April 6, 2023
NCX announced a major pivot over email yesterday afternoon. The company appears to be have stopped signing landowners up for their famous and critiqued, yet diligent one-year harvest deferral credits. This move seems to signal a focus shift toward their core technology and away from carbon accounting. Here’s the fine print and corresponding FAQ (emphasis highlighted):
<aside> ✉️ Subject: NCX Program Development and 2023 Opportunities
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Over the years we have engaged with buyers ranging in size, industry, and location. These organizations are interested in supporting landowners through various project types including harvest deferral and more. Through our recent survey and ongoing conversations, many of you have also shared with us the desire to explore alternative program offerings.
Expansion of Program Offerings
Rather than continuing to operate large, quarterly enrollment periods solely driven by short-term harvest deferral commitments, moving forward we will bring specific opportunities to you based on specific interest from buyers. In practice this may look like a biodiversity project, a reforestation project, or a harvest deferral project. Eligibility will depend on location, project type, and property characteristics. Our team will work to supply you with opportunities to participate in projects that support your management objectives and align with demand from companies that want to invest in communities and forests.
What This Means for You
To focus on the work ahead, we will not be hosting a nationwide enrollment cycle in 2023. However, we will present opportunities from our expanded offerings as they become available in your area and continue to keep you up to date on our evolving program.
You will also see changes in the NCX Landowner Platform that help us understand your eligibility and communicate when a new opportunity arises for you. These changes will have no bearing on current cycles in progress; those will be completed according to the dates outlined in the Seller Agreement. As we invest in supporting new program offerings, we recommend continuing to manage your property as you deem appropriate, including harvesting if that is due.
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I had just stumbled on their precursor - SilviaTerra - when that serendipitous pivot email hit my inbox. Inspired by reading material and a thought-provoking discussion from my Airminers Boot Up group’s session on Forest Carbon Removal, I was digging through PR archives and LinkedIn profiles, seeking to learn the origins of NCX. They rose in 2020 out of obscurity. Where did these guys come from, and how did they achieve such a quick start?
SilviaTerra (now known as NCX) built their initial forest inventory platform back in the 2010s. Over a dozen forestry companies used their platform as early as 2014.
Around the mid- to late 2010s they explored additional ways to scale and bring their forest inventory platform to market - paper mills and large private landowners show up as potential users in some of their go-to-market copy from the period. They joined Microsoft’s AI for Earth program in 2018 and launched the first Natural Carbon Exchange pilot through Microsoft in 2019, getting 20 landowners in western PA to enroll an average of 40 acres each. They struck gold with that pilot.
In January 2020, VersionOne announced that they would co-lead (with Union Square Ventures) a $4.4M Seed round investment in SilviaTerra to build a Natural Carbon Exchange (NCX), “a marketplace for landowners and large corporations to exchange gigatons of new carbon offsets.” NCX would leverage transparency and validation tools offered by Basemap, a forest inventory platform that combined satellite and on-the-ground forester data.
When NCX put together an initial batch of committed carbon offset buyers (Microsoft, Shell, South Pole) during their $20M Series A round back in Spring 2021, those offset purchases were conditional on successfully listing projects in Verra’s registry. To get certified by Verra, NCX had to prove additionality: Demonstrate how enrolling landowners in their program is significantly better at keeping CO2 out of the air when compared to doing nothing. Demonstrating additionality can seem like *rocket science.* So, how did they do it?
Landowners would agree to extend tree harvest rotations on their land by an additional year or more in exchange for money from carbon offsets. Somewhere between the January 2020 Seed round and April 2022, NCX developed ton-year accounting using discount rates as the standard method to calculate additionality for these projects. They believed this accounting technique would satisfy Verra’s requirements while giving landowners the freedom of a 1-year harvest deferral commitment.
In late Spring 2022, one year after the Series A, NCX had doubled landowner sign-ups and closed their $50M Series B. The new funding was intended to enable international growth of their technology and "formation of new natural capital markets". That strategy would come to an abrupt halt three months later when Verra rejected their tonne-year accounting proposal on the back of concern about the discount rate calculations from the scientific community. Consequently, NCX reduced their team by 30% and reformulated the go-to-market strategy that we see in yesterday’s announcement.
I can’t seem to wrap my head around the marginal CO2 capture that occurs in that 1 year of deferred harvest.
Using some rough benchmarks, a forested acre in New England might capture the equivalent of 2 tons of CO2 (tCO2e) a year, and it may hold another 30x that amount (60 tons) of CO2 in the wood, soil, deadwood, litter, and roots that are already there. About 1/3 of that forest’s carbon (20 tons) is stored in what you see growing aboveground, and about 2/3 would be in materials unaffected by regenerative harvesting - soil, deadwood, litter, and roots.