21 January 2022 |

Keep Cool Deep Dive #0002: Nori


The year is 2027. It’s a beautiful Saturday afternoon 🌞. The aerial cab ride you took across town touches down gracefully on a helipad above your local grocer. As you land, an insurance ad plays on the screen on the seat-back in front of you. After extolling the virtues of their services, the sponsor ends with this message:

“One more way that we’ve got you covered? We’ve paid for all the carbon from your trip to be removed from the atmosphere!” 

Your next stop? The grocery store. After loading up your cart with a hearty mix of organic vegetables, local produce, cold brew and more (good on ya!), you head to the automated checkout aisles. Again, after all your groceries have been tallied up, you’re prompted by the touch-screen checkout monitor:

“Would you like to make your shopping trip carbon neutral today?” ✅

Boom. You’re 2/2. And the cost so far? Only a fraction of the goods and services you’ve paid for.

So what’s next on the agenda? You’re back at your apartment, sipping some of the delicious cold brew you picked up at the store. Keep Cool’s latest email is in your inbox. Score 💪. And looks like they’ve got new merch, too! You navigate over to their online storefront and add one of the t-shirts to your cart. Before clicking the final “Buy” button, you remember to take a glance at the description for the shirt. As you imagined, there’s a section covering how Keep Cool handles the carbon footprint for its merchandise:

“We’re pleased to partner with Nori to purchase carbon removals to offset all carbon released into the atmosphere from the production of our merchandise.” 

Sound too good to be true? Fair enough, our typical Saturday isn’t that productive either . If you think we’re further removed from ubiquitous carbon removal options, whether at checkout or entirely sponsored by businesses themselves, then we recommend you hop on a brief call with Paul Gambill, CEO of Nori, like we did last week. 

Sure, the world view is ambitious. But Gambill invites this lofty ambition. In our conversation with him earlier this month, he shared his goal for Nori with us as follows: 

“Long-term, we want to be Stripe for carbon removal.”

Anytime you invoke Stripe, an absolute titan of payment processing, you’re not trying to win 1% of a niche market. You’re gunning for the whole pie 🥧. 

Ready to dive a whole lot deeper into the world of Nori? Let’s do it ⬇️⬇️⬇️.

Setting the Stage

When we began studying the intersection of blockchain solutions and climate impact at Keep Cool, we uncovered a few key benefits that blockchain and cryptocurrencies can offer in the fight against climate change, such as solving double counting issues and mobilizing large amounts of capital without intermediaries.

After each Keep Cool Report that we write, we engage one of the companies covered in the report for a subsequent Deep Dive. As the blockchain x climate space is still in its infancy, we were transparently a bit concerned that we wouldn’t find a business we felt confident about covering and stamping our seal of approval on. 

However, after learning more about Nori and getting the chance to speak with Gambill, we were impressed with the company’s ability to leverage the best of both climate tech and blockchain. 

Of course, we’re not the first to take note of Nori’s promise. In September 2020, Nori closed a $4m seed round (bringing their total funds raised to $5.3m) to continue building their carbon removal marketplace on the blockchain. Curious about how they got to this point and where they’ll go from here? Here’s where this piece is headed:

  • TLDR / The Nori Thesis: The vision, and inspiration of the business 
  • Creating a Market: The inner workings of the marketplace and Nori’s business
  • Challenges and Opportunities: Nori’s “blue ocean” opportunity and the challenges it will face
  • What’s Next: Upcoming milestones and accelerants for Nori + opportunities to get involved  
  • Key Takeaways: Tying a bow on things for those who read this far 

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TLDR / The Nori Thesis

Alright, let’s take a step back. To appreciate the Nori opportunity in full, it helps to gain an understanding of the fundamental yet complex climate tech challenges they’re solving.

Before co-founding Nori, Gambill worked in software. Much like us at Keep Cool, he yearned for more impact in his work, which is how he landed on climate change. As he learned about the space, he was quickly confounded by a variety of problems. 

