Charm Industrial

Overview of Charm Industrial


Charm Industrial is a US-based company that converts agriculture residues into bio-oil through a process known as fast pyrolysis. Charm collects agriculture residues (such as corn stover and wheat straw) from farmers in Kansas and feeds them into a pyrolysis unit, heating them at very high temperatures (> 500° C) in the absence of oxygen for a matter of seconds, creating bio-oil. Instead of slowly decomposing and releasing greenhouse gases, the bio-oil locks up the carbon from the original biomass and is injected into EPA-regulated wells, sinking to the bottom of the geological formation where it remains for thousands or millions of years.


Image courtesy Charm Industrial

Charm’s business model is currently entirely dependent on the sale of offsets to individual and corporate buyers. The company uses these funds to build small, mobile pyrolysis units at its factory in San Francisco that can be deployed near farms where agriculture residues are collected. Charm’s theory of change is that using modular, distributed pyrolysis units instead of centralized biomass processing plants can help drive down capital and transportation costs over time to make this technology more affordable in combatting climate change, and make biomass residues economically accessible for use.


The use of biomass feedstocks as a climate mitigation strategy has traditionally been associated with using biomass for energy production (bioenergy). However, as interest in offsets has increased and the cost of other renewable energy technologies like solar and wind have decreased, more emphasis has been placed on the carbon value of biomass and the potential for long-term storage. This pathway is known as biomass carbon removal and storage (BiCRS), and its proponents believe it will play an important role in global efforts to achieve net-zero, with a global potential to capture and store 2.5 gigatons of CO2 annually by mid-century. Having sequestered thousands of tons of carbon to date, Charm is a pioneer in actively demonstrating how to scale up this important climate mitigation pathway responsibly and sustainably.



Mechanism

Avoided or removed emissions, depending on which parts of the process are considered. Charm’s process heats up agriculture residues left behind after harvest to create a highly stable product called bio-oil, resulting in avoided decomposition of the original biomass and thereby reducing CO2 emissions. Their process could be considered carbon dioxide removal (CDR) if one considers as part of that process the CO2 that was removed through photosynthesis as the original crops were growing. Because Charm’s does not grow the crops themselves, under a strict definition, their process would be considered avoided emissions. It can be removed emissions if one expands the scope of the process to include the CO2 removed by the original biomass.


Causality

High causality. Charm collects agriculture residues that would have otherwise been left on the field and broken down by microorganisms. This process of decomposition would return some of the nutrients from the residues back into the soil, but would have also resulted in the release of greenhouse gases including CO2 and nitrous oxide. Heating up these agriculture residues through fast pyrolysis locks much of this carbon into place in the form of bio-oil, which is then injected into EPA-regulated injection wells. Heating up biomass through the process of pyrolysis creates an end product that is much more difficult for bacteria and microbes to break down, resulting in lower CO2 emissions. The carbon content of the bio-oil that is injected underground is easily measurable, making it possible to accurately quantify carbon reductions because of their process.


Project Additionality

High project additionality. Charm’s only revenue stream is from the sale of carbon offsets to individual and corporate buyers. Unlike other companies that convert biomass into biochar or bio-oil through pyrolysis, they do not sell the end product for commercial uses. While their fast pyrolysis process also produces a small amount of biochar, this is returned to the field for the nutrient value and is not included in their carbon offset offerings. Based on our research and conversations with Charm, there is a strong case that the bio-oil would not be produced and injected into wells without revenues from offset sales. Compared to conventional fuels, bio-oil has a lower energy density and higher viscosity and easily hardens on contact with air. In the absence of additional refining, these properties make it a poor substitute for conventional fossil fuels. Charm has determined that bio-oil has potentially greater value as a carbon store than an energy carrier and has therefore pursued a commercialization path that depends entirely on revenues from offset sales. This may change in the future, as the cost of their process comes down. The company is hopeful that once the price reaches $250/ton of CO2 (from present day $600/ton), the company will be eligible for revenues from federal 45Q and state LCFS incentives and crediting systems. At the <$100/ton range, the company expects to be exploring commercial use cases, like the production of industrial syngas. For the foreseeable future, we assess Charm’s process as high project additionality.


