Imagine you’re a brilliant engineer with an idea that could help save the planet. You’ve spent years thinking about a technology that could pull carbon dioxide directly from the air and store it safely underground. The science seems sound but developing it would cost hundreds of millions of dollars. Your potential customers say they’d love to buy it once it exists, but nobody wants to be the first to commit real money to an unproven technology. Banks won’t lend for something this risky. Venture capitalists want faster returns. You’re stuck in a circular trap: you can’t build it without customers, and customers won’t commit without proof it works.
This is the innovation paradox that has strangled countless breakthrough technologies before they could draw their first breath. But there’s a mechanism that can break this cycle, one that’s elegant in its simplicity yet profound in its implications. It’s called an Advance Market Commitment, and it might be one of the most powerful tools we have for solving humanity’s biggest challenges.
What is an Advance Market Commitment?
At its core, an Advance Market Commitment (AMC) is a binding promise to purchase something that doesn’t exist yet. Think of it as a signed contract with a blank space where the product should be, accompanied by a substantial check and a clear message: “If you can create this thing we need, and if it meets these specific standards, we promise to buy it from you at this pre-agreed price.”
The beauty of this arrangement lies in what it does to risk. Normally, when someone sets out to invent something radically new, they shoulder enormous uncertainty. Will it work technically? Will it cost too much? Will anyone actually buy it? An AMC removes the last question entirely and significantly reduces the financial risk of the first two. It transforms a terrifying leap into the unknown into a challenging but navigable engineering problem.
Consider how different this is from typical government grants or private investment. A grant might fund your research, but it doesn’t guarantee anyone will buy what you create. Private investors might fund your company, but they’re betting on your ability to both invent something and then convince people to buy it. An AMC says: we’ve already solved the demand side of the equation for you. Now go solve the supply side.
The Carbon Capture Frontier: A Case Study in Coordinated Ambition
In April 2022, a coalition that included Stripe, Alphabet, Shopify, Meta, and McKinsey launched something remarkable. They called it Frontier, and they committed nearly a billion dollars to purchase carbon removal technologies that, at the time of their commitment, didn’t exist at commercial scale. Not technologies that might exist, or technologies they hoped would exist, but technologies that would need to be invented, perfected, and scaled to meet their specifications.
The Frontier commitment wasn’t charity and it wasn’t speculative investment in the traditional sense. These companies genuinely need carbon removal services to meet their climate commitments, but the market for those services was nascent, fragmented, and risky. No single company wanted to be the first mover and bear all the risk of catalysing a new industry. But together, they could create the market conditions that would make that industry viable.
Think about what this meant for a carbon removal startup. Instead of spending years pitching to individual companies, hoping to cobble together enough interest to justify building their first facility, they could look at Frontier’s commitment and know: if we solve the technical challenges and meet these standards, we have buyers lined up with hundreds of millions of dollars ready to spend. This certainty changes everything. It makes raising additional capital easier. It makes hiring top talent more appealing. It transforms a moonshot into a mission with a clear market waiting at the end.
The results speak to the power of this approach. Within two years of Frontier’s launch, the carbon removal industry saw unprecedented growth in both innovation and investment. Technologies that had languished in research labs began attracting serious commercial development. New companies formed specifically to meet Frontier’s technical specifications. The commitment didn’t just fund carbon removal; it conjured an entire industry into existence.
Why Markets Fail and How AMCs Fix Them
To understand why AMCs are so powerful, you need to understand a peculiar type of market failure. Sometimes, products that would be enormously valuable to society simply don’t get created because the economics don’t work for any individual actor.
Imagine you’re pharmaceutical company trying to decide whether to develop a vaccine for a disease that primarily affects low-income countries. The research might cost half a billion dollars. The countries that need it can’t afford to pay prices that would let you recover those costs. Aid organizations might want to help, but they can’t commit funds years in advance for a product that doesn’t exist. So despite the enormous human value of the vaccine, it never gets made. Everyone loses.
This same dynamic plays out across countless domains. Pandemic preparedness technologies sit uninvented because we don’t know which pandemic will strike next. Revolutionary energy storage remains theoretical because the business case requires too many uncertainties to align. Life-saving diagnostics for rare diseases languish because the market seems too small to justify development costs.
The market isn’t failing because of lack of demand or lack of innovation capability. It’s failing because of a coordination problem and a timing mismatch. The people who would ultimately pay for these technologies can’t commit to purchasing them before they exist, and inventors can’t afford to create them without that commitment. We’re all trapped on opposite sides of a canyon, able to see each other but unable to meet.