First and foremost? There are already too many greenhouse-gas emissions (“GHGs”) in the atmosphere. We don’t just need to reduce future emissions, we need to actively remove GHGs from the atmosphere, too. Gambill notes: 

“We already have all the tools that we need – we know how to do this, we’re just not doing it. So that to me speaks to a lack of incentives.”

So, what’s the gap between the current state of affairs and a world where there are proper incentives for say, farmers, to adopt the types of agricultural practices that can actually remove carbon from the atmosphere? Here’s where Gambill recognized one of the biggest issues in carbon markets today: double-counting ❌. 

“I was reading the 2017 State of Voluntary Carbon Markets report and they break down the total volume, the total amount of money spent on carbon credits, and they included re-sales…”

What’s happening here? In effect, carbon offsets, which are certificates that represent a reduction in future carbon dioxide or other greenhouse gases, were being traded more than once. Over and over again, in fact. You would think that if a supplier in Brazil reduces its CO2 emissions and sells that ‘offset’ to a buyer in France, the buck and the carbon offset would stop there. However, carbon offset markets have been plagued by double counting; frequently, the French buyer in our example goes on to sell the carbon offset again to another buyer in say, Germany. 

What you end up with is a “market” that reflects total volume traded, where the actual amount of CO2 offsets is far, far lower. This frustrates Gambill: 

“The problem is that [each participant is] claiming it… The solution is double-entry bookkeeping, technology that we’ve had for ~500 years. They don’t do it because what ledger are we going to use to track this?”

The question of “what ledger are we going to use to track this” lies at the core of Nori’s innovative model, which straddles cryptography and climate technology. Built on top of the Ethereum blockchain, Nori maintains a record of every carbon removal transaction they sell: 

“What do we do at Nori? When the carbon removal is sold to the buyer by the supplier it’s immediately retired. You [as the buyer] own it forever. That solves the double claiming problem.”

In parallel to solving the double counting problem, Nori also aims to address the original problem Gambill identified. What do we need to accomplish again? Beyond reducing global GHG emissions, we need to actually remove carbon from the atmosphere, too. The problem? Carbon offsets don’t actually remove carbon from the atmosphere. 

“Offsets are avoidances and reductions in future emissions and removals are removing past emissions. We [Nori] only deal in removals… [because] even if you could magically turn off all carbon emissions tomorrow … there’s still too much carbon in the air.”

The foundation of Nori’s business lies in solving these core problems. Carbon markets have been a mess since inception; they suffer from minimal to no documentation and are plagued by double-counting issues. Secondly, carbon offsets alone aren’t enough to mitigate climate change. We need scalable markets for carbon removals to reverse climate change.

Creating a Market: The Business

What have we learned so far? Nori is building a carbon marketplace that leverages blockchain technology to solve double-counting issues while also exclusively dealing in carbon removals as opposed to carbon offsets. Let’s now analyze the various sides of the marketplace, as well as how the market itself operates. 

Supply Side
In order to create a market for carbon removals, Nori had to first focus on onboarding supply, i.e. producers of carbon removals. They began with farmers who are storing carbon in soil:

“We very quickly started focusing on soil carbon because it was by far the most affordable and scalable method of removal.”

At present, this remains the main methodology supported by Nori (to read up on how farmers ensure carbon retention via regenerative agriculture practices, see our report here). To ensure the validity of each ton of carbon removed, verification and methodological onboarding remain a primary focus for the business. Taking steps to understand potential suppliers’ methodologies and measuring how much carbon they remove from the atmosphere is time and tech-intensive. 

Here’s Gambill describing the lifecycle of an ‘NRT’, which stands for a “Nori Removal Tonne,” Nori’s standardized unit of carbon removals: 

“Suppliers provide operating data to us about their farm operations. That’s then verified by third-party verifiers… [who] check to see stuff like the [accuracy of] input data. They might want to look at invoices or receipts for seed or fertilizer purchases, they might want to look at satellite imagery to know that you’re actually growing that crop on that field…”

From there, there’s still a third step of carbon quantification, in which Nori works with a third-party to quantify how much carbon is going in the ground “relative to what would have happened if you had just continued with the conventional [farming] practices on that field.” 

