How to Kick-Start the
Carbon Removal Market:
Shopify’s Playbook

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1. Introduction
2. BackgroundIndex

3. Funding the right types of climate solutions
4. Being flexible with purchases to maximize impact on companies

How to Kickstart the Carbon Removal Market:
Shopify’s Playbook

5. Running a strong process to identify the most promising companies
6. What we learned and where we are going
7. Join us
8. Appendix A - Templates

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How to Kickstart the Carbon Removal Market:
Shopify’s Playbook

1. Introduction

Shopify spent the past year
kick-starting the carbon removal
market. Our greatest takeaway is that
more companies need to demonstrate
demand to accelerate market growth.

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How to Kickstart the Carbon Removal Market:
Shopify’s Playbook

1

Introduction

We’re opening up our notebooks to share how we’re kick-startingthe carbon removal market.
We've figured out a successful approach to support this developing
field, and we want to make it as easy as possible for other companies
to follow our lead, avoid our failures, capitalize on our learnings, andbuild on our successes.
If you or your company is looking to buy carbon removal andcontribute to a net zero future, you need to:

For companies without the time or resources to conduct a processof your own: we hope sharing Shopify’s process will give you theconfidence you need to support some of the same companies wehave identified.
While our primary audience is companies looking to purchasecarbon removal, we expect this playbook to also be useful forclimate entrepreneurs, researchers and scientists, and venture
capital firms participating in this space.

Fund the right types of climate solutions. We’ll walk you throughthe importance of supporting long-term atmospheric carbon
removal, explain why we aren’t picking winning industries yet, andshare why Shopify hasn’t set a net zero target date.
Be flexible with purchases to maximize impact on companies.
We’ll discuss why it’s critical for buyers to be flexible with theirpurchases—paying higher prices as early adopters of high-quality
removal, prepaying, and entering into long-term agreements.
Run a strong process to identify the most promising companies.
We’ll explain our decision to run a targeted process, share how weevaluate companies and assess performance for investment, andopen-source our research, recommendation / decision, andcompany performance templates.

We want your feedback. Get intouch with us at environment@shopify.com
and let us know how we can iterate on our
approach to increase the impact of
Shopify’s Sustainability Fund.
This is a snapshot of year one forour fund. To follow along with updates andcontent, subscribe to our newsletter or visit
our website.

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How to Kickstart the Carbon Removal Market:
Shopify’s Playbook

2. BackgroundA look back on Shopify’s
Sustainability Fund launchand how we spent our ˜irst
year’s budget.

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How to Kickstart the Carbon Removal Market:
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2

Background

A. The landscape in September 2019

Late in 2019, the world was focused on being carbon neutral, but
the noise was starting: we need to do more than maintain thecurrent level of emissions in the atmosphere; we have to undo thelast 200 years of emissions. Research was progressing andprototypes were being built. The tools were identified but there
was a lack of available capital to support the development offrontier technologies.
Companies were working to adopt science-based targets, focusedon footprint measurement and developing emissions-reduction
strategies, with plans to o˜set all remaining unavoidable emissions.
While methodical and important, this alone will not achieve theIntergovernmental Panel on Climate Change (IPCC)’s target oflimiting global warming to 1.5°C.
There was a missing component: we need carbon removal
solutions that work on shorter timescales than nature-based
solutions. Shopify CEO Tobi Lütke recognized this deficiency andlaunched Shopify’s Sustainability Fund to solve the problem.

7

Shopify’s Sustainability Fund launched in September 2019, with a
mission to support the most promising solutions and technologies
fighting climate change globally:

How to Kickstart the Carbon Removal Market:
Shopify’s Playbook

2

Background

B. The launch of Shopify’s
Sustainability Fund

“Shopify is a company that wants to see the next century.
To make the next century worth reaching, we need to take bettercare of our planet.
While Shopify is investing in proven solutions that are alreadyfighting climate change, we are also placing bets on high-potential
technologies at the frontier of the carbon
removal industry.
Our goal is to help prove, scale, and commercialize climate
technology for massive impact in the long term.
Commerce is a powerful vehicle for change. Individuals andbusinesses making conscious choices can change the world, andShopify is committed to being an active driver of that change.”
Tobi Lütke
Shopify CEO

Our goal was to kickstart the carbon removal market by:Generating demand when there previously was none
Allowing new companies to prove their impact and scale
Driving down prices for future buyers looking to join us
The fund’s budget was set to a minimum of $5M USD annually, witha minimum of $1M USD earmarked for permanent atmosphericcarbon sequestration. We chose to operate as a capital expenditure
fund, purchasing carbon removal at any price, with our return on
investment being an accelerated carbon removal market. And with
that, our journey began.

8

$5

10

MILLION
invested annually

INDUSTRIES
we’ve identi°ied as high-potential

Spend bysolution
type

Ocean
Maximizing the world’s largest carbon sinkand reducing ocean acidi°ication.

Collaboration
Partnering with like-minded organizations
looking to reverse climate change.

ForestPlanting, restoring, and protecting forests
to allow trees to store more carbon.

Direct air capture
Pulling carbon directly out of the air, thenstoring it safely and long term.

Mineralization
Turning carbon into a mineral that can be
stored long term.

Soil
Using speci°ic farming techniques that
increase soil health and soil carbon.

Transportation
Reducing and o˜setting emissions
caused by transport vehicles.

Biomass
Using organic material to create
renewable energy and store carbon increative ways.

Renewable energy
Creating fossil fuel alternatives that cause
less pollution and that we can create
more of.

