A Blueprint for Opportunity

This is the first of a series of letters that Voyager will write on climate change, technology, investment, and the long-term value created at their intersections. Think of this as Voyager’s first set of blueprints, laying out our vision for decarbonization. It is a data-driven look at the scope and scale of the problem that imperils our planet, and its potential solutions. We aim to convey the optimism and opportunity we see in building a livable future for all.

Voyager’s guiding concept for stabilizing the climate is faster every day. Today’s earth system is one of rapidly accelerating climate risks and impacts. However, the tools to avert disaster and create long-term economic value are rapidly advancing too. More than ever, we see an opportunity for technology to durably and profitably restore balance to the global climate system.

At Voyager, we see decarbonization as the next industrial revolution. We believe that using technology, ingenuity, and invention to drive worldwide greenhouse gas emissions to zero is the single greatest business opportunity of this century. For more than a decade before we founded Voyager, we recognized — and built for — the extraordinary opportunity that replacing fossil fuels in the global economy represents. This is an opportunity to create a foundation for growth that can endure for centuries.

We see three paths in the global carbon transition, all of which are necessary: scaling deployment of the decarbonized technology that works today, expanding the application of what works to new sectors, and creating entirely new technologies. We believe decarbonization will occur in a world of distributive abundance: the low-carbon technologies that can successfully power gains in quality of life for people around the world are also the most likely to see rapid adoption and scale. We recognize that this global transition will require systems-level thinking and systems-level action: coordinated activity will save money and time and is required to achieve transformative change in how we produce energy, food, and everything else.

Importantly, we believe that success begets more success. Progress in decarbonization unlocks additional opportunity as markets mature, supply chains develop, people begin to believe in progress as it becomes more visible around them, and cheap, effective decarbonized technologies provide the foundation for the next layer of advances. Successes accumulate and enable further successes, across an opportunity surface the size of the planet itself.

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Where We Are Now and Where We Need to Go

Stability is Gone

We start with a well-known fundamental condition, but one worth emphasizing: climate change is very real, it is becoming more urgent, and it impacts everything. Today, atmospheric carbon dioxide levels are higher than they have been in 800,000 years, which we know from ice core studies and air monitoring sites.  

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Higher concentrations of atmospheric greenhouse gases (carbon dioxide, methane and hydroflourocarbons) not only make for a warmer earth - they make a more volatile earth. Higher temperatures strain and may break existing infrastructure, supply chains, geopolitical compacts, and food and agricultural systems. The stability we have assumed from the dawn of the Industrial Revolution until today is gone; climate change will affect every business and every person on earth.

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Emissions Are Unevenly Distributed Across the Global Economy

Stabilizing the climate means one thing above all: addressing the sources of greenhouse gas emissions. Fossil fuel combustion, chemical production, and industrial processes result in carbon dioxide, while many agricultural practices generate methane as well, a more potent if shorter-lived gas. It is worth examining the sources of these gases by sector. Contributions are not what many might expect. Residential structures emit more than commercial structures, for instance. Livestock and manure emit as much carbon dioxide equivalent as the global chemical and petrochemical industries.

Emissions sources come in several flavors, representing the concentrated or diffuse nature of the economic activity that generated them. There are high-emitting activities from many millions of fairly-similar fuel-burning machines which industries know how to address (road transport), highly concentrated sectors where industry is already looking to change (iron and steelmaking, cement, marine shipping), and a tail of smaller and potentially more challenging sectors like crop burning, rice cultivation, and agricultural soils. Electricity and heat production (31.9% of total emissions), transportation (14.2%), manufacturing and construction (12.6%), buildings (5.9%) and industrial processes (5.9%) account for more than 70% of global emissions.

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Economic Growth and Improving Quality of Life Do Not Require Commensurate Pollution

We live in a world where we can increase economic growth without increasing emissions. The global economy has already begun decoupling economic growth from emissions growth. On a per-capita basis, global GDP has increased 74.6% since 1990; global emissions per capita have risen only 11.4% during the same time. In the United States, primary energy demand peaked more than a decade ago, while economic activity has continued to grow.

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All growth in US primary energy now comes from very low to zero-carbon energy sources, primarily geothermal, wind and solar. It has been more than a decade since the US increased its consumption of fossil fuels.

