beginning to put the trees in the ground or to prepare the site or, or just owning the land, you know, paying taxes on, on the land. And so, they tend to harvest not randomly but actually where it maximizes their benefit, however that's described. You know, that benefit might even just be creating habitat for things they care about, like deer or something along those lines, but anyway, it's not a random event. And so, if you sort of map those economics, it looks like a normal net present value curve, like a, you know, just a parabolic curve and they cut at the top of that MPB curve.
And so, by offering them payment just to bump it out a little bit further, that typically coincides with really like sort of still rapid growth in those trees. And it turns out that's the most efficient way to increase the carbon in existing standing forests. It's just to grow them on a margin a little bit longer.
Jason Jacobs: Uh-huh [affirmative]. And then what about on the other side? So, who's buying and what are they buying?
Zack Parisa: Right. So, on the buy side, it's net zero companies. It's tech firms, energy companies, and consumer goods companies, mostly, that have made commitments first to, you know, reduce their emissions as much as they possibly can, and as we're ramping towards this, the decarbonized economy that we're all pushing hard towards, offsetting what they can't otherwise reduce and what they're purchasing are verified carbon credits.
Jason Jacobs: And what is NCX's role in this process? We've talked about the stakeholders on either side. What is NCX bringing to bear?
Zack Parisa: Yeah. So, we're, you know, we're doing the measurements, monitoring of these properties, we're working directly with landowners. We're helping those landowners originate these credits and then we are connecting those landowners to these net zero companies that would like to purchase carbon credits from within forests, from their neighbors, from, you know, from these communities that are connected to their supply chains.
Jason Jacobs: Uh-huh [affirmative]. And a marketplace like this and I guess this is less of a climate question and just more of a business question, seems like there's a chicken and egg, where there's not a compelling value proposition to the landowner without the buyers and there's not a compelling value proposition to the buyers without the inventory. So, how did you and how does one get started building a marketplace like this?
Zack Parisa: Yeah. So, when we first got started, it was actually right after that work I mentioned that we had done with, with Microsoft. We, you know, immediately after finishing what we call Basemap, that wall-to-wall inventory for map of all the forests in, in the US, we went to them and we're like, "Look. This is, you know, it's an incredible data set and data itself is great but it's, what's really amazing is what you can do with it."
And so, they agreed. We piloted a little, baby version of, of NCX at, in Pennsylvania. It was six counties in Pennsylvania and we basically, I literally drove around and talked with landowners and, for them, it was reallY simple. It's like, "Look. You normally harvest," for a lot of those people. It was to pay for their annual taxes or something along those lines. And we just said, like, "Here's, here's the offer. If you're willing to defer harvest. Doesn't have to be all of it. But if you're willing to reduce it below what the, kind of the economic level would be, here's a payment and it's a one-year term, so measure the beginning, measure at the end, confirmed what, you know, what carbon was delivered." And it, yeah, created credits at that time, not, not verified credits but really sort of kind of our start with, our pilot start with Microsoft and it went from there.
Jason Jacobs: Uh-huh [affirmative]. And I'm certainly no expert, but I've heard that these tons per year is a bit controversial in the carbon markets world. Can you talk a little bit about what some of the concerns are or objections to that approach and, and your response to those objections?
Zack Parisa: Yeah, absolutely. So, the question really is about permanence. So, you know, permanence is one of the key pillars of, of quality in carbon credits. I mean, we talk about permanence. What we're really talking about is sort of the long-term debt that's created when I can't help it. I release a ton of CO2 into the atmosphere and that ton of Co2 is going to be there for a long time. That's going to persist in the atmosphere for quite a while and create costs to society through damages, the process of, of climate change.
And so the question with permanence is with these unavoidable emission is how do we deal with that long term stream of those damages that normally when we think about forest carbon credit or carbon, carbon removal or sequestration overall, we're talking about removing one ton and holding it for a long period of time, typically one hundred years, and we call that one hundred years. That's permanence and that is one CO2 e, one CO2 equivalent, and that e, that equivalence hearkens back to global warming potential, this IPCC concept of drawing equivalence between high magnitude greenhouse gases like methane that are shorter lived and longer lived GHGs like CO2 but that are less potent.