To date? Nori has sold north of 30,000 NRTs, representing more than 30,000 tons of CO2 removed from the atmosphere and sequestered for at least ten years (For more on Nori’s carbon removal retention methodologies, see here). This is also where the blockchain comes in. You might think Gambill supplied us with the above statistics on his business’ run rate. Actually, all we had to do was to consult Nori’s registry, which is open to the public (see here and here), tying back to data stored on the Ethereum blockchain. Every single transaction facilitated by Nori is logged on this public blockchain ledger and then summarized on its online registry. This is a radically transparent step compared to the labyrinthine dysfunction of other carbon marketplaces. 

The blockchain is also at the core of preventing the double-counting issues we discussed earlier. For more on how blockchains solve double-counting issues, you can consult our most recent report on blockchain in climate tech here

Demand Side
Now that we’ve explored the supply side of the market and understand how the blockchain acts as its ‘backbone’ so-to-speak, let’s take a look at the demand side of the marketplace. Nori works with a wide range of customers, from individual retail buyers to large enterprises. Going into the call, we expected large enterprise customers — i.e. businesses capable of buying hundreds of thousands of tonnes of CO2 and locking in recurring, annual agreements — would be Nori’s priority. What Gambill shared with us was surprising: 

“Enterprises are not good customers for us right now… If you’re a giant company and you’ve built out a big sustainability team… the people responsible for making a purchasing decision are the ones we’re putting out of a job… [it’s also] a total red ocean, everyone is competing for the same 5 companies, and we don’t want to be part of it.”

Instead, Nori is taking more of a retail and consumer-focused route. Technically, this is a “B2B2C” play; Nori wants to build partnerships with all of the direct to consumer businesses that people like you and I frequent everyday. To this end, they are developing an “API” (short for Application Programming Interface, i.e. a software intermediary of sorts that can connect two applications ). Nori’s API will allow merchants, e.g. an ecommerce shop, to integrate Nori directly into transactions and checkout flows:

“On the demand side, we’ve been focusing more on recurring purchases through an API. Long-term, we want to be Stripe for carbon removal. We want our API to be easily integratable into other platforms.”

The questions Gambill asks himself when thinking about his ideal customer are as follows:

“Who’s never had access to this before? Who wants this to be really easy and easily integrated? That’s our target market.”

Nori is also unique in their full-throated approach to content marketing. In one of their recent “Reversing Climate Change” podcast episodes, Gambill highlighted how Nori has committed to content since the inception of the business:

“We know that carbon removal is really complex. We also know that crypto and blockchain are really complex… And we put the two together. We knew there was going to be … an opportunity to share that story and bring people along with it.”

We love this focus on ‘building in public,’ especially insofar as it maps to our own ethos at Keep Cool, too. And because it works. In the same episode, the Nori team noted the podcast is reaching “a huge number of people.” In fact, across its podcasts, Nori has garnered almost 800k total downloads. Clearly, Nori’s content isn’t just a demand acquisition play; by providing real education on a front-of-mind topic for many people (reversing climate change), Nori builds brand awareness, promotes trust, and grows the whole market for carbon removals.

The Business Model
How does Nori make money? It’s simple: they charge a 15% transaction fee when brokering sales between suppliers and buyers. It’s a volume business. This may seem like a high fee, but considering that many large enterprises hire entire teams of consultants and strategists to execute on carbon offset purchases, it’s a reasonable fee. As demand picks up, perhaps Nori will also find they can reduce the transaction fee to attract more retail demand.

Building a Moat: The NORI Token
Finally, there’s another element to the Nori marketplace that is poised to become a critical part of the ecosystem. While eliminating double-counting is an important way to renew faith in carbon markets, there are benefits to a liquid, commodity-esque market, too. These types of markets are useful in that they help illustrate how deep demand is and what the real price for an asset, e.g. removing one tonne of CO2 from the atmosphere, should be. 