How to Kickstart the Carbon Removal Market:
Shopify’s Playbook

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BackgroundC. Where we landed in September 2020

Product
Injecting and storing carbon directly into
usable products, like concrete.

3%

4%

6%

8%

9%

9%

15%

23%

24%

Ocean

Mineralization

RenewableenergyCollaboration

Soil

Forest &Transportation

Product

Direct air
captureBiomass

104,800 tonnes*

9

TOTAL

How to Kickstart the Carbon Removal Market:
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BackgroundOur commitments:
Carbofex

1,100

Charm Industrial

1,000

ECHO2

600

Ecoera1,000

Carbon Engineering

10,560

Climeworks

5,000

CarbonCure

25,000

Grassroots Carbon

25,000Indigo Ag

25,000

Nori

5,000

Pachama

80,000

Planetary Hydrogen

730

Running Tide

4,100

Biomass
Biomass
Biomass
Biomass
Direct air capture
Direct air capture
Product
Soil
Soil
Soil
ForestOcean
Ocean* Quantities represent our total contracted commitment
and some tonnage will be delivered in future years.

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How to Kickstart the Carbon Removal Market:
Shopify’s Playbook

3. Funding the right types of climate solutions

The key elements andfactors we consideredwhen establishing ourfund strategy.

How to Kickstart the Carbon Removal Market:
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Funding the right typesof climate solutions

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A. Long-term atmosphericcarbon removal

While reducing emissions isparamount to slowing climatechange, we have already increased
the concentration of CO° in ouratmosphere beyond acceptablelevels. To reverse these emissions,
we must capture CO° and store it
for the long term outside of theatmosphere.
The IPCC’s 1.5ºC report defines carbon dioxide removal (CDR) as:“Anthropogenic activities removing CO˜ from the atmosphere anddurably storing it in geological, terrestrial, or ocean reservoirs, or inproducts. It includes existing and potential anthropogenic
enhancement of biological or geochemical sinks and direct air
capture and storage, but excludes natural CO˜ uptake not directly
caused by human activities."

ATMOSPHERE

Soil / Vegetation
RiversOCEANS
Fossilfuel

Sediments

ROCK FORMATIONSWhen we set up the fund, there were no solutions that
accomplished this at scale. We entered the market to change thisnarrative, committing at least $1M annually for long-term
atmospheric carbon removal. We see atmospheric carbon removalwith long-term storage as being fundamentally di˜erent fromavoided and reduced emissions o˜sets.

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Funding the right typesof climate solutions

12

A. Long-term atmosphericcarbon removal
I. Atmospheric carbon removal
We are focused on finding technologies and solutions that pullCO˛ out of the atmosphere. This can be accomplished by bothengineered and nature-based solutions, including direct air
capture, carbon mineralization, sustainable bioenergy withcarbon capture and storage (BECCS), ocean-based methods,
forests, and soil.

There are a lot of great solutions that reduce or eliminate
emissions such as carbon capture utilization and storage (CCUS),
energy e˜iciency, and fuel transition technologies. Heavy
industry and large emitting sectors will soon be forced todecarbonize through government policy. Plus, many investors are
only willing to finance companies with climate programs that
account for their emissions. These two levers will ensure thatindustrial sectors continue to invest in these kinds of emissions
reductions, but on their own will not be enough to reverse
climate change.
There is limited incentive for large emitters to fund atmosphericcarbon removal and undo more than two centuries of emissions,which creates a funding gap for companies developing thesesolutions. To solve this, we are leading the charge by creating
demand that will drive funding towards atmospheric carbon
removal.

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Funding the right typesof climate solutions

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A. Long-term atmosphericcarbon removal
II. Long-term storage
Duration of carbon storage is a critical factor when evaluating thequality of a technology or solution. It is measured by the number ofyears a project or solution can keep carbon outside of theatmosphere with a reasonable assurance of it not being
re-released.

Our threshold for long-term
storage is 100 years or more, as
this time horizon will provide therunway needed to develop andimplement emissions-reduction
measures and carbon removal
technologies at scale.

In general, solutions that store CO˛ for longer cost morebecause they employ emerging engineered technologies, andoften require large amounts of clean energy to capture theatmospheric CO˛. Then the captured CO˛ must be safely
stored for the long term which again requires technology as
well as monitoring and verification systems.
With typical nature-based solutions, carbon is stored for lesstime since the processes are reversible—when trees die anddecompose, for example, much (if not all) of the stored
carbon is re-released into the atmosphere. In contrast, manyengineered solutions lead to carbon stored for at least 100
years. Some of these engineered solutions acceleratechemical processes that normally take place over many years
in nature, including carbon mineralization and ocean alkalinity
enhancement; others involve unnatural processes likegeologic storage, or reacting and storing CO˛ in the matrix of along-lived material such as concrete.

How to Kickstart the Carbon Removal Market:
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Funding the right typesof climate solutions

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A. Long-term atmosphericcarbon removal
III. Avoided and reduced emissions o˜sets
When selecting solutions and technologies, we paid close
attention to whether we were buying an avoided emissiono˜set (where CO˛ is prevented from entering the atmosphere),a reduced emission o˜set (where CO˛ emissions are reduced
due to process changes or material substitution), or a carbon
removal o˜set (where CO˛ is pulled out of the atmosphere).
While we focused our e˜orts on carbon removal, wepurchased avoided and reduced emissions o˜sets in a few
cases where our purchase would help that technology
develop into true carbon removal.