And so, really what we're looking at with ton-year accounting is the simple question of how much CO2 do we need to remove for how long to be equivalent to one CO2 e? Because what we know with that global warming potential metric is that 100 years itself is a time preference. You know, we value carbon for 100 years with zero discount and then, thereafter, it's a 100% discount. So, how does that translate to a time preference for immediate high magnitude removal versus smaller removal held over a long period of time? And so that comes down to indicating that something like removing about 20 tons even for just one year is equivalent in climate impact to one ton removed from the atmosphere and held for 100 sequential years.
Jason Jacobs: And were you the first to look at it this way or where did that perspective come from and how long has it been around?
Zack Parisa: No, ab- absolutely not. So, yeah. Ton-year accounting like this has been in the literature for quite a while and was even, they attempted to kind of work with it in the Kyoto Protocol and ultimately decided at the time that it was pretty complicated. It's hard, you know, it's hard to get all the measurements right. Technology might, you know, wasn't exactly where, where it would need to have been at, at the time. So, yeah. I mean, ton ... It, it sort of bounced around in the literature and, you know, as we were, we were looking into it, we started, again, working with climate science, some scientists that work with the IPCC, and, and forest economists to try and get clear on what that equivalence really is. How many tons would we need to remove and hold for one year or five years or 10 years?
And I think intuitively you kind of, you know, you could imagine that it's like, "Yes, we want to, you know, if one ton of CO2 e is one ton held for 100 sequential years, does that mean that if you can only hold it for 90, that there's no value to that or 50 or 30 or 20 or one? No, there is value. It's just a question of how much."
Jason Jacobs: And where do the certification bodies fit in, the Verras and Gold Standards and things like that? And also, what's your role with any in the certification process?
Zack Parisa: Yeah. So, you know, the certification bodies have been a real driving force for making these markets work for, for as long as they've been around and, you know, we've been working with Verra on this process and sort of thinking through ton-year accounting, bringing in experts from outside in academia and NGOs and other spots really just to try and get the conversation together about what is going to be effective here because really, like, we know that nature-based solutions can be a major contributor to solving this climate crisis. It's going to be the ...
You know, it's not the solution but it is, it's definitely on the path and it's a shovel-ready solution that we can scale quickly. And that could, you know, as we ramp up these other technologies for direct air capture and, and as we ramp up technologies in that prevent emission in, in the first place. So, yeah. I mean, we've been, we've been working with them to, to try and find something that's going to work, something where, you know, we can scale those with landowners where they're not having to sign multigenerational contracts, but we can have clarity that the magnitude of the impact is equivalent to one ton of, of CO2 emission today.
Jason Jacobs: So, you have no desire, ambition to do this certification yourself?
Zack Parisa: No. I mean, the thing here is that these markets are built on trust, just like we were talking about before. There's no physical delivery, you know? When you, you know, if you buy a 2x4 or a cup of coffee, you can inspect it yourself and, and there's a physical thing for you to look at. And for carbon markets or for markets in wildlife habitat or fire risk reduction, it's really driven by these measurements. And so, it's important that there is third-party certification, third-party verification, you know, that can be trusted by, by these buyers. So, it's not just like, "Well, Zack said it was okay. Surely, that should be enough."
It's about making sure that the science are right. It's about making sure that we get the math right and about making sure that there's transparency all the way through this process, not only for the buyers, but also for these landowners. They're creating a valuable service, a product for, for society and it comes at a cost to them. I mean, they're, they're having to choose to forego income from harvesting to instead grow more carbon or, perhaps in the future, you know, wildlife habitat for species at risk or water yield so, or fire risk reduction, which is so important here in, in California.
Jason Jacobs: And for people that say, "Well, yeah, it theory offsets are great, but the incentives are off, there's fraud. The quality isn't where it needs to be. There's oftentimes not nearly as much additionality as, as is, is promised. They're so broken, we need to look elsewhere for, for our solutions." What's your response?