In an ingenious move, Nori is launching a cryptocurrency token, NORI, to make sure they don’t strip price discovery out of their marketplace as they solve double-counting issues. Each NORI token will account for one NRT, the standardized Nori Removal Tonne we described earlier. Said differently, the price of one NRT will always be one NORI, with the NORI price fluctuating relative to supply and demand.

The NORI token should make market depth and real-time demand highly visible to potential suppliers. If suppliers see that they could be getting paid for carbon removals and that there is robust demand, they’ll be more likely to work with Nori, and may even jump through some of the verification hoops of their own accord 💡. 

The NORI token also adds an important layer of insurance that will help reinforce accountability. What happens if it turns out that a carbon removal project didn’t actually remove and sequester the carbon it was supposed to? Whether driven by malintent on the suppliers side or not, customers who purchased those NRTs wouldn’t just want their money back — they’d want new carbon removals, too. To this end, 20% of the total NORI token pool will be reserved as ‘insurance’, which Nori can tap into to replace buyers’ NRTs. This is another way in which the NORI token confers Nori with unique advantages; an insurance pool of tokens pegged 1-1 to carbon removal tonnes  is more effective than a cash insurance pool, as it mitigates the risk that prices for carbon removal might increase overtime. 

Further, by building ‘smart contracts’ on top of Ethereum, Nori can create payment schedules with suppliers that release NORI tokens to them over time. The benefit of this is an additional layer of insurance; if Nori discovers that a supplier failed to remove and / or sequester carbon, Nori can claw back unvested NORI tokens and purchase new NRTs that are reallocated to the original buyer (rather than drawing exclusively from the NORI insurance pool). 

Finally, especially for corporate buyers conscious about the optics of an offset or removal project they participated in not delivering on its targets, the various insurance mechanisms facilitated by the NORI token provide reputational insurance in addition to financial benefits. With the backing of the insurance pool, and smart contracts, Nori will become the first carbon marketplace to offer full 10-year warranties to all its customers.

Blue Ocean 🌊 🌊 🌊

We see Nori entering a blue ocean, i.e. a minimally contested market, in business parlance. What’s this blue ocean? Nori is poised to go after a market of small businesses and individual consumers that is just now gaining access to carbon removals for the first time. 

The way we think about their roadmap is as follows:

  • Release NORI token to create a real-time gauge for demand
  • Ramp up supply by onboarding new farmers with regenerative agriculture practices as well as adding new supported carbon removal methodologies
  • A successful NORI token launch should attract new suppliers and provide an incentive for them help to verify and onboard themselves (to the extent possible)
  • Roll-out the Nori API to create demand drivers at countless points of sale to drive scale

If steps #1 and #2 are executed well, then steps #3 through #4 become self-reinforcing. 

Nori Flywheel

As demand increases (predicated on sufficient supply), the price of carbon removals should increase and reflect in the NORI token price. This will attract more suppliers, ideally to the point where they shoulder much of the verification and measurement process and costs themselves:  

“We’ve been putting together a scientific advisory board who are going to be overseeing peer review on these methodologies. The idea is we want to be a platform … where people are proposing methodologies to us.”

This NORI token also offers the business a formidable moat to new entrants 🥊. Since one NORI token will always map back to a NRT, suppliers attracted by the NORI token market are automatically supplying their carbon removals to Nori, not other carbon removal marketplaces.

The combination of innovative tech to solve double-counting issues, a highly marketable focus on removals vs. offsets, and integration directly at point-of-sale via their API will make Nori a consequential player in the space. If Nori successfully builds one of the most liquid and transparent carbon removal markets via their NORI token launch on top of this, they’ll become one of the most attractive clients for suppliers, and will be able to offer customers a novel warranty on their carbon removals, building even more trust.