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Funding the right typesof climate solutions

CASE STUDY

How to Kickstart the Carbon Removal Market:
Shopify’s Playbook

3

Justin Lazenby of Thomas Concrete stands
next to a CarbonCure valve box at a plantin Atlanta, United States

CASE STUDY

CarbonCure

While we focused our e˜orts on carbon removal, we alsopurchased avoided and reduced emissions o˜sets from companies
like CarbonCure. The company's mineralization technology enables
concrete producers to permanently store captured CO˛ withinconcrete. The process also increases concrete’s compressive
strength, reducing the amount of carbon-intensive cement
required, which provides additional avoided emissions. Today
concrete producers source CO˛ from industrial sources like ethanol
production. In the future when CO˛ captured directly from theatmosphere or biogenic sources is more readily available, thetechnology could easily switch sources. Supporting CO˛ storage
solutions like CarbonCure’s are a crucial component to scalingcarbon removal.

PachamaNature-based solutions, including forest protection projects likethose we support through Pachama, also produce avoided
emissions o˜sets. These are very di˜erent from o˜sets that pay
heavy industry to implement process improvements and pollution
prevention technologies to reduce their emissions—arguably,
heavy industry should already do this and the costs should bereflected in the actual price of the goods they produce. Forest
protection e˜orts provide more than just the climate benefit of
avoiding emissions: these projects can have significant co-benefits
for biodiversity, habitat protection, and community.

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Funding the right typesof climate solutions

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B. Building a balanced fundWe can’t wait until the perfectsolution is developed and ready toscale; we need to support all kindsof approaches now. We need to
get them o˛ paper, out of labs, andinto practice. We must accelerate
iteration cycles, identify thesolutions and technologies that will
work and give them access tocapital, while learning by doing theentire time.

At this point, no one can predict which combination oftechnologies and solutions will reverse climate change. It certainly
won’t be one single solution given the sheer amount of CO˛ theworld needs to pull from the atmosphere to keep global
temperatures below 1.5° C warming: anywhere from 1.3 to 29
gigatonnes per year.
year And we don’t have a lot of time.

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Funding the right typesof climate solutions

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B. Building a balanced fund
I. Engineered and nature-based solutions

We didn’t want to pick winners or put all our capital behind one
solution because we need many solutions across all verticals toreverse climate change—from capturing CO˛ from waste biomass
and direct air capture; to CO˛ utilization in products andmineralization; to agricultural, forest, and ocean solutions. So we
explored every engineered and nature-based option in depth toidentify the leading companies that are focused on scaling themost promising climate solutions.

B. Building a balanced fundII. Technology readiness levels

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Funding the right typesof climate solutions

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We put significant funding behind companies that arecommercially ready and looking to aggregate demand to secure
financing for their first-generation facilities. We also pursued
companies that are pre-seed and pre-series A/B funding, and stillde-risking their science—because if these companies are
successful, our support will accelerate their progress andencourage other investment. If their approach fails, we can crossthat potential solution o˜ our list and focus our e˜orts on otheroptions. A negative outcome contributes to progress and is just as
important as a positive outcome because it spurs innovation andcontributes to the body of knowledge.

Technology readiness levels
DEPLOYMENT

9 Actual system proven in operational enviroment

DEVELOPMENTRESEARCH

7

8 System complete and qualified

System prototype demonstration in operational enviroment

6 Technology demonstrated in relevant enviroment

4

5 Technology validated in relevant enviroment
Technology validated in lab

3 Experimental proof of concept

1

2 Technology concept formulated
Basic principles observed(source)How to Kickstart the Carbon Removal Market:
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Funding the right typesof climate solutions

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8

B. Building a balanced fundIII. Learning along the way

Another driving factor behind our decision to set up a balanced fund
was to ensure that we could learn along the way. We didn’t want tobecome specialists in one area, and instead were determined toobserve and identify the most impactful ways to support companies
in each vertical to remove barriers.

CASE STUDY

works? What if developments in research, alongside newmonitoring and verification protocols, allow us to accurately
quantify storage capacity and develop a strategy that improves
agricultural yields while pulling CO˛ out of the atmosphere andlocking it away on a project-by-project basis?
To increase our knowledge on the viability of this solution, and toobserve the development of monitoring and verification protocols
and research science, we selected three companies innovating inthis space: Grassroots Carbon, Indigo Ag, and Nori. Our purchases
are helping to develop and push monitoring and verification
protocols forward.

Soil Carbon Storage

It would be an understatement to say there are divergent opinions
on the e˜ectiveness and scalability of improved agricultural land
management to increase soil carbon. Promising research suggeststhat regenerative practices could increase soil carbon by up to four
tonnes of CO° per acre per year. Opposing research suggests this isan overestimate. The di˜iculty of accurately monitoring andverifying soil carbon at scale could mean our investments lead tono carbon stored.
It would be easy to avoid these divergent opinions altogether andfocus on solutions with fewer question marks, but what if it actually

Soil sampling at a ranch using regenerative
grazing practices

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Funding the right typesof climate solutions

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C. Corporate climate commitments

