Q: What is the Carbon Containment Lab?
The Carbon Containment Lab is an independent nonprofit. Our mission is to identify promising strategies for abating greenhouse gas emissions and to provide the scientific, economic, or entrepreneurial expertise that will allow them to scale.
Sometimes, this means working directly with a scientist to validate research and guide it through pilots to commercial scale. Other times, it involves supporting companies with proven solutions by helping them secure funding and connect with customers. We also work on policy and building trust in carbon credit markets.
We’re a team of 18, which is small enough that we can adjust our approach to support each project’s needs. It’s also small enough that, to be effective, we must partner widely across all sectors. Because we are a nonprofit, we’re in a position to work collaboratively. And since we do want to have impact, we prioritize solutions that represent quality and value, are investable, and will make economic sense at large scale.
Q: You started the Carbon Containment Lab after a long career in the Yale Investments Office. Are there lessons that carried over to the Carbon Containment Lab?
I worked with David Swensen in the Yale Investments Office for more than three decades. In the early days, we had no experience managing endowments or even institutional portfolios. We weren’t experts in any specific area, but we had a strong belief in working from fundamental principles. That helped us start from a blank slate.
At the time, conventional wisdom was that everyone should invest in U.S. stocks and bonds and use the S&P 500 as the benchmark. We realized, for the endowment, that wasn’t our real goal. Our fundamental purpose was to generate strong returns to support the university’s operating budget and to preserve purchasing power long term. Looking at things differently produced good results for the university.
We also had fortuitous timing. We were exploring new markets—Russia, China, Brazil—as well as new sectors including biotechnology and the rise of venture capital and absolute return hedge funds. That was all really fun and exciting. And we had to think through how to fit it all in a portfolio.
In setting up the lab, again, we were not experts in any particular approach to removing, storing, or preventing greenhouse gas emissions. We started with an openness to learning. When we did an inventory of all the greenhouse gas emissions, we realized almost everyone was focused on figuring out how to stop fossil fuel emissions of carbon dioxide. That’s incredibly important, but it’s perhaps 35 gigatons of the 60 gigatons of total greenhouse gas emissions. It’s also incredibly important to address those other 25 gigatons of emissions, and given my background in endowment management, the opportunity to find quality and value really resonated.
I started to think about how to apply quality and value to constructing a portfolio of climate solutions. We knew that there was no one silver bullet. We needed to do lots of different things. So we started looking for high-quality opportunities that weren’t being addressed. We looked across all the different sources of emissions for existing technologies that aren’t being employed and for nascent technologies that could be developed.
We brought investment principles to our decision making. Given limited resources, how do we direct them to have the largest social benefit? Where are there low-cost options? Where can our partnering be most effective? Going back to the work at Yale in the Investments Office, and to what I learned at Yale SOM too, it’s an approach that focuses on first principles, continuous learning, interpersonal relationships, trust, and communication.
Q: Would you give an example of a project?
Even before coal is burned, when coal seams are disturbed in the process of mining, they release methane, which is a potent greenhouse gas. Perhaps someday we won’t mine coal. But currently coal usage is going up every year. And even when we stop using thermal coal for power, we can expect coal for metallurgical purposes to stick around for some time. So it would be incredibly impactful to capture and abate these methane emissions.
We talked with coal operators to understand how that might happen. Currently, mine safety air ventilation infrastructure circulates surface air into the mine and in doing so, vents methane. That prevents explosions, and it’s what regulations require. There aren’t any regulations preventing venting the methane into the atmosphere, so operators don’t have an incentive to do anything else.
We’re looking at promising solutions and saying, what are the missing elements to this being ready to scale? Is it the technology, the people, the policy infrastructure, the economics overall? Is there anything we can do to help it all come together and work?
There is existing technology that can both measure the methane and oxidize it to reduce its climate impact. It’s low cost, but that doesn’t matter to coal producers because however low cost, it’s an added expense. But since the technology can measure just how much methane is being abated, incorporating it to reduce methane release would make for a high-quality carbon credit.
Our research helped investors understand the opportunity to abate highly potent methane permanently at low cost and has resulted in the containment of many millions of tons of carbon dioxide equivalent.
Q: It sounds like part of what you’re doing is helping to direct capital toward innovation.
We’re looking at promising solutions and saying, what are the missing elements to this being ready to scale? Is it the technology, the people, the policy infrastructure, the economics overall? Is there anything we can do to help it all come together and work?
It’s something that very few were focusing on. It’s really interesting work because it requires a very entrepreneurial approach with each solution. It’s, “OK, how do we innovate to tackle this problem?”
It’s exciting. It feels very much like the early days at the endowment when we knew we weren’t the experts in venture capital or emerging markets and what we became experts in was finding opportunities and good people to partner with. Here, too, we’re coming in open-minded and willing to learn how we can make a difference.
Q: You mentioned working with scientists to move research from the lab to pilot projects and beyond. Would you share an example of that?
Hydrofluorocarbons (HFCs), typically used as refrigerants, are significant superpollutants. They can be many thousands of times more potent than CO2. We know demand for air conditioning and chilling is expected to grow threefold by mid-century, largely in the Global South, so demand for HFC gases is growing quickly.
It’s currently very difficult to properly dispose of HFCs. In many countries there’s ostensibly a legal requirement for technicians to drain refrigerant during equipment servicing and end-of-life disposal. They are supposed to collect it from the machines, transfer it to a larger tank at their shop, and finally ship it to one of a few places in the world where it can be properly reclaimed or destroyed.
That process is cumbersome, time consuming, and expensive, and in many cases the cement kilns or argon plasma arc machines used to destroy the HFCs aren’t that effective or can’t handle the potential volume of gases. On top of that, technicians aren’t fully compensated when they do make the effort, so it’s not too surprising that even in the U.S. it’s estimated that more than 90% of the gases are just vented or leaked instead. The situation is even worse internationally.