Zack Parisa: So, first of all, when we were talking about, I mean, climate change is one of the greatest, maybe the greatest challenge for this generation and it is going to take every single thing we can throw at it to bend the arc on this huge problem, it's a huge challenge. Forests can and should be part of that solution. We know the, like, from the biology, they can pull carbon out of the atmosphere and convert it into wood and they can hold it there maybe not forever. I mean, these are disturbance-based ecologies. It's not ... You know, we gave up on steady-state ecology I think in the 70s, but they can hold it and they can hold it there for a little while.
Are there improvements? Is there evolution that can and should happen with these, like the way that we produce these credits? Absolutely. But there is a baby in the bathwater and there is a great conversation going on right now with this community that we're grateful to be working with to make sure that these products are high quality and yeah, so there's ... I would tell people that if they were asking, like, "Is, is this somewhere we should look," absolutely. Be part of this solution and be part of the conversation.
Jason Jacobs: So, then, NCX aside, if, if the offset markets are going to get to a place where they are in a better place, what are the key things that need to happen to bring that about?
Zack Parisa: Yeah. So, I mean, it's the things that are happening. It's these conversations. It's pioneering companies that are investing in, in trying to understand for themselves what is a quality carbon credit? How are they going to account for it, not ... You know, their carbon footprint, how are they going to work with offsets and then transmitting and sharing that information. And we see that, you know, we see that with a lot of companies. We see that happening right now between not only buyers but with verifiers, with landowners, with originators, so it's, it's community effort.
Jason Jacobs: And what about the people that say, "Well, that's great but the people, the majority of the people that are buying this stuff today are voluntary and voluntary's only going to take us so far and until the compliance is really there, we're not going to get any meaningful scale." Do you agree with that perspective?
Zack Parisa: So, I don't. So, as individuals, we need to change the way that we are thinking about consuming and the way that we're thinking about our carbon footprint, which companies we choose to work with, are they also thinking about this? And those companies, they're focusing that concern and clarifying how they can change their practices to achieve better climate outcomes.
And we're working with, and I say, "We," sort of like the everyone here in society is sort of working with our leadership to develop policies that are fair and that can help move us towards this, but every, every little thing we can do right now is, is important and has, and has value. In fact, some of the, like these conversations that we're having within the private sector, around voluntary credits, those are going to translate to better outcomes when this begins to move more into a, a policy-type setup.
Yes. I, I guess I, I would disagree. I'd say all of these conversations, all of these efforts, you know, individual as, as organizations, you know, companies, all the way up to policy changes are going to be important in getting it right, in making sure that we're further ahead in 2030 than, than we are today in 2021. You know, I, I don't think we have time to just sit and wait and be like, "Oh, it'll, it'll work itself out. We'll figure it out later."
Jason Jacobs: So, how important is the policy landscape to NCX?
Zack Parisa: It's important. You know, we, I think everyone wants to see landowners, you know, these ... Every acre of forest potentially being able to contribute to a solution here. Every acre of farmland, every acre of rangeland and working at that scale is going to have policy implications and getting clarity on accounting methods could potentially be accelerated by clarity coming from, you know, some of these state and national and international governing bodies. So, it's immensely important. But, again, it's an evolving conversation, so we're, we're excited to take part and contribute when and where we can.
Jason Jacobs: So, what are the most impactful things that, if they came out of the policy landscape, would accelerate your business?
Zack Parisa: Yeah. So, I think it's really a distillation of carbon accounting. So, there's confusion even now about sort of where bounds on who is responsible for which carbon debts, whether it's jurisdictional, within states or, or even as an individual, like how should I think about, is this my carbon debt, is this a carbon debt, uh, you know, associated with a company? How do they even really begin to, to think about that. And then certainly for both sellers, so for these landowners, clarification of how they can expect to participate in this stability in these markets. How, you know, from a buyer's perspective, what constitutes, you know, quality offset and how can that be an evolving and improving thing while still building stability into a market? So, there's, there is a role for, for policy in all of these conversations. So, yeah. I think it's just clarity and distillation.
Jason Jacobs: So, is that something that you resource towards then actively, government relations? And also, what's your advice for other climatech founders who have businesses that, you know, that can be impacted by policies? Is it viable for companies like NCX to be resourcing to this function and, if so, in what capacity and, and how might they go about it?