In September 2020, Oxford University released The Principles for
Net Zero Aligned Carbon O˛setting. This report provides guidanceand standards for using carbon removals to meet net zero targets,rather than avoided emissions o˜sets or o˜sets that provide
removal with a high likelihood of reversal in the short term. They
conclude that companies with net zero commitments must
eventually transition all o˜setting to carbon removal thatpermanently locks away carbon. More recently, the Science Based
Targets initiative posted their net zero guidance for publiccomment. The big takeaway is that avoided emissions o˜sets are
no longer acceptable for corporate climate commitments. Carbon
removal with long-term storage is emerging as the gold standard,
especially for net zero commitments.
Many companies with very large footprints are committing tobecoming net zero and carbon negative, and when theircommitment dates start getting closer, there will be an influx ofbuyers into the market. But what carbon removals will there be forthem to buy? Higher quality and long-term carbon removal isrelatively scarce and expensive right now. Without a monumentale˜ort by companies around the world to develop and scaleengineered and frontier technologies, when it comes time to honor
net zero commitments companies will be forced to purchasesolutions that store carbon for less time, are less additional, andare less likely to comply with emerging guidance.
Currently, there is no incentive to pay a higher price forhigh-quality, long-term carbon removal and fund new technologies,
because it’s acceptable to use lower quality solutions that are
currently available. Although well intentioned, net zerocommitments combined with this practice could prevent us from
catalyzing the solutions we truly need to reverse climate change.

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Funding the right typesof climate solutions

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We cannot focus only on emissions
reductions and avoided emissionso˛sets to make good on our
corporate climate commitments.
We must also kick-start the carbon
removal market or the solutions weneed to reverse climate change will
not be available to help us.
This is exactly what we are doing at Shopify: rather than being
restricted by a corporate commitment that dictates the tonnageof carbon removal we must purchase (which inherently limits theaverage price), we have embarked on an experiment.
We plan to continue measuring Shopify’s entire carbon footprint,
working tirelessly to implement reductions, and continuing toinvest in carbon removal at the price necessary to scale thesetechnologies and drive down costs. This ensures we won’t missan opportunity to support a promising carbon removal solution
because we can’t a˜ord the price per tonne in order to achieve a
corporate climate commitment. We are removing that tradeo˜because for us, it is more important to support the most promisingclimate solutions and to make them accessible to all than tocomplete an accounting exercise.

Carbon Direct published an article in late 2020 that clearly explains
the e˜ect that a net zero commitment can have on a company, andShopify has decided to start at the last stage—walking the walk:“You buckle down to the hard task of helping scale up an industry to provide
negative emissions. Not all of those projects or small companies will make it,
but the ones in your portfolio that do—with your help—will be real, and they’ll
scrub out enough carbon to cancel your residual emissions. You can reachyour target of net zero and fulfill your vision, but it won’t be easy. The real work
has finally begun. You invest well and sidestep traps. You already envy those
who will come after you once you help build the industry—but that’s what itmeans to lead.”22

How to Kickstart the Carbon Removal Market:
Shopify’s Playbook

4. Being flexible to maximize impact

Our unconventional strategy
to make our fund go further
than with dollars alone.

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Being flexible tomaximize impact

23

It was critical for us to be flexible with our purchases because we
wanted to support a wide range of technologies and solutions at
various readiness levels. We also realized that to make our impact
go beyond our $5M USD annual commitment, we needed tocollaborate with companies to find ways to remove barriers, rather
than pursuing simple customer relationships. We paid higher prices
as an early adopter, prepaid, and entered into long-term
agreements to purchase carbon removal. We wrote letters of
support for grant applications, and in many cases were acompany’s first customer.

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How to Kickstart the Carbon Removal Market:
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Being flexible tomaximize impact

A. Pay a premium as an early adopter

Our initial idea was to use market forces to purchase the mostadditional and long-term carbon removals that were already on themarket regardless of price. We knew of a few promising companies
like Climeworks that were seeking customers to demonstrate
demand and secure financing for the construction of their next
scale facility—we felt that purchasing carbon removals fromcompanies like this was an important role that Shopify could play.

However, as we explored thecarbon removal space, built out a
network, and engaged the top
researchers and academics, one
thing became crystal clear: it would
be very hard to spend our $5M
USD budget this way because
there are simply not enoughcommercially ready solutions.

With this insight, we adjusted our approach and were willing to
pay high prices as an early adopter of high-quality solutions tocompanies across all business stages. To each of our investments,
we posed the question: “How will our funds help you reach thenext stage?” Our purchases enabled companies to fund research,pilot plants, equipment purchases, and establish monitoring andverification standards.
We found a variety of companies at di˜erent stages of technology
readiness, each with their own unique challenges. In terms ofoutstanding research, companies pursuing ocean and agricultural
solutions need to prove their carbon storing capabilities. Ocean
solutions also need to demonstrate their ecological safety to avoid
unintended consequences now and at full scale. Completing thisresearch is critical to unlock the potential of these verticals, so they
can be accepted as viable carbon removal options.
For other technologies, foundational research is complete and thescience has been de-risked—but they need support to move fromthe lab to proof of concept. This is why Shopify commits topurchasing any carbon that is captured and stored from a pilot
plant or small-scale test.

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Being flexible tomaximize impact

Shopify is purchasing the CO˛ that will be sequestered from theproduct generated at their first scale pilot facility, to be brought
online in 2022. As an early adopter, and Planetary Hydrogen’s first
customer, we are willing to pay a high price to fund research thatwill evaluate the ecological safety of the marine environment
receiving the byproduct, and confirm the carbon storage pathway
and durability in the ocean.

CASE STUDY

Planetary Hydrogen

Planetary Hydrogen plans to revolutionize the hydrogen fuel market
by replacing natural gas with the lowest cost hydrogen available,
and by combining it with carbon captured from the air to createcarbon-negative synthetic fuels. Their business model hinges on
governments around the world enacting low-carbon fuel standards
that put a price on carbon pollution from traditional fuels. Planetary
Hydrogen will take a byproduct from the hydrogen production
process and use it to enhance the ocean’s natural ability tosequester CO˛ while simultaneously fighting ocean acidification.