The Impact
Of course, at Keep Cool we don’t just care about companies’ ability to make money. The climate impact side is critical for us, too. In Nori’s case, the path to impact is clear. If you can create a vibrant market for carbon removals where transactions are frictionless and data is transparent, you stand a better chance of stimulating real demand. You can also reduce the cost of carbon removals in the process. How? By eliminating the need for carbon removal buyers to conduct extensive due diligence on removal or offset projects. As we mentioned earlier, many corporate buyers build out entire teams to identify and conduct diligence on potential projects. This adds to the cost of carbon removal without incentivizing suppliers (e.g. the farmers). Reducing the cost of carbon removal should drive greater demand in the marketplace, too.  

Once there’s demand, there’s many other carbon removal solutions out there that could be tapped for supply, ranging from kelp cultivation to olivine weathering. A verified carbon marketplace with real demand might be just the incentive needed to supercharge efforts to quantify and verify the amount of carbon these other solutions enable. This in turn could unlock the next wave of carbon removal projects 🌊. At scale, once both the demand and supply side start humming, this could seriously help reverse climate change 🔁.

Challenges and Opportunities

No significant opportunity comes without its own unique set of challenges. In the interim, the carbon removal market remains supply constrained. Gambill admits it readily: 

“Carbon markets are supply constrained… There have only been somewhere between 4-6 billion carbon credits ever created… that’s only 10% of 1-year’s worth of annual [global] emissions. If we’re going to be serious about this as a planet, we need to be building a metaphorical factory for pulling carbon out of the air that’s capable of removing at least 50-75 billion tons every single year.”

While the flywheel we visualized earlier should make it easier to onboard new supply over time, in the interim, Nori will have to expend considerable time and resources to onboard new farmers. Similarly, to really scale up supply, time and resources need to be allocated to onboarding and verifying new carbon removal methodologies, too:

“Right now we’re only able to work with farmers in the U.S. because that’s where [the] Soil Metrics platform works. We want to go international on soil, but we also want to add other methodologies.” 

We reckon this will be one of the largest hurdles for Nori in the coming months. The more of these methodological hurdles they can clear however, the more scale on the supply side they can add. Fun, gamified ways to choose which types of projects removals are coming from may attract more digitally native consumers, too.

The blockchain side of the business presents its own issues, as well. As covered in our blockchain x climate tech report, blockchains themselves can be heavy GHG emitters. The Ethereum blockchain is a non-negligible source of global GHGs; the consensus protocol used to maintain the ledger, ‘Proof-of-Work,’ relies on real energy (mW) expended by different participants in the network (‘miners’). As goes the global power grid, so go the ‘miners’ who iteratively build the Ethereum blockchain. 

We asked Gambill whether Nori currently retires its own NRTs to ‘offset’ the emissions related to Nori’s use of the Ethereum blockchain. As of yet, they do not, but Gambill says they’ll certainly consider doing a cumulative look back in the future. 

We wonder whether future competitors in the carbon marketplace space might use competitive chains that are “greener” than Ethereum (e.g. Solana) to frame their business as “greener” than Nori. This would be an oversimplification, but we could see it playing with consumers. 

There’s a bigger problem (at least as far as Nori’s business is concerned) at current with the Ethereum blockchain, however. Right now, transactions on-chain can be prohibitively expensive; the Ethereum network charges ‘gas’ fees to compensate the network participants that build the ledger. The ‘micro’ transactions we hinted at in the opening of this piece (i.e. a $0.50 carbon removal purchase post trip to the grocery store) that would be supported by Nori’s API could carry Ethereum ‘gas’ fees that are higher than the size of the actual transaction . 

The Ethereum organization is planning to execute upgrades to the protocol / blockchain layer of their operations (these types of upgrades are referred to as layer-1 changes) that will allow the Ethereum blockchain and network to support more transactions (you can read up on Ethereum’s planned move to a Proof-of-Stake consensus mechanism as well as things like blockchain sharding here and here). 