Zack Parisa: Yeah. So, I think it's absolutely, uh, worth hopping into the conversation and just helping the entire community be, be thoughtful about what opportunities exist and what potential paths forward might look like. So, yeah, like I said, this is an enormous challenge and it's going to take, it's going to take pretty much everything and everyone, everyone's best work to, to get there. So, yeah, I'd advise, hop in and see where we can go.
Jason Jacobs: Uh-huh [affirmative]. And, I mean, you know, I'm an investor in [Potomas 00:41:49], so clearly I'm a believer in the importance of the natural solutions, but I do hear some objections out there and one of the, one of the ones that I hear is, "Look, we can plant trees, we can preserve trees, but, like, no matter how much you get these landowners to, you know, to avoid cutting down the trees, they're going to burn down faster and faster as the conditions change not based on what we do today, tomorrow and the next day, but based on what's already been done. So, like, we better find some other ways because, like, the headwinds here are just going keep getting worse and worse no matter what we do." How do you think about that?
Zack Parisa: Yeah. So, when it comes to mitigating climate change, this is definitely a yes and scenario. So, you know, I think it's a false dichotomy to be like, "Should we invest in forests or should we invest in direct air capture?" Absolutely not. Like, yes, we should invest in forest because they can very quickly, we can change management and they can pull down additional carbon. Some of those forests we wouldn't want to do that because it would increase the risk of, of fire and we want to avoid catastrophic fire risk. And so that gets back to that thing we talked about at, at the beginning, Jason, with the, with balance.
But, you know, forests are not an infinite sponge. You know, if you and I are lucky enough to be able to have a conversation like this in, I don't know, 2060 and we're still talking about, like, forests being the, the first best, you know, sort of shovel-ready opportunity that can scale, that would be terrible. That'd be a terrible outcome. We need to be investing in direct air capture. I'm excited to see what, you know, what Stripe and others are doing there and drive down the costs of those type of carbon removal tech. So, yeah. I mean, it's yes and here.
Jason Jacobs: Yeah. And, I, I guess from a business standpoint, then, how do you see all this playing out where the big companies don't necessarily, you know, they just want to get to net zero, I would imagine. They don't necessarily want to go to one platform for natural solutions and one platform for tech solutions and one platform for removal and another platform for mitigation and one platform for the US and another platform for my regions in that part of the world. So, how does this all play out? I mean, is it, are there going to be kind of one or a handful of players that just kind of, that are the key platforms that these big companies work with or do you think there's going to be a long tail where they work with different platforms for different things?
Zack Parisa: So, I think it's going to be that some companies are going to want to source, you know, particular types of offsets or particular types of technologies that are going to help them reduce their carbon footprint in overall or remove their historic CO2 contributions. They're going to do that work. They're going to ... And, and, you know, sort of work directly with companies that can make that happen on the ground.
They're going to be a lot of other companies that, just like you say, they're going to look for a kind of a one-stop shop for those solutions. And so, NCX might work with those, you know, those other companies. They either exist now or hopefully soon will, and they can roll up a combined product that works really well for those companies. What we're seeing is that companies that are working with offsets. It's like, "Yes, we have to make sure that the carbon benefit is real," but we also want to make sure that we're working with, that there's sort of equity in which communities we're working in where sort of how these offsets affect those communities, how these offsets or the changes people are making and how they manage forests to make sure that those changes also benefit elements of biodiversity or that those changes are happening within a company supply chain or within, within the communities that they most directly effect with their, with their business processes.
And so, that's ... There's so much opportunity there to figure this out and it's, it's amazing to me, even in the last six months about how a lot of that is kind of shaking out and how people are emerging, companies are emerging to help make that possible for these companies, these particularly smaller, medium-sized companies that can't have a complete team to, to work through how they're going to do their full carbon offset plan.