Mike Kelland (left) and Paige Westeinde(right) at Planetary Hydrogen’s new lab in
Dartmouth, Canada

26

We prepaid for carbon removal from companies with solutions andtechnologies that were not yet commercially available. Companies
at this stage are usually seeking seed and Series A funding.

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Being flexible tomaximize impact

B. Prepay

They are not focused on fulfilling astandard carbon removal purchasebecause they need to first
demonstrate proof of concept,
innovate and optimize theiroperations and equipment, andestablish monitoring andverification procedures.

We could not take the standard procurement approach of paying
for services or goods once they are delivered. Because Shopify’spurchase is an important, and often the only, revenue stream forthese companies, we pre-pay for the carbon removal and reserve asmall hold-back which is released if the operation is successful.
Our prepayment allows companies to run their operations anddeliver the service commitments agreed to in our contracts.
Obviously, we must de-risk this approach for ourselves as much as
we can, so we have reserved hold-backs of up to 15% of the total
payment amount, which will be released once the carbon removal
is completed. This approach is necessary because proof of concept
activities may not yield the desired results. They may fail. We
recognize that the proof of concept stage can be unpredictable,
and in these early-stage cases we do not require companies torefund our prepayment if the carbon removal is not successfullycompleted. If we did require a refund, most companies would not
be interested in having a customer and carrying this liability on
their books.

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Being flexible tomaximize impact

CASE STUDY

Carbon Engineering

Carbon Engineering has begun construction of their Innovation
Centre in Squamish, British Columbia, Canada. They are building
this facility to give their engineering team a place to optimize theirtechnology and develop next-generation improvements to berolled out at their commercial facilities around the world.
Shopify’s involvement will ensure the captured CO˜ from testing
Carbon Engineering’s operations gets stored. We are purchasing
the CO˜ that is captured from the atmosphere at the facility andare working with Carbon Engineering to find innovative newstorage partners.
Our combined goal is to demonstrate long-term carbon removal
and support the development of a variety of storage technologies
that can be paired with direct air capture. We are prepaying as
construction milestones are reached and service quantity
percentages are captured. This purchase agreement makes it
economically feasible for Carbon Engineering to store the CO˜ andsupport the development of new storage solutions. By prepaying,
Shopify is funding construction activities and providing an earlyrevenue stream that supports purchases of equipment needed tocompress and prepare the CO˜ to be transported o˜site for longterm storage.

In addition, we reserved 10,000 tonnes of carbon removal capacityfrom a large-scale direct air capture and geologic sequestration
project that will be achieved through Carbon Engineering’s
development partner, 1PointFive. We have prepaid a deposit toreserve our carbon removal units and owe the remainder once thecarbon removal has been achieved and independently verified. By
prepaying a portion of our purchase today, we are playing a keyrole in helping Carbon Engineering commercialize bydemonstrating market demand for their solution. This in turn helps
Carbon Engineering and its plant development partners raisefinancing for projects and influence policy change to help develop
market conditions for a global carbon removal industry.

Rendering of Carbon Engineering’s
large-scale direct air capture facility

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Being flexible tomaximize impact

C. Long-term agreements

Multi-year purchase agreements provide carbon removal
companies with a reliable cash flow and revenue on the books foryears to come. This makes them more attractive to investors. Plus,
access to additional capital can help a company scale, increase thesupply of carbon removals, and move down the cost curve.

Many of our purchase agreements
have five-year terms, with options
to extend for a subsequent five
years, giving these companies acustomer until 2030.

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Being flexible tomaximize impact

CASE STUDYClimeworks

Climeworks has completed their proof of concept and is one of the
only engineered solutions that are commercially available today.
Climeworks’ direct air capture technology pulls CO˛ from theatmosphere and locks it away underground. What makes
Climeworks’ technology unique compared to other solutions is thestorage durability (the CO˛ is locked away for thousands of years)
and its scalability (the modular containers can be stacked toconstruct machines of any size).
Construction of Climeworks’ first-of-a-kind direct air capture andstorage plant called Orca is well underway. Orca will be able tocapture 4,000 tonnes of CO˛ per year. Currently, Climeworks isfundraising for their next plant (Mammoth), which will increase
their CO˛ removal capacities by an order of magnitude.
Like many early CO˛ removal solutions, Climeworks is bringing its
service to market for a relatively high price. But as more companies
and individuals become customers, the scale-up of thismuch-needed climate technology will accelerate. This will lead tocost reductions that make CO˛ removal more accessible, which willthen lead to an increase in demand and supply (the same thing that
happened with the adoption of solar energy technologies).

Shopify is supporting Climeworks’ scale-up and has committed tobuying CO˛ removal from Climeworks for the next five years, with
an option to extend for another five years. Our commitment sends
a critical market signal that engineered CO˛ removal solutions areneeded. Other companies and individuals can join Shopify andenter into similar purchase agreements to stack demand. This
enables Climeworks to secure project financing because they havepre-sold carbon removal in advance of the construction of theirnext generation plants.

nstallation of the collector containers at
Climeworks’ Orca plant located in Iceland

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Being flexible tomaximize impact

D. What this means for businesses

Our flexible approach means we are meeting carbon removal
companies where they are at. We’re providing them with a leverthat gets them to the next stage, moving them closer to becoming
fully commercialized, scaled up, and expanding.

