Welcome to the 84th edition of Deep Tech Catalyst, the channel from The Scenarionist where science meets venture!
If you’ve ever wondered how carbon markets really work—or what it takes to build a fundable business at the intersection of deep tech and natural ecosystems—this episode is your essential briefing.
Today, we’re joined by Chloë Payne, Principal at Ponderosa Ventures, who brings a sharp investor lens to the emerging world of nature-based carbon removal, reforestation, and MRV (monitoring, reporting, and verification) technologies.
Together, we unpack what makes a carbon credit credible, why most forestry projects aren’t structured for venture returns, and where the real investment signals lie—from dual-revenue models to pre-purchase agreements and techno-economic fluency.
In this edition, we explore:
Why trust is the real currency in voluntary carbon markets—and how it’s earned
What separates project finance from venture-backable innovation in forestry
How MRV tech is becoming the central infrastructure of nature-based removal
Why pre-purchase agreements matter—and what they signal to Series A investors
What startups must prove to survive the coming commoditization of carbon
Whether you're an operator building in Deep Tech, an investor exploring carbon removal, or a scientist navigating the path from prototype to platform, this conversation offers a grounded view of what it means to build and scale real value—at the frontier of Forestry Tech.
Let’s get into it 🌲
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BEYOND THE CONVERSATION — STRATEGIC INSIGHTS FROM THE EPISODE
The Foundations of Carbon Credit Economics
At its core, a carbon credit represents one metric ton of carbon dioxide that has either been removed from the atmosphere or prevented from being emitted. In theory, this should be a standardized, commoditized unit. In practice, it’s anything but.
Carbon credits vary widely in perceived quality, permanence, trustworthiness, and price—especially in the voluntary carbon market, which is where most early-stage innovation is happening today.
The carbon market is divided into two primary categories: voluntary and compliance.
In the compliance carbon market—often built around cap-and-trade systems—governments issue emission allowances to large emitters, gradually reducing them over time. Companies that emit less than their allowance can trade their surplus to others, creating a financial incentive to reduce emissions.
By contrast, the voluntary carbon market allows organizations to offset their emissions outside of any regulatory obligation. It includes a wide range of carbon removal approaches, from reforestation and biochar to cutting-edge technologies like direct air capture and enhanced rock weathering.
The voluntary market is highly dynamic. Prices can range from as little as $5 per ton for afforestation credits to over $1,000 per ton for engineered solutions like direct air capture.
This variation reflects differences in permanence, scalability, and trust. The market rewards high-quality credits with longer-lasting carbon storage and verifiable outcomes.
At the same time, concerns over fraud, double-counting, and poor project implementation have made buyers especially wary—particularly in nature-based solutions like forestry. It’s not enough to claim carbon removal. Buyers want evidence, third-party verification, and long-term monitoring.
The High-Stakes Role of Trust and Quality
In a space where the core product is invisible—carbon that’s not in the atmosphere—trust becomes the most valuable asset. That trust is built through protocols, validation, and verification steps that prove a credit represents a real, additional, and permanent removal.
Third-party verification bodies play a critical role, auditing project data and certifying compliance with carbon standards such as Verra, Gold Standard, or Isometric.
Even with certification, quality is judged on a spectrum. High-tech removals with strong durability and clear MRV (monitoring, reporting, and verification) frameworks command higher prices. Nature-based credits—like those from reforestation—can be valuable, but only if buyers believe in their permanence and integrity.
Events like wildfires or disputes over land ownership have eroded confidence in some forestry projects, underscoring the need for rigorous monitoring and transparent methodologies.
This is why monitoring technology—especially satellite data, drone imaging, and even blockchain-backed traceability—has become such a focal point. Without credible data, the value of a credit falls apart. As carbon credits edge toward commoditization, the battle for quality, precision, and trust is defining which credits—and which business models—will endure.
From Protocols to Verification: The Anatomy of a Project
Despite its operational complexity, the process of generating carbon credits from forestry follows a relatively standardized path. It begins with identifying an eligible site for reforestation or afforestation—each with its own legal and ecological requirements.
The project developer then selects a carbon standard or registry, each of which has detailed forestry protocols that must be followed.
The developer creates a Project Design Document (PDD), outlining the technical basis for carbon removal and the expected volume of credits. This document is then assessed by a third-party verification body—often referred to as a VVB (Validation and Verification Body)—that audits the methodology and confirms alignment with the selected protocol.
After validation, the project proceeds to implementation. This phase can take years, depending on the nature of the intervention and local conditions. During and after implementation, monitoring is essential.
Forestry, in particular, has been plagued by low-quality credits—projects that were poorly monitored, exaggerated claims, or forests that later burned down. As a result, rigorous long-term data collection is necessary to maintain buyer confidence and support credit issuance.
Once monitoring and verification are complete, the registry issues credits—typically one per ton of carbon removed. These credits are then eligible for sale. But issuance is not the end of the journey. It’s simply the threshold that makes commercialization possible.