That said, these upgrades to Ethereum have been planned for years. In the meantime, Nori will also pursue layer-2 solutions, i.e. technology that works on-top of the underlying blockchain to facilitate more transactions at a lower cost. Gambill readily admits this is a major challenge they’re focused on: 

“We’re sorting through what layer-2 solutions we want to work with, it’s definitely an issue.” 

To learn more about what layer-2 solutions can look like, you can read up on ‘roll-ups’ here

Of course, there’s significant opportunities inherent to these challenges, too. Perhaps Nori can become a leader not just in advancing the carbon removal market, but in advancing and advocating for innovative tech to scale blockchains and for more efficiency, transparency, and education, too. Already, many of their clients are crypto-native businesses, like NFT marketplaces, looking to offset the emissions inherent to their use of blockchains. 

Finally, the regulatory side certainly came to mind as we considered what pitfalls might stand in the way of Nori’s ascendency. Nori isn’t waiting for climate-positive regulation to offer tailwinds: 

“I think people overestimate the necessity and importance of … support from the Feds. My bigger concern is the Feds coming in and squashing innovation somehow… There is general interest in providing standards for measurement and verification, which by necessity will erect barriers to entry for new, innovative ways of doing verification, I am concerned about that.” 

On the crypto side, regulation could certainly be a headwind, especially as it pertains to the NORI token launch. Still, Gambill sees positive developments, including a recent proposal from SEC Commissioner Hester Peirce proposing guidance for how startups can sell tokens: 

“I am a big fan of the Safe Harbor proposal that commissioner Peirce put out for the SEC. If that were in place it would be good for us, it would be good for other crypto businesses in the U.S., that’s the kind of regulatory guidance that we would like to see happen.”

What’s Next?

In closing, what milestones should we be on the lookout for in terms of charting Nori’s growth from afar? Which key accelerants can folks who are interested potentially help with? Let’s turn to Gambill one more time, shall we : 

“We would like to launch the tokens first… [Then] we will need to raise another round to facilitate growth on the sales side and on the adding of new methodologies.”

Indeed, the token launch may be the most ambitious step Nori has taken yet. As we noted in the “Blue Ocean” section, it will be powerful for Nori’s ability to attract and secure suppliers. 

In terms of their next raise, Gambill is constantly on the hunt for mission-aligned investors who are both passionate about climate and understand blockchains and crypto well. 

Similarly, on the hiring side, Gambill noted keen interest in potential employees who sit at the intersection of crypto and climate the way Nori does. Sound like you, either as a potential investor or employee? Get in touch with us and we’ll be happy to facilitate an introduction: [email protected]

Our main takeaway from our conversation with Gambill takes us back to the core of the business. Sure, there’s a ton of cool stuff going on here, whether you’re excited about offsetting your own personal carbon footprint or speculating on future upside in the carbon market via the NORI token (Nick’s got his bazooka primed ). Most importantly however, Nori has already solved critical issues that would otherwise keep carbon removals from going “broad market”. The importance of a marketplace that ensures that one tonne of carbon removal purchased actually equals one tonne removed from the atmosphere can’t be understated. 

With every Fortune 500 company rolling out what some might see as ambitious net zero commitments, Nori’s focus on carbon removal as opposed to offsets is also critical. Even just educating consumers on the difference between the two is a paramount issue (as Nori is doing in their aforementioned “Reversing Climate Change” podcast), let alone creating a solution to allow businesses to offer carbon removals and for consumers to buy them at scale. We’re encouraged by the prospect of a future where every Shopify digital storefront can integrate Nori, and where companies and individuals alike can be fully transparent with (and can be held accountable to) their carbon removal efforts. 

As those of us crypto nerds like to quip, the blockchain is immutable. Here’s to hoping that chains like Ethereum have billions of carbon removal tons recorded on them, forever, soon ♾️.

Disclaimer: None of the information or analysis included should be interpreted as financial advice. All financial figures quoted are in USDs except where otherwise stated.