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Running a strong process
to identify the mostpromising companies

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5. Running a strong process to identify the most promising companies

How we analyze,
evaluate, and selectcompanies developing
the most promisingtechnologies andsolutions.

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A. Targeted approach

We also focused on the basics and evaluated the following:
Life cycle analysis of the project now and at scale(more on this below)

During our research, we found well-recognized companies in needof capital and support to scale. We wanted to move fast, andundertook a targeted approach to seek out solutions that alignedwith our mission. We built an extensive network of experts,scientists, and leaders in carbon removal. We conducted our own
research and leveraged our network to complete further due
diligence.
We developed relationships with potential investments and tooktime to understand their businesses, challenges, and productroadmaps. We often asked the questions:
What would a purchase from Shopify do for your company?
What barriers exist right now?
What is your greatest uncertainty?

Potential to scale
Target annual removal amount and cost per tonne
Operational considerations such as potential environmental
impacts and co-benefits
These questions, among others, led us to select companies withthe greatest chance to reach massive scale with our support.
Although we used a targeted approach, we were strict about our
research and evaluation process. We developed templates andtools to guide us through each step and to arrive at a balanced
decision—we’ll share each of them with you below.

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B. Research template

Our research template provides a consistent framework forinvestigating each potential investment. Here we document thetechnology/solution, company information, financial
considerations, and expected market e˜ects. This template is aliving document that will evolve as we learn more about what works
and what doesn’t.

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C. Life cycle analysis

A life cycle analysis compares a
project’s emissions intensity to its
climate benefit. This is done by
documenting all the emissions thata project generates, including frommanufacturing raw materials,
energy usage, shipping andtransportation, and weighing thatagainst the carbon captured andlocked away outside theatmosphere by the project.
For a project to be viable, it must
remove more carbon than it emits.

We requested that each company submit a life cycle analysis. Life
cycle analyses were readily available for established companies athigher technology readiness levels, commercially available
technologies, and companies supplying carbon o˜sets that are
subject to third-party verification or standard evaluation protocols.
Many early-stage companies, however, were still working towards
their first comprehensive life cycle analysis when we met. In thesecases, we relied on scientific literature and advice from experts inthe field to evaluate the potential removal capacity of the solution.
For solutions with promise, we committed to purchase carbon
removed during research projects to prove or disprove theirestimated removal capacity, which enabled them to create theirfirst life cycle analysis.
Review of this analysis is a complicated undertaking and requires ahigh level of subject matter expertise. Recognizing that this is a
critical part of evaluating companies, we recommend using
industry standard tools, and consulting widely with industry andscientific experts. We worked with Carbon Direct to ensure weunderstood the true carbon benefit of each company’s technology
or solution, now and at scale.

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D. Recommendation template

Our recommendation / decision template is a record of the key
considerations and rationale behind each investment we made. Our
template includes an overview of the technology/solution,company highlights, life cycle analysis results, and the carbon
storage potential at scale. The core of this analysis is a risk matrix
that assesses four possible outcomes:

1. Company successfully scales and Shopify is involved (win-win)
2. Company successfully scales and Shopify is not involved (win)How to Kickstart the Carbon Removal Market:
Shopify’s Playbook

3. Company fails and Shopify is involved (sunk costs)
4. Company fails and Shopify is not involved (possible missed opportunity)

This requires us to objectively look at the motivating factors anddetractors of entering into a legally binding contract with acompany. It standardized our process and ensured we madedecisions in a pragmatic, balanced, and consistent manner, which
was critical given our targeted approach.

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E. Fund targets

The carbon removal landscape is constantly changing and we
expect this to accelerate, so in the first year of our fund we wanted
to explore all verticals to build a solid foundation of knowledge andconnections, and to identify opportunities. Alongside ourcommitment to spend $1M USD on long-term atmospheric carbon
removal, we defined an additional target of investing in every
carbon removal vertical in order to have a balanced fund in termsof solution type and technology readiness level.
To monitor our progress and how the fund evolves over time, weare tracking: Spend per vertical
We looked at spend per vertical in three ways:

Spend on an individual vertical basis

24% Biomass
23% Direct air capture
15% Product
9% Forest/Transportation
9% Soil
8% Collaboration
6% Renewable energy
4% Mineralization
3% Ocean

Spend on Evergreen and Frontier solutions
24% Evergreen: key solutions that temporarily remove carbon or
reduce carbon emissions. We need these right now while long-term
carbon removal technologies begin scaling
76% Frontier: groundbreaking technologies that remove carbon
from the atmosphere and store it for the long term. Our goal is tospend most of the fund in this category each year.

Spend on commercial and pre-commercial solutions
71% commercial
29% pre-commercial

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F. Contracts

We took a customized approach to each contract because of thewide range of technologies and solutions at varying degrees oftechnology readiness. We developed innovative agreements thatmade sure our purchases were as impactful as possible. Our
flexible approach came to life in our contracts, where we included
prepayments and entered into multi-year agreements with options
to extend.
For companies in research and pilot stages, the contracted amountof carbon to be removed is an estimate that may not be achieved.
Rather than requiring companies to provide a refund, we included
options to extend the delivery time period or to adjust the price per
tonne upwards.
For commercially available solutions where we are not the first
customer, we included stringent expectations because thesecompanies have already de-risked their technologies which
reduces uncertainty. These contracts include standard payment
structures where Shopify is invoiced for services once completed,and performance requirements and penalties (such as refunds) inthe event that delivery is missed.
For certain nature-based solutions that must rely on
well-developed, peer-reviewed and accepted monitoring andverification protocols, we stipulated that these protocols must be
in place before credit delivery and payment.