Jason Jacobs: So, we talked about, from an offset standpoint, you know, the quality, the consistency, the additionality, the incentives. One concern that we haven't brought up is just this concept that, if you're offsetting, you're offsetting other behaviors that you're doing and the concern that I've heard from some factions of the climate community which I understand, which is, "Look. We're going to need offsets ..." I mean, it's going to take time. There's some sectors that are hard to decarbonize. I mean, concrete and industrial processes, aviation. Like, things that just ... It's going to take a while and in the mean time, there's a lot of other things we can do and to the extent we can't have quality and additionality and then like, it can help. Like, that's actually my perspective, right?
So, I'm in your camp, right? But, but the concern is that, by having them, even if they're high quality, it's kind of permission to keep doing what you're doing and to slow roll, actually stopping doing the things that are causing the damage directly. Is that something you worry about? Like, you're such a mission-driven guy. I can hear it in your voice. So, yeah. I mean, does that keep you up at night at all?
Zack Parisa: It does not. Yeah. Climate change keeps me up. And when I look at the challenge that we're facing, it is ... You know, we are trying to prevent what we see as an immense amount of damage to future us, future generations, due to what we see coming down the pike, and if we were to snap our fingers right now and, you know, there's no more petroleum, nobody's pumping any up, those energy sources just somehow don't work. We're not doing it. There'd also be an immense amount of struggle for people. There's so much infrastructure that's built on that and even though we see that now as sort of the clear problem and we need to, you know, we need to move quickly, as quickly as possible, really, to ramp that down. It is going to take time and it is going to take a lot of effort to do that in a way that is just and equitable for the many places and communities that, well, that need to make those hard changes and offsets are, are part of that transition. They are the last step after you've reduced as much as you possibly can and we need to make sure that there is transparency and accountability in the commitments that we are making as individuals, as companies, as governments, as we start to look at what we can, you know, how we can be more ambitious.
So, for me, it's about making sure that when we talk in a policy arena, when we talk, uh, with a lot of the broader community around science-based targets or, or, you know, net-zero type, type targets or net negative type targets, that we are being clear-eyed and thoughtful about what role offsets can play to accelerate our transition and that, what these are, they add a cost to those who I think responsibly choose to, to use them for that last mile, what they can't otherwise reduce.
Yeah. So, I don't see them as, like, a, as a pass. I see them as sort of that closing the gap on that last mile here in what is a very critical decade to make sure that we, we are accounting for what we can't otherwise reduce and, and for that to be part of a fully, you know, a full acceleration and again, holding ourselves and our community and our peers accountable for that.
Jason Jacobs: But, I mean, given that we're so far from the last mile. We're more at the front end of that journey for most of these companies and for our global economy in general. I mean, this is ... They're not exactly last mile today. Aren't they like 90% of the current journey?
Zack Parisa: Gosh. So, what I'm struck by is how many companies have made commitments, even in the last ... And how many individuals have, like this has entered even their, their sort of mind space, their attention in the last year, in the last two years and it's a lot to deal with. It's a lot to try and understand what your carbon footprint is, where it starts, where it stops, what sources of CO2 emission really are there? And so, yeah, for many, if you want to ... Like, as they start working through that, it is a high percentage of what they can immediately address. We are, like, this global economy is so interconnected that even when you make choices for yourself, you're dependent on so many other companies, communities and economic actors that, that you can't immediately control it. You know what I mean? You'll have alternative choices for and it's, it's exciting to see the progress but just like you say, we're not anywhere near where we, where our, I wish we were, where, where I hope that we are in in the coming years. And so, the role that offsets play are going to be different for different actors.
And the point, like you raise, is to make sure that is not diminishing the urgency or decelerating our path of this transition and I, seeing the investments that we are not only, you know, from investors into companies that are developing technologies that truly can renewable energy and other processes to avoid emission in the first place or increase removal. I see lots of promise and I think it's about making sure that what you raise is part of each conversation that we're having. If we're going to employ offsets, is that the last option that we have?
Jason Jacobs: And to the extent that you want to and you feel comfortable sharing, it'd be great to talk a little bit just about the kind of stage of the company, traction you've got to date and then you, you just had a big funding event, so it'd be cool to talk about that as well, both the event but also what that means for the business and what's coming next.