To help address this, we started to look for a technology that destroys HFCs effectively and is small enough that it could be installed at a technician’s shop or even brought directly to the HVAC units. We didn’t find anything.
An intern on our team, Yale PhD student Clare Butler, told us she was working with non-thermal plasma arc reactors to destroy PFAS, also known as “forever chemicals.” Her engineering professor, Lea Winter, thought this type of technology might work well for HFC destruction.
We decided to work with Dr. Winter, knowing it was a pretty high-risk thing, but recognizing that the upside and need was really big. She eventually figured out that the original approach would be OK, but she modified the reactor and that worked really well.
With Yale Ventures’ support, we’ve filed a provisional patent, delivered a presentation at the Association of Environmental Engineers and Science Professors at Duke, and won a substantial grant from the Yale Planetary Solutions to develop it further. It’s amazing. We’re really off and running.
Q: You have mentioned carbon credits a number of times. Would you explain where they fit?
They’re a big piece of how I came to be doing this. Over the last few decades, I’ve learned more and more about climate change often from managers and partners of the Yale Investments Office, people like Jeremy Grantham and Tom Steyer, who are very concerned and active in the climate space.
In 2005, Yale made a commitment to significantly reduce its greenhouse gas emissions and carbon footprint by 2020. As I started looking at what the university could do to meet the targets, it became clear that there was only so much we could do on campus without it being really disruptive or expensive. We formed a working group to see what we could do “off campus”—for example, with carbon credits. In trying to buy high-quality carbon credits to meet our commitments, we began to realize many of them overstated their effectiveness—they simply wouldn’t ever abate or mitigate or contain the carbon that they said they would. We had a “technical” term for that: bogus.
Project developers would say, if we don’t protect these forests through this carbon credit project, the forests will be clear cut in the next five years, so this becomes the baseline against which their project delivers credits. Yale invests in timberlands so I was familiar with the industry and knew that clear cutting was really unlikely. Selective cutting was all that might happen. And while the difference between full protection and clear cutting is large, the difference between full protection and selective cutting is much less.
The protocols and methodologies for creating carbon credits are quite involved. Complicated science and estimations go into developing them. In many cases, it’s very hard for the buyer to understand exactly how greenhouse gases are being abated. And with some projects it’s not possible to verify that the project actually has the impact the sellers said it will.
For the sponsors of a given project—the people who sell those specific carbon credits—the incentive is to get as much as they can for the carbon credits. There were cases of overstating the impact, and a few outright frauds. This happens with everything; once you set up the scheme, people are going to figure out how to play it the best they can. It’s difficult to close all the loopholes. But unfortunately, these instances have eroded trust in carbon credits. It meant this potentially really impactful tool—carbon credit markets—had become weak and inefficient.
It seemed like someone ought to do something about the problem. Then I realized I was in a good position to work on the issue. Things were going well with the investments team and portfolio. The idea of a new challenge was appealing.
When I raised the possibility of making climate my focus, I got a lot of support from David Swensen and friends in the investment world. The Carbon Containment Lab launched in fall 2019 as part of the Yale School of the Environment. It was really helpful to be able to talk to people like the Yale Nobel Prize winner Bill Nordhaus about his work on climate and the social cost of carbon and the pioneering environmental economist Robert Mendelsohn about valuing damages. Last year we spun out to be an independent nonprofit, but we of course still have many ties to Yale, and several of us continue to teach there. We also have many Yale students as interns.
Q: How are you trying to improve carbon credit markets?
We’re trying to design and structure projects in a way to build trust in the market. We like solutions where it’s easy to measure and monitor the greenhouse gases being abated. We look for protocols that are transparent and understandable to investors. And we look for ways that technology, whether it’s satellite monitoring or low-cost gas meters, can make projects easier to develop and monitor, which will make for a more efficient market.
We’re also doing a lot of work with corporations to help them understand carbon credits. Educating potential buyers is a way to make sure the best carbon credits, which are very high quality and a good value, are purchased. It should be a race to the top.
Q: Did attending Yale SOM shape the work you have gone on to do?
Absolutely. The lessons I learned from Art Swersey on portfolio theory, Monte Carlo simulations, and how to think about diversification were always part of the work. From my Individual & Group Behavior class with David Berg, the importance of working collaboratively and building long-term trusted relationships showed up in everything we did at the Investments Office.
I chose Yale SOM because I believe that mission matters. And I bought into the approach. In the early days of Yale SOM, the whole concept was to prepare leaders to work across sectors. But implicit in that was that the public sector and the nonprofit sector had the most to learn from the for-profit corporate sector. So it was gratifying when, decades later, our work in nonprofit investment management had the best investment track record and performance of any sector.
The School of Management connections have continued with the Carbon Containment Lab. All five board members have Yale SOM connections. We’re fortunate to have the former SOM faculty member and former Yale president Richard Levin as our chair. Len Baker is on the Yale SOM advisory board and a former Yale trustee and former chair of the investment committee. And the other three board members, Catherine Smith, Robert Bettigole, and me, are all from the SOM Class of 1983.
Q: Is there anything else you want to add?
I don’t know if I can say this in a way that conveys how important I believe it to be, but we need people to step up and accept challenges that are beyond their current role or career track. We need people to take on societal problems. We need people dealing with the big issues.
There’s a responsibility that comes with the privilege of the Yale SOM education. You’re in a good position to contribute to solving issues that don’t have any easy fix. If we don’t do it, how can we expect anyone else to engage? It’s the right and responsible thing to do. And it also is rewarding and exciting to face up to real challenges, to think bigger picture about solutions, and to seek out positive steps rather than just focusing on the problems.