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G. Monitoring, verification, and reporting

For nature-based solutions including reforestation andregenerative agriculture, we used existing monitoring andverification protocols developed by the voluntary carbon market asa starting point. These protocols contain measures to help mitigate
the risk of carbon being re-released, including holding back credits
in a bu˜er pool. This gives carbon credit purchasers assurance thatthe exact amount of carbon they purchased will remain stored forthe expected storage term. This is critical because project-based
solutions rely on land management to maintain a specific amountof carbon stored within the natural system, and this includes aseries of fluxes that are subject to external factors, like floods, fires,or human error. However, these protocols are imperfect and havebeen subject to criticism. To better understand the risk of our
nature-based solution investments, we worked with Carbon Direct
to conduct deep project reviews and due diligence.

While monitoring and verification
protocols for engineered solutions
have not been fully developed andapproved by voluntary carbon
market registries, this did notdissuade us from investing in them.
We were comfortable moving ahead because storage mechanismsthat rely on well-understood chemical reactions, such as theincorporation of CO˜ into concrete or reactive rock formations,pose little risk of re-release—so the monitoring requirements are
more straightforward. It’s also easy to verify how much carbon has
been stored using simple process monitoring equipment. In cases
where there is a risk of re-release, including geological storage, we
expect companies to use systems to monitor the integrity of thestorage system. Where available, we rely on standard protocols
and reference these in our contracts. In all cases, our contracts
include requirements for companies to submit monitoring andverification data and attestations that demonstrate that the
carbon was stored.

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H. Objectives: performance indicators

It’s challenging to measure and determine if our Sustainability
Fund is meeting our primary objective of kick-starting thecarbon removal market because we are unable to separate
out the direct e˜ects of our purchases and communications.
Instead, we observe trends and their directionality.
This is what success looks like to us:

We have also developed performance criteria and indicators toevaluate our investments on an annual basis. Our detailed company
performance template assesses the following factors:
Project and research milestones are met
Carbon quantities are achieved within contract timelines (expected
vs. delivered tonnage)
Monitoring and verification documentation is provided and storage
term is adhered toLife cycle analysis performance (comparison of expected with actual)
Carbon accounting, including the energy requirements and theassociated energy resource mix

Our fund companies see an increase in customers

Carbon return/reversal events (voluntary and involuntary)

Our fund companies see increased investment and interest

Open communication and information sharing on progress,

Increased capital flows to projects and companies that still need to de-risk
their science
More businesses decide to purchase carbon removal instead of avoided
and reduced emissions o˜sets
The supply of carbon removal available for purchase increases and thecost per tonne decreases
The body of knowledge increases because of research we’ve funded thatproves or disproves new methods

obstacles, and business development
Cost performance (reducing over time):
Capital expenditures per tonne
Operating expenses per tonne
Monitoring costs per tonne
Storage costs per tonne
Scalability
Removal tonnage at scale (on track?)
Projected time to scale (on track?)

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What we learned andwhere we are going40

6. What we learned and where we are going

Some insights we’ve codi˜iedto help you start purchasing
carbon removal.

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What we learned andwhere we are going

41

When we started connecting with companies andcommunicating our intent to make purchases in early 2020, we
discovered there was limited carbon removal available to buy. As
we have a $5M fund that renews on an annual basis, we arelooking to move the money within each calendar year. We arealso a capital fund and are looking to buy something rather thanmake donations. With few high-quality options ready forpurchase in 2020, we formed the foundation of our flexible
approach, to work with each company and provide exactly what
they need to move their business forward.
This created a tension between needing to prepay for futurecarbon removal and the risk of companies being unsuccessful
and folding before delivering our quantities. This makes legal andfinancial minds go crazy, and led us to uncouple themanagement of our corporate carbon neutrality commitment
from our Sustainability Fund objectives. It became clear that weneeded to do both: measure, reduce, and purchase o˜sets that
we can retire against our footprint now, and also take risks to get
the carbon removal market moving so that in future years the
supply will increase.

With our first year of purchases
behind us, the companies we aresupporting have started to scale,and have increased their carbon
removal quantities ready forpurchase in 2021 and beyond. Now
more than ever, we need otherbuyers to enter the market andsupport these companies.

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7. Join us

How to Kickstart the Carbon Removal Market:
Shopify’s Playbook

Calling all companies—
the planet needs your help.

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Join us

Carbon removal will not scale with only a handful of customers.
Companies in this space need more people’s support to deliver
atmospheric capture and long-term storage at the scale thathumanity desperately needs.
Venture capital and other funding sources are flowing into thisspace and now we need more customers to drive market
development. Guidance and standards are quickly being developedby leaders like Oxford University and the Science Based Targets
initiative. Carbon removal is becoming widely accepted as anecessary component of any corporate climate program, and thisis good news: the more customers there are, the more thesesolutions will scale, the more the cost of carbon removal will
decrease, and the more attractive carbon removal becomes toother buyers.
Some of these technologies and projects are complicated. We
collaborated with the leading experts in this space to support ourinvestment decisions. This can be intimidating and a significant
time commitment for a company whose business focus iselsewhere. But many companies still want to begin purchasing
carbon removal and don’t know where to start.
The objective of this playbook is to allow others to follow and buildon what we learned. Rather than reinvent the wheel and wastetime, reach out to us and we would be happy to help kick-start yourcarbon removal journey.