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Some major economies have gone further than unlinking economic growth and emissions, and have actually seen emissions decline significantly as the economy grows. In the UK, the GDP has grown more than 50% per capita since 1990, while emissions have gone negative. Importantly, UK emissions per capita have been trending negative even when factoring in consumption – including the many things the country imports (which contain the embedded emissions of production processes in other countries).

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Why can the world now produce more with less (emissions)? We can look to two foundational shifts: the rise of computing, and advances in clean power. First, the world has shifted its global economic activity towards information and services, with services now comprising almost two-thirds of global GDP. The cost of a megabit of data has fallen 98% in two decades. Since the 1950s, the cost of compute has fallen by a factor of 100 million, while the energy intensity of computation fell by a factor of 100 billion from 1950 to 2010.  That computation creates economic activity in its own right (as the IT sector) but also enables advances in other industries that were unimaginable even two decades ago.

Second, dramatic advances in clean energy technologies mean that increases in energy consumption now come from renewables. This results in less wasted heat, less pollution, and more efficient operations. Solar and wind, the early-stage energy technologies of the late 20^th century, are now reducing the emissions intensity of economic production around the globe. Simply put, to create the same amount of products or services now takes much less energy than it used to, and that energy is more likely to come from renewable technologies that are cheaper than fossil fuels.

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Inflection Points

We are, it is important to note, approaching liftoff in the accelerating adoption of renewable energy and decarbonized transportation. This is less for moral reasons than for practical ones: clean technologies are rapidly becoming cheaper and better than fossil-fueled incumbents. Some already are. The cheapest new electricity generation one can add to the grid now comes from large-scale solar or wind farms. In 1990, renewables were 1% of global power generation. It took 15 years, until 2005, for renewables to double to 2%, but only eight years to double to 4%, and six years to double to 8%.

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To Voyager, these accelerating rates of renewable deployment signal an inflection point in the power sector and set the stage for decarbonized technologies’ disruption of additional markets. Once new, clean technologies become cheaper than their polluting peers, their adoption can scale exponentially, not linearly.

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Innovation Favors Decarbonization, Forevermore

As decarbonized technologies create inflection points of better price and performance, they can quickly overtake a market. Improvements in materials science, supply chains and manufacturing accrue to new technologies, accelerating their superiority relative to the outdated incumbent paradigm. Investment shifts further accelerate the momentum and cost advantage for new, superior technologies. These twin forces of technological improvement and financial momentum can enable challenger technologies to swiftly transform massive industries, sometimes in only a few decades (though seemingly overnight, to those who have not been paying attention). Learning rates – the percentage decrease in a technology’s cost for every cumulative doubling of capacity - matter greatly. Utility-scale installed solar and wind power in the US have learning rates of 24% and 15% respectively, and no fuel costs, meaning that they already outcompete fossil fuel-fired power today.

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Affordable, Foundational Clean Technologies Primed for Scale

The economics of wind and solar (and lithium-ion storage batteries) are global, not national. All three technologies have decreased in cost and increased in efficiency to the point where they meaningfully shape power and transport markets. Solar in particular has never been cheaper against benchmark fossil fuels, and globally, solar and wind price as the cheapest power in dozens of electricity markets.

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Lithium-ion storage battery costs have declined by 89% since 2010, while the cost of grid-scaled stored energy in lithium-ion batteries has dropped to the point where energy stored in batteries  can compete with the cost of power from open-cycle gas turbines.  Batteries are now meaningful contributors to power grid stability (at times, as much as nuclear in California).

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Massive improvements in battery performance and cost are enabling the electrification of the transportation industry, and the eventual demise of fossil fuel powered vehicles. Electric vehicles are in the process of exponential growth that will lead them to dominate new car sales by the 2030s. Only 55,000 electric vehicles were sold in 2011; 6.8 million were sold last year. EVs are now about 10% of global new car sales and constitute the only source of growth in the car market since 2018.  And the global EV fleet displaced 1.5 million barrels of oil demand per day in 2021.

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Driven by both favorable costs and regulation, new energy technologies will continue to accrue price and performance advantages relative to the fossil-fueled incumbents in power generation, storage, and transportation. This is a dynamic that we recognize across markets: forces including R&D investment and a favorable cost of capital for deployment at scale drive increasing improvements in the cost and performance of decarbonized technologies.

