Market shaping for climate tech
Sharing a new published piece outlining what we're missing in the way the world is pursuing market shaping for decarbonization
My longtime collaborator and co-founder Oliver Sabot and I have a new piece out today in the Stanford Social Innovation Review. Those of you who’ve followed this blog for awhile know that I’ve been writing about the intersection of market shaping and durable carbon removal. Market shaping is applicable way beyond CDR, with exciting potential applications in a whole range of market transitions central to decarbonization. But the concept of “market shaping” (and the term itself) is squishy, and that squishiness helps explain why it’s hard to help a true market-shaping discipline take root in climate tech.
In the SSIR piece Oliver and I unpack what market shaping means, and contrast the robust market shaping discipline and ecosystem that has emerged in global health over the last twenty years with the comparatively thin market-shaping landscape we see in climate tech today.
We offer up a short definition of market shaping: privately-catalyzed efforts to 1) create a shared vision for the ideal future state of a market, and then 2) build, assemble and deploy a combination of soft power and financial heft to aggressively steer the market toward that state.
The “privately-catalyzed” piece of that definition is critical. Clearly, government policy and regulation shape markets in profound ways. But if we use “market shaping” to mean anything any government or private entity does to influence a market, the term becomes so broad and vague as to become nearly useless. And since major government policies have such far-reaching impact—like the Inflation Reduction Act or the Carbon Border Adjustment Mechanism or the German solar feed-in tariffs—it’s easy to fall into the trap of saying “well, shaping this market all really boils down to getting the government to do XYZ.”
In global health, private actors trying to get governments to do XYZ is part of privately-catalyzed market shaping, but just one prong of a four-pronged approach:
Influencing government policy
Investors and philanthropies providing “push” funding—in the form grants, loans, and equity—to accelerate the development and deployment of next-generation technology
“Pull” funding and innovative-finance interventions that accelerate and de-risk demand—such as advance market commitments, volume guarantees, R&D prizes, buyers clubs, market entry rewards, and different forms of buying down the early price premiums on next-gen tech
Concerted private “quarterbacking” of market transitions: the unsexy but essential work kind of work that CHAI and others have done to coordinate activities across all sides of the market: suppliers, buyers, procurement agents, regulators, opinion leaders and more. This kind of relentless organizing, informing, influencing, and dot-connecting speeds up market shifts by parallel processing key steps that would otherwise happen slowly and piecemeal.
Over the last twenty years, the global health community has established a wide-ranging market-shaping toolkit aligned with these four approaches and an ecosystem of actors and funding flows to unleash this full suite on every big technology shift.
The main problem with market shaping in climate tech today is that we’re pursuing it far too narrowly. We rely almost entirely on the first two prongs above, and have only initiated privately-driven market shaping for a small subset of the many market transitions that need to happen across so many sectors in so many geographies. We are only very partially engaged in the project of building out a true market-shaping ecosystem and discipline to power the global green transition.
Early bright spots in climate tech market shaping—including Frontier, Breakthrough Catalyst, Rewiring America, and the First Movers Coalition—are the exceptions that prove the rule. I’ve written extensively about Frontier, perhaps the best example so far of a private entity pursuing all four of the market-shaping avenues outlined above.
Frontier (and Stripe more generally) has been key to the night-and-day difference between the state of the durable carbon removal landscape three years ago and its current momentum. We can’t rely on government to play this catalytic role. Government is powerful, but private entities are directionally more likely to be the first movers—to be creative, to take bigger risks on unproven things that don’t yet have a huge constituency, and so forth.
This gets to the heart of why we argue for centering private players in the way we collectively conceive of market shaping. To be clear, private players doesn’t mean private companies, but rather any non-public actor: ambitious nonprofits like Rewriting America or CHAI; forward-thinking foundations; mission-driven corporates; and unusual hybrids like Breakthrough Catalyst or First Movers Coalition.
There’s no shortage of opportunities to go after more ambitious market-shaping opportunities across climate tech. One that Oliver and I have been getting off the ground recently is an effort to shape the market for lower-footprint air conditioners in the biggest markets (such as India) that will drive enormous new demand for cooling in a world that is becoming warmer and wealthier at the same time. Though we’re in the early stages, there’s a good chance this heads down a Frontier-esque pathway in the coming months and years. We highlight and flesh out this example in the SSIR piece and will write more about it in the coming months as we continue to build the team to go after it (and if this is of interest to anyone reading this, please reach out!).
In the coming years we need to bring the climate tech market-shaping platform—the toolkit, the ecosystem of actors, the intellectual discipline—to the next level. In addition to the pioneers mentioned above, we need philanthropy to step up and play a driving role, akin to the role the Gates Foundation played in supporting the build-out of the global health market shaping landscape. Schmidt Futures—with thought leadership and community-building from Tom Kalil in particular—has been one great early node for this, and we will need more.
Next week we’ll be back with the second post in the series John Sanchez and I are writing about open-system carbon removal pathways. Thanks for following along!
The economic incentive for direct air sequestration is built-in. It needs legislatively coerced. The extraction crowd doesn’t want to devote resources to anything related to their wife on the planet planet killing methods. Trans global corporate rape and pillagers cannot have the best practice and true goal of the planetary system as their focus. By their own self impose duties and practices. The only duty is fiduciary. Consequence of actions irrelevant and not considered by such entities.
Pathetic. Just stop.
Absolutely love Frontier, but the idea of relying predominantly on private companies like Stripe to shape markets for urgently needed technologies makes me really nervous. While the Stripe Climate/Frontier example has been unbelievably successful, I’m not sure it’s the kind of thing most businesses would want to get into (because it is so far outside their area of expertise and probably has low/uncertain ROI). I’ll be curious to see if we start to see other companies try to spin up versions of frontier for other technologies, but I’m skeptical we’ll see something as well funded and thoughtful as Frontier coming out of the private sector that often.