Rethinking the Business Model: Where Technology Meets Forest Carbon
At first glance, forestry seems like an obvious fit for carbon markets. Trees absorb carbon, and forests can generate measurable, verifiable credits. But when viewed through the lens of venture capital, forestry project development reveals structural limitations that make it a difficult fit for traditional VC expectations.
The primary challenge is capital intensity.
Forestry projects often require the purchase or long-term lease of land, upfront labor, and ongoing maintenance. While these projects can generate steady cash flow once operational, their economics are closer to infrastructure or project finance than to high-growth, high-margin tech startups.
Margins do exist, but they are modest by venture standards.
Even well-run forestry projects may fall short of the scalability and return profiles required by early-stage VC investors. The growth is linear, tied to land acquisition and biological timelines—not exponential product adoption. This doesn’t make forestry unimportant or unprofitable. It simply places it outside the typical parameters of VC-backed hypergrowth.
So how can this model be reimagined to attract venture-scale capital? Two complementary paths are beginning to emerge: one rooted in technology, the other in business model innovation.
From Trees to Tech: The Rise of MRV Innovation
Adjacent technology plays are beginning to reshape the investable landscape. The opportunity doesn’t lie in planting trees—it lies in enhancing the systems that support, verify, and scale the carbon value those trees represent.
Monitoring, reporting, and verification (MRV) is emerging as one of the most critical and promising areas of innovation. As demand grows for high-integrity carbon credits, so does the need for precise, reliable, and scalable measurement. Technologies that help quantify biomass growth, ensure compliance with protocols, and provide tamper-proof data trails are becoming essential to project developers and credit buyers alike.
This is where new tools come into focus: satellite imaging, drone-mounted sensors, LiDAR systems, and advanced data processing algorithms. Each offers tradeoffs in cost, resolution, and operational complexity. But collectively, they form the foundation of a more transparent and accountable voluntary carbon market—one where nature-based solutions can begin to compete with engineered removals on trust and quality.
As the market shifts from good intentions to verifiable outcomes, the companies that control access to data—and the ability to interpret it—may hold the most strategic ground.
Margin Realities and the Dual-Revenue Model
Despite the long timelines and modest margins of traditional forestry, there are models that open the door to venture-scale opportunity.
One promising avenue is the emergence of dual-revenue businesses—companies that generate both a primary product and carbon credits as a byproduct of their core operation.
Consider the example of green ammonia production.
The product itself—sustainable fertilizer or chemical input—has intrinsic market value. But if the production process removes or avoids carbon emissions, it may also qualify for carbon credits. In these cases, the credits become an additional revenue stream, improving project economics and potentially offering a bridge to profitability.
The same logic applies in other biomass-based businesses, such as sustainable coffee cultivation or forestry-derived biofuels. If a company can generate high-integrity carbon credits alongside a primary product, it creates leverage: the credits can de-risk early stages, help attract capital, and validate climate impact—without becoming the sole source of income.
That said, these hybrid models are not easy to execute. They require careful attention to verification, monitoring, and market positioning. But when structured correctly, they can unlock new forms of investability—especially for technologies and processes that span the boundary between natural systems and industrial applications.
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Going to Market: From Issuance to Carbon Credit Market Access
Once carbon credits are issued—following verification by a third party and registration with a recognized carbon standard—they become eligible for sale. But how they reach buyers, and at what price, varies significantly depending on the type of credit and the sophistication of the seller.
At the simplest end of the spectrum are spot sales: project developers list their credits on established carbon marketplaces and wait for buyers—typically corporations seeking to offset emissions—to make purchases.
These buyers may be motivated by internal sustainability goals, reporting requirements, or brand strategy. The process is often transactional, driven by availability, price, and public perception of credit quality.
More strategic are private B2B negotiations.
In these cases, a buyer may seek credits that align with its operations or messaging. A shipping company, for example, may look specifically for ocean-based carbon removal credits to match its industry profile. Negotiated sales allow for greater alignment between buyer and seller—but they also require more effort, more relationship-building, and a deeper understanding of what each party values.
At the high end of the market, pre-purchase agreements represent a different class of transaction entirely. These are forward contracts, typically offered by corporate climate leaders like Microsoft or coalitions such as Frontier. Instead of buying credits that already exist, these buyers commit capital in advance—sometimes years ahead of project launch—to secure a future supply of high-quality, high-permanence carbon removal.
For early-stage companies developing novel carbon removal technologies, these agreements are more than just revenue. They serve as external validation, help fund scale-up and engineering, and act as a commercial milestone that unlocks further investment. But they are also difficult to secure.
Buyers in this space are deeply technical, intensely rigorous, and often staffed with domain experts who evaluate each proposal through the lens of long-term scalability and cost reduction potential.
Pre-Purchase Agreements = a Strategic Milestone
In the early stages of a carbon removal startup, few indicators are as meaningful as a secured pre-purchase agreement. These deals typically emerge around the seed or Series A stage—once the company has proven some level of removal, demonstrated engineering feasibility, and shown a credible path to scale.
What makes these agreements powerful is their catalytic effect. A pre-purchase from a high-trust buyer de-risks the commercialization path, provides predictable future revenue, and signals to other investors that the company has crossed a key threshold of credibility.