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Favorable Markets

Investment from public and private sources is finally responding to both the urgency in stabilizing the climate and the massive opportunity in doing so. Since 2020, capital has flowed into climate technologies like never before: between the $40 billion in private capital raised for climate technology investment in 2021 and infrastructure to the $370 billion allocated by the United States to accelerate deployment of decarbonized technologies across the American economic system. Readers of our note regarding the Inflation Reduction Act will recall this chart on the change in annual US federal government funding authorized for climate investment – a 4x increase over a decade ago.

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We have never before seen this capital abundance, coupled with government and corporate commitments to decarbonization: 128 country governments with $83 trillion in GDP and global companies with $6.3 trillion in 2019 annual revenues have adopted net zero targets. By some estimates, decarbonization offers a $100 trillion revenue opportunity by 2050, with ongoing opportunity for technology developers and capital providers. Alongside this capital abundance, new regulations continue to further accelerate decarbonized technology deployment: California mandating 100% electric new vehicle sales by 2035, in one prominent example.

Stating where society needs to go is relatively simple. We believe that net emissions must be cut to zero in every place that such is possible, and that cutting emissions alone is not enough: there is so much excess CO2 in the atmosphere that we also need to start actively removing it. Carbon removal will be necessary to counter-balance the residual, ongoing emissions from human activity as well as at least a trillion tons of historical emissions from fossil fuel combustion. Essential to all these efforts is the protection of natural carbon sinks, such as grasslands and forests. This means that emissions need to fall both quickly (right now) and rapidly (with a high rate of change). Emissions trajectories, in other words, should look like this set of illustrative mitigation pathways from the Intergovernmental Panel on Climate Change.

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How We Will Get There

Scale What Works, Expand Where It Works, and Invent

At the very highest level, we can think of stabilizing the climate as a combination of three interacting approaches.

• First, we must continually improve and massively scale up what works today – wind, solar, and batteries – for applications in energy generation, energy storage, and light duty transportation.

• Second, we must apply these technologies’ continual improvement and massive scale in new ways: decarbonizing heavy-duty transport, steel production, cement production, and even hydrocarbon production.

• Third, we must also invent. That means inventing wholly new processes and business models for infrastructure, food and materials, and carbon removal. This is a point of particular optimism for us. Voyager, as an early-stage investor, can see the very frontiers of what is possible from conversations with visionary founders, and can accelerate their commercial scale.

Stabilizing the climate would not be the first time that society produced massive shifts in human activity that successfully reshaped the global economy and raised peoples’ standard of living. We can look to the wartime surges in production of complex machines such as aircraft, cars, boats and the energy to supply them, and the rapid develop of new technologies such as nuclear power, satellites, rockets, and radar.

One example of exceptional scale in an exceptionally short time: US aircraft production during the Second World War. In 1940, US aircraft production barely exceeded 3,600 units a year. With its entry into the Second World War, the US increased production six-fold in one year, 17-fold in two years, and 26-fold in four years – all while producing planes with much greater complexity and capability than before.

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Distributive Abundance

A world of massively scaling climate solutions implies a world of abundance, not scarcity. The world is certainly capable of getting more from less, but what society requires is the positive side of the Jevons Paradox: making climate-positive technologies cheaper and better, and therefore doing much more with them.

Enacting this potential is a matter of mentality as much as it is a matter of technology. It means embracing the notion that humanity can improve our climate by doing more, while also having more, and living better. It means acknowledging that doing so requires investment, to create opportunity for all involved, and is not a cost or a burden. It means value creation, for companies and for society, as a result.

We also believe that this requires a bias towards engagement and action, rather than disengagement and delay. That means a thoughtful but sped-up process of planning, permission, and environmental review for climate technology and its supporting infrastructure.  We will not create a negative-emissions global economy without tens of trillions of dollars of new power plants, factories, vehicles, and infrastructure.

Finally, we believe that this is an approach of distributive abundance. Climate technologies with wide distribution can, and should, widely distribute their benefits. Climate benefits, of course, will be global, but environmental, financial, and operational benefits accrue at the community level.