Zack Parisa: Sure. Yeah. Happy to do that. So, you know, earlier we talked a little bit about the pilot that we had run. That wrapped up 2019, right? So, coming off of the pilot, you know, we were excited to have worked with those landowners, excited to have worked with, with Microsoft and we just saw an immense amount of opportunity and, and started working with Verra on a, on a methodology to codify this process and make sure that we can put it in front of the broader community to vet it and make sure that it's going to be effective and produce the kind of outcomes and impact that we all, we all want.
And like you said, you know, we saw the need and opportunity to ramp this up and, uh, so we raised a, around, that actually closed I think in, like, towards the end of last November and had a couple of milestones in, in front of us. And one of those was expanding this market to 11 states in the US South, which we did this spring and it, you know, created at least by acreage, the largest forests carbon project, at least that I'm aware of, in the US, about 1.2 million acres of landowners and that's composed of lots of small landowners, a few large landowners. So, over a hundred, you know, a hundred participants. And we have a quarterly cadence and we're expanding, so we're expanding the number of landowners that we have involved in, in this, within the states we're already active in and expanding the number of states where we are active in.
So, we actually just closed the second quarterly event with all the Southern states, lake states, New York and Pennsylvania and it was ... I can't be able to share kind of the final numbers here but I, what I can say is it's multiple times larger than, than our first event and we're now open for every landowner in, in the US. So, it's been amazing working with our investors. They're so thoughtful on, on these topics and have really kind of helped accelerate not only the growth of the company but our thinking around how best to approach this. We were appreciative of these net zero companies that we're working with that are purchasing these credits and investing in in kind of the advance and scale and quality we can bring to bear with offsets and obviously super excited to be working with these landowners that, up until now, haven't had opportunities to, to participate and to be part of ...
So, I get, actually, Jason, that's one of the most heartening things for, for me is hearing from these landowners that not only ... You know, the payment's great and it makes, it makes sense and they're happy for the recognition of value that they're creating, but many of them are excited just to be part of, part of a solution to a global problem. So, yeah, like I said, it's, it's about kind of bringing this entire community together and that's what I see as we're growing this, not only the team internally but the investors. You know, through these rounds that you mentioned. So, here we go.
Jason Jacobs: And if you could wave your magic wand and change one thing outside of the scope of your control that would most accelerate your efforts and the efforts of decarbonization in general, what would you change and how would you change it?
Zack Parisa: Oh, man. A magic wand question. Good! Good! You know, I wish that we had more time to move these conversations forward, not only with, with landowners, you know, getting it in front of more, you know, more landowners to see what the opportunity is and see what, you know, what benefit they can bring to, to society, but, but also with, with companies, with scientists with all of the actors within this climate mitigation community. So, you said that, you know, to accelerate it and I'm asking for time here but it's really, I think it's just bringing more people into the conversation and accelerating that, that conversation around what we can do and what we should do.
Jason Jacobs: And for anyone listening that's inspired by what you're doing, where do you need help and what kinds of people do you want to hear from?
Zack Parisa: Yeah. I mean, landowners, please get in touch, companies, anyone interested in the work. Please reach out. We are hiring, so check out our, our web page. We have some, some positions we'd love to, to work with you. The thing about this challenge is that it, it's really multidisciplinary and so I think everyone, so many people have so much to bring. So, even if you weren't, you didn't decide you wanted to be a forester when you're 13 and, and sort of invest and sort of work on satellite technology, there's ... It's so much more than that. And so, yeah, eager to, eager to hear from you.
Jason Jacobs: Great, and anything that I didn't ask that you wish I did or any parting words for listeners?
Zack Parisa: No. I think we, we covered it. I mean, it's an involving conversation and yeah, I'm just excited to be part of the, the journey here with you and to move the, move the conversation forward, hopefully.
Jason Jacobs: Likewise. Well, thanks so much, Zack. This is awesome. I feel like we covered a lot of ground here and definitely wishing best of luck to you and the entire NCX team. Thanks for coming on the show.
Zack Parisa: Likewise. Thanks, Jason. Take care.
Jason Jacobs: Hey, everyone. Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at myclimatejourney.co. No, that is dot C-O, not dot com. Someday, we'll get the dot com, but right now, dot C-O. You can also find me on Twitter @jjacobs22, where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. And, before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.