It can be di˛icult to stay on budget andmeet corporate climate commitments
while supporting carbon removal.
If purchasing only expensive carbon removal credits is a barrier
for your company, we encourage you to do both: continue to
execute your corporate climate plan, but also set aside somemoney to experiment with carbon removal. Do this with no strings
attached and understand that it may not work out. Choose an
amount that you are comfortable with—even $10,000 USD can
get you started. This will give you the chance to get to know themarket and its key players, so you can be ready when carbon
removal is the only acceptable option for meeting a net-zerocommitment.

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Join us44

We hope you embark
on this experiment with us.

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Appendix A

Templates

Research Template
Recommendation / Decision Template

How to Kickstart the Carbon Removal Market:
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Company Performance Template

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COMPANY NAME
Company website

How to Kickstart the Carbon Removal Market:
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Research Template

Research Template

Technology
˜. Describe their technology.
°. Does it capture carbon or does it rely on another source ofconcentrated CO˜?
˛. Does it store carbon or does it rely on another process forsequestration?
˝. Is carbon removal permanent? What risks exist that it is not?
˙. How is carbon removal measured and verified?
ˆ. What are the process inputs/outputs ˝energy, reagents, waste, etc˙,and at what scale relative to carbon removal ˝e.g kWh/tonne˙?
ˇ. How mature is the technology? Is it a novel process or an
adaptation of an established process? Is there consensus ordisagreement in the literature about its effectiveness?
˘. What is the carbon removal potential at scale? What has to be done
to reach this scale?

˙. Do they have results yet? What are they?
ˆ. Is the financial/decarbonization success of the company contingent on
certain regulatory conditions? What are the risks here?
ˇ. Who are they connected to? ˝university research groups, collaborations
with large emitters, venture arms of other corporations˙˘. Is there alignment in mission/values beyond decarbonization?

Company
˜. Describe their business model. Are they for profit? If so, how dothey intend to make a profit?
°. Who does the company compete with ˝if anyone˙?
˛. Does the company sell a product other than carbon offsets?
˝. What stage are they in ˝concept, pilot, scale-up, commercial˙? Whatis the timeline? Technology readiness level?

Market Effects
˜. What does this solution displace? Are there avoided emissions elsewhereor is this replacing a carbon intensive sector/technology?
°. How many other companies are in this sector and what stage are they at?
What are competing business models?
˛. How long will it take for the cost curve to change? Are their efficiencies ofscale or cost controlling factors such as energy costs?

Financial˜. What is the estimated cost of carbon removal? Are there differences
between the company’s estimates and what is in literature?
°. Does the company rely on external parties to realize part or all of the
carbon removal ˝e.g individual farmers˙? How are incentives structured
around this?
˛. How are the costs of the process distributed? Upfront CAPEX vs OPEX?
Paid by company or partners?

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COMPANY ˆ PROJECT NAME
Investment Terms

Recommendation /Decision Template

Recommendation / Decision Template
Success ˝ not involved ˙winˆ

Success ˝ involved ˙win winˆOverview— Vertical - biomass, direct air capture, product, forest, soil,
mineralization, ocean— Description of technology/solution— Timeline and development stage ˝concept, pilot, scaling up, commercialized˙— Viability/Risks ˝science, regulatory, investment needs, certifications˙— Organizational capabilities ˝collective skills, abilities, and expertise˙— Alignment with corporate mission and values— Who else is involved, what company are we keeping

How to Kickstart the Carbon Removal Market:
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Systems/Lifecycle Analysis— Review of complete carbon cycle including inputs ˝electricity, materials,
equipment, waste, water, etc˙Fail ˝ not involved ˙missed opportunity?ˆ

Fail ˝ involved ˙sunk costsˆ

— At scale will remove how much CO˛?

Recommendation

pre-commercial/commercialized
frontier/evergreen% of spend% of tonnes CO˛

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Performance Criteria
and Indicators

Performance Criteria and Indicators
Milestones
and Execution

Objective

Example Indicators

TargetContract requirements are met

Ordering, invoicing, and billing carried out in accordance with contract timelines

100%

Services completed and certi°ied (if appropriate) within contract timelines

100%

All postponements/delays reported within contract timelines100%

All reporting and documentation requirements completed

100%

Financing secured by [date]100%

All permits and approvals completed by [date]

100%

Construction completed and project fully commissioned by [date]

100%

Annual service quantity is achieved

Annual total of CO˛ captured and stored[value]Life cycle analysis isconducted annuallyService quantity determined by standard methodologies, protocols, or equipment (as applicable)

yes

Project and construction
milestones are met

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Performance

Storage is achieved

Cost reduces over time

Scalability is demonstrated

Collaboration

Open communication andinformation sharing

CO˛ emissions caused by delivering annual service quantity[value]Life cycle analysis provided on an annual basis

yes

Storage term achieved[value]Monitoring and veri°ication systems implemented to monitor storage

yes

Certi°ication protocol developed (if applicable)

yes

Capital expenditures per tonne$/tonneOperating expenditures per tonne$/tonneMonitoring costs per tonne$/tonneStorage costs per tonne$/tonneTonnage captured and stored annually[value]Projected time to scale[value]Number of individual buyers[value]Number of buyers purchasing > 1,000 tonnes[value]Regular updates provided on progress, obstacles, and business development

yes

Carbon return/reversal events (voluntary and involuntary) communicated and compensated, as appropriate

yesYear 1

Year 2

Year 3

Year 4

Year 5