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Systems-level Thinking and Action

The energy, transport, industry, food, and agricultural systems that created our current climate are complex. We cannot think about any one of these big emissions-and-climate systems without thinking of the others to which they are connected. Our global food system requires transportation; industry requires energy. We must think of decarbonization as enacting change within a system of other complex systems. We recognize the power of the positive feedback loops that come from deliberately designing technological and industrial activities together. This connection is as basic as recognizing that such an advance in one area can and will go much further. Using cheap renewable electricity to energize electric road transportation, when successful, enables a path towards electrifying short-haul aviation and marine transport, electrifying material production processes, and electrifying heat generation.

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Success Is Cumulative, and Successes Accumulate

We believe that climate success is cumulative. It is cumulative at the policy level, where a successful feed-in tariff or tax treatment in one jurisdiction becomes the basis for a similar-but-improved policy in another.  It is cumulative at the level of fundamental technology. Each process improvement in manufacturing hardware or cultivating proteins becomes the new baseline, and the new basis for subsequent improvements. Some of the climate technologies being developed today will become the prevailing paradigm, and foundational for entire industrial segments. These successes continue to accrue to decarbonized technologies, resulting in performance and pricing advantages relative to unsustainable incumbents.

Successes accumulate across industries. Success in one domain enables success in completely different sectors. Take, for example, the successful development of powerful, small batteries for smartphones. Over a decade, smartphone demand and billions of dollars of investment in engineering, research and manufacturing drove dramatic decreases in the cost of lithium-ion batteries, and equally dramatic increases in performance. Once these energy dense, affordable batteries existed, they could be applied to solve other problems in energy. And they were. Bundled together, hundreds of small, powerful lithium-ion batteries could be repurposed to provide energy for the electric vehicle revolution, with electric boats and small planes on the horizon.

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The Opportunity Surface

Information security researchers use the term ‘attack surface’ to describe the total vulnerabilities of a software environment. We can think of climate change in a similar way. It creates vulnerabilities across the natural and human-made environment as a result of higher volatility in extreme weather events, in temperatures, and in disruption to other natural processes such as animal and plant behaviors across the globe.

As investors, however, we can invert this way of thinking.  The attack surface is also a climate opportunity surface, the area across which Voyager can invest in valuable solutions. Voyager focuses on the six sectors responsible for most of the world’s emissions, representing the biggest opportunity for both climate impact and financial return.

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The Time-Value of Atmospheric Carbon

As a venture capital investor, Voyager invests in technology companies that we believe can create climate impact through meaningful commercial scale in under a decade. The 10-year term of Voyager’s funds aligns with the decade that many scientists say is critical to avert tipping points in ecosystems from the Amazon to the Arctic. By many respected estimates, the world has just under ten years before current rates of atmospheric carbon concentrations trigger what the Intergovernmental Panel on Climate Change believes to be the most dangerous – and compounding - outcomes of a destabilized climate. In assessing the venture-scale viability of climate technologies during Voyager’s investment process, we consider the time-value of atmospheric carbon: do we believe a given technology company can achieve massive commercial success in under a decade, given the importance of the next ten years? Addressing atmospheric carbon is not a binary proposition but one of degrees: velocity matters, and this decade is one of acute urgency – and opportunity.

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A Blueprint for Opportunity

Speed matters. Every day, climate change moves faster. Events which seemed exceedingly unlikely a decade ago are now commonplace. To put it another way: if 1,000-year floods happen multiple times a decade, they are no longer 1,000-year floods; they are the new normal.

But as we emphasize throughout our writing and our investing approach, progress in the technologies that can address climate change are also moving faster every day. Industry-standard, general-purpose climate technologies were laboratory experiments four decades ago, bench tests three decades ago, edge cases two decades ago, and specialist applications one decade ago. Now they are established realities.

And they are the basis for whatever comes next, too. The next industrial revolution is here, and it heralds a wave of innovation in energy, materials, hardware, analytics, computing, and biotech, as the world replaces outdated fossil-fueled infrastructure with a new generation of sustainable and simply better technologies. This revolution, should we embrace it, offers the opportunity not just to stabilize the Earth’s climate at livable conditions, but also to raise the standard of living for people around the world. However, this will not happen by itself. It will require deployment of sustainable technologies at scale, innovation, and invention, and trillions of dollars of investment. Exponential progress creates exponential opportunities. And to succeed, all of it needs to happen at an accelerating rate – faster every day.

Think of this as Voyager’s blueprint for opportunity.

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