For hardware-intensive infrastructure projects, this can be the difference between a theoretical business model and one that institutional capital is willing to back.
However, the existence of a pre-purchase agreement doesn’t guarantee long-term success. It solves the problem of the first buyer—but leaves open the question of who comes next. As more projects come online, competition will increase, and buyers will expect lower prices and tighter verification. The companies that endure will be those that use early demand to scale efficiently, improve cost curves, and build systems robust enough to serve a broader, more price-sensitive market.
Monitoring as a Moat: The New Arms Race in Nature-Based Carbon
As carbon markets mature, monitoring has emerged as one of the most important—and contested—frontiers in nature-based removal. The value of a credit depends not only on what was done, but on how reliably and repeatedly it can be measured. This has triggered an arms race among technologies designed to verify carbon removal, especially in forestry.
LiDAR, Satellites, and Drones
Each monitoring approach offers its own set of tradeoffs.
LiDAR (Light Detection and Ranging) provides exceptional accuracy and depth, capable of measuring sub-canopy biomass with high resolution. But it's expensive, hardware-heavy, and operationally complex—especially when deployed at scale in remote environments.
Satellites, by contrast, offer affordability and reach. Public and commercial satellite data can cover vast areas and are often accessible at low or no cost. However, the resolution is lower, and satellites struggle to detect biomass variation under dense forest canopies. The lack of precision can limit confidence in credit calculations.
Drones represent a middle path. With lightweight payloads and customizable sensors, drone-mounted cameras can achieve higher resolution than satellites while offering greater flexibility than LiDAR. They’re particularly useful for spot-checking forests, enabling targeted sampling without full deployment. For many projects, the ideal approach is hybrid—leveraging satellite data for large-scale monitoring and complementing it with drone or LiDAR data for high-accuracy validation.
Ultimately, the goal is to balance cost and confidence. Projects don’t need to monitor every tree to issue credible credits—but they do need to provide enough verifiable data to maintain trust. As monitoring costs come down and precision improves, the potential for nature-based credits to compete with engineered removals becomes more realistic.
Trust at Scale: The Emerging Importance of MRV Innovation
Monitoring, reporting, and verification (MRV) isn’t just a compliance step—it’s the linchpin of trust in the carbon economy. And trust is what turns a carbon credit from a promise into an asset.
This is especially true in forestry, where concerns over double-counting, non-permanence, and project integrity have damaged market confidence. Buyers are no longer content with claims—they want evidence, audits, and transparent methodologies.
MRV is how that trust is built, and it’s increasingly where innovation is focused.
For early-stage technology companies, this creates an opportunity. If they can build MRV systems that improve the accuracy, frequency, or cost-efficiency of monitoring, they don’t just serve existing projects—they become enablers of scale. And as carbon credits edge closer to commoditization, the quality of data will determine whose credits hold value.
MRV innovation is also key to unlocking new financing models. Institutional buyers and capital providers are more willing to engage with projects that offer clear, auditable data streams. In the long run, the best MRV platforms may not just support project developers—they may become central infrastructure for the carbon market itself.
Aligning Incentives: Techno-Economic Milestones in a Volatile Market
In the world of carbon removal, particularly at the intersection of Deep Tech and natural systems, credibility is earned through alignment—not just of science, but of business fundamentals. Startups that win in this space are those that understand how cost structure, scalability, and market demand must reinforce each other.
Early-stage teams often underestimate this alignment.
They may demonstrate a working prototype or publish strong lab data, but fail to connect that progress to techno-economic viability. Investors aren’t looking for certainty—they’re looking for fluency.
They want to know:
What drives cost?
Which variables are fixed, and which can be engineered down over time?
What are the key inflection points for scale?
Carbon removal is especially sensitive to these dynamics. Because the “product” is a ton of CO₂ removed, cost-per-ton becomes the natural benchmark for market competitiveness. Companies must not only track the cost of production, but also the cost in use, factoring in delivery systems, application rates, verification overhead, and buyer willingness to pay. Without a clear understanding of how these variables interact, even the most elegant technology can become commercially irrelevant.
From Seed to Series A: The Role of Carbon Commitments
As startups move from prototype to scale, one of the strongest signals of investability is buyer commitment—especially in the form of pre-purchase agreements. These contracts don’t just inject revenue into the business. They demonstrate that external stakeholders—often sophisticated, technical buyers—believe in the viability and scalability of the solution.
Pre-purchase deals often crystallize around the seed or Series A stage, when a company has demonstrated enough technical progress to validate its core concept, but still needs capital to build first-of-a-kind infrastructure or expand operations.
These agreements provide external validation and financial traction—giving investors more confidence that the business is moving beyond theory and into execution.
At the same time, these commitments raise the bar.
Once a company has secured a flagship buyer, the next challenge is proving that demand is repeatable and that costs can drop as production scales. The market is watching closely. Success isn’t measured just by the first sale—but by the company’s ability to turn early traction into sustainable growth.
In a volatile, rapidly evolving carbon market, that’s the ultimate milestone: not just proving the science, but building a business that aligns product, economics, and demand—at the right time, and at the right price.