Marginal Additionality

High marginal additionality. According to the company, a single pyrolysis unit is approximately the size of a shipping container and costs several million to build and deploy. One of these units can capture (as bio-oil) the equivalent of several thousand tons of CO2 annually. Charm’s offset revenues will go toward the procurement of pyrolysis units like this, that are small and mobile enough to be moved along the boundary of farmlands, reducing the costs associated with transporting biomass feedstock. We consider this to be a modular system that lends itself well to high marginal additionality. Charm was able to walk us through how new offset revenues contribute to procurement and deployment of new pyrolysis units that become increasingly mobile and cost-effective over time.


Permanence

High Permanence. The bio-oil produced through Charm’s pyrolysis process is more stable than the original biomass. This is true for other products created through pyrolysis like biochar. However, biochar is typically applied to soils, where it undergoes complex interactions with soil microbes and other microorganisms and is further affected by environmental conditions and soil properties. This makes it difficult to measure real-world biochar decomposition rates – and, in turn, the permanence or durability of carbon fixed to the biochar. Charm has attempted to avoid this problem by injecting the resulting bio-oil into EPA-regulated injection wells. Injection wells are “used to place fluids underground into porous geologic formations”. Charm claims that their highly viscous bio-oil sinks to the bottom of the well and solidifies over time, eliminating any chance that the carbon locked in the bio-oil could be re-released into the atmosphere. These wells are regulated by the EPA under the Underground Injection Control program to ensure that injection activities do not endanger underground sources of drinking water. The over 680,000 injection wells in the United States have a number of uses including disposing of brine generated during oil production, disposal of other liquid wastes, and storing carbon dioxide. These wells must be rigorously separated from underground sources of drinking water; once filled, they are capped by an impermeable cap rock called the “confining layer”. Charm has conducted initial studies comparing bio-oil before and after injection that demonstrate the bio-oil solidifies within 48 hours. The company is continuing to study this effect. Given the high stability of bio-oil relative to existing biomass, and the sinking of bio-oil thousands of feet below the surface, we assess permanence as high.


Cost

High cost. Charm’s cost is currently $600/ton of CO2 avoided. This is significantly higher than most traditional offsets and removals. Much of the cost is associated with the development and deployment of pyrolysis units and the transportation of biomass feedstock to pyrolysis units. The company expects that offset purchases made today will help them eventually mass-manufacture pyrolysis units to reduce unit costs, capitalize on internal supply chain efficiencies, and reduce biomass transportation costs by developing and deploying more mobile pyrolysis units. While current costs are high, the company has a roadmap for bringing costs down in the coming years, but that depends on investments made today.


Co-benefits

Low co-benefits. Charm instead needs to manage potential risks. Pyrolysis units can emit some particulate in the process, which the company is mitigating using diesel exhaust filters and will continue to focus on further reducing these emissions in future iterations of their technology. It is also important to note the potential risks with the structural integrity or leakage of injection wells. However, the bio-oil is expected to solidify shortly after injection where it is stored thousands of feet below water tables. The EPA has determined risks to be low, and far more buoyant materials including CO2 gas have been injected into geologic formations for decades without issue. We therefore believe that risks associated with injecting bio-oils must be monitored, but are not disqualifying in any way.


Further, Charm's technology, if scaled, has the potential to provide jobs for former oil and gas workers and additional income for the farmers and forest managers who provide biomass, bringing direct benefits to groups who might otherwise be opposed to aggressive climate action. We think this is promising and look forward to seeing Charm's progress.


Conclusion

Charm has developed and is beginning to scale up a process that can measurably and permanently keep CO2 from agriculture and forest residues from entering the atmosphere. It avoids some of the permanence and additionality concerns associated with biochar providers, has made the purchase process streamlined for offset buyers, and is currently working on a public dashboard to further improve transparency. Their process is measurable, additional, and permanent. The only drawbacks are its current price, and the need for more data on the solidification of bio-oil in injection wells. We have determined that supporting Charm Industrial at this juncture can have a significant effect on scaling up their climate mitigation solution by reducing costs and helping improve their technology. More broadly, this can help shape a relatively new climate mitigation pathway. You can purchase offsets from Charm Industrial on their website with expected fulfillment by late 2023 (at time of writing).


We thank Peter Reinhardt, CEO of Charm Industrial, for conversations that informed this document.