An AMC builds a bridge across that canyon. It allows future purchasers to make credible commitments today, creating the market certainty that innovators need to invest in development. It aligns the incentives of all parties: buyers get the technologies they need, inventors get compensated for their risk and effort, and society gets solutions to problems that markets alone couldn’t solve.
The Anatomy of an Effective Commitment
Not all advance commitments are created equal. The most effective ones share several key characteristics that distinguish them from wishful thinking or vague promises.
First, they’re legally binding. When Frontier committed nearly a billion dollars to carbon removal, that wasn’t a letter of intent or an expression of interest. It was a binding obligation that could be enforced in court. This distinction matters enormously because it changes the calculus for everyone involved. Innovators can take that commitment to banks, investors, and potential employees as proof that a market exists. The binding nature of the commitment makes it as real as if the technology already existed.
Second, they specify clear quality and performance standards. The commitment isn’t to buy just anything labelled “carbon removal.” It’s to buy carbon removal that meets specific durability standards, verification requirements, and cost thresholds. These specifications serve multiple purposes. They ensure that the commitment drives innovation toward genuinely useful solutions rather than superficial ones. They create clear goalposts that innovators can target. And they protect the buyers from having to purchase ineffective products just because they made a commitment.
Third, effective AMCs typically include price structures that recognize the economics of innovation. Early purchases might be at premium prices to help companies recover their research and development costs and achieve economies of scale. Later purchases occur at lower, sustainable prices that reflect the cost of production once the technology is established. This tiered approach acknowledges that creating something new is expensive, but it also ensures the technology becomes accessible over time.
Finally, the best AMCs include mechanisms for verification and adaptation. How do we know if a carbon removal technology actually works as claimed? Who measures and confirms compliance? And what happens if unexpected technical challenges arise or if external conditions change? Thoughtful AMCs anticipate these questions and build in processes for handling them.
Beyond Carbon: The Expanding Frontier of Commitments
While climate technology has captured significant attention in the AMC world, the mechanism’s potential reaches far beyond carbon removal. Once you understand the structure, you start seeing opportunities everywhere.
Consider pandemic preparedness. We know that novel infectious diseases will emerge, we just don’t know when or what form they’ll take. This uncertainty makes it nearly impossible for pharmaceutical companies to justify maintaining the surge capacity needed to rapidly develop and manufacture vaccines or treatments. But what if governments and international organizations made binding commitments to purchase pandemic response capabilities? Not specific vaccines for specific diseases, but platforms and manufacturing capacity that could be rapidly deployed when needed. Such commitments could maintain industrial capabilities that would otherwise be economically unviable but are critically important for global security.
Or think about space sustainability. Low Earth orbit is becoming crowded with debris that threatens satellites and future space activities. Technologies to remove this debris exist in prototype form, but the business case is challenging. No single entity bears enough cost from space debris to justify paying for its removal, yet collectively we’re all harmed by the growing problem. An advance commitment from space agencies, satellite operators, and launch providers could create the market for debris removal services, transforming it from a public goods problem into a viable industry.
The same logic applies to revolutionary energy technologies, breakthrough medical treatments for neglected diseases, novel materials that could enable new industries, artificial intelligence safety research, and countless other domains where innovation is stymied not by lack of capability but by market coordination failures.
The Ripple Effects of Certainty
What makes AMCs particularly fascinating is how they create cascading effects beyond the direct commitment itself. When a credible advance commitment exists, it doesn’t just affect the companies directly trying to fulfil it. It transforms the entire ecosystem around that challenge.
Imagine you’re a materials scientist who has been toying with ideas about novel carbon capture membranes. Frontier’s commitment suddenly makes those ideas relevant to a billion-dollar market. You might decide to pursue them more seriously. Or perhaps you’re a venture capitalist who previously thought carbon removal was too risky. The existence of committed buyers changes your risk assessment, making you more willing to fund companies in the space. Maybe you’re an engineering student choosing between different career paths. The visible, funded challenge of carbon removal might pull you into the field when you otherwise would have chosen something more conventional.
This is how AMCs can catalyse entire industries. The commitment creates certainty, certainty attracts talent and capital, and that influx of resources accelerates innovation far beyond what the original commitment might have directly funded. The market signal is as important as the money itself.
There’s also a powerful demonstration effect. When one AMC succeeds in catalysing innovation and creating a new market, it makes similar commitments more credible in other domains. Success breeds success. The pneumococcal vaccine AMC helped establish the model. Frontier demonstrated it could work for climate technology. Each success makes the next commitment easier to organize and more likely to attract the participants needed to reach critical mass.
The Challenges and Limitations
For all their promise, advance market commitments aren’t a panacea. They work best for specific types of challenges and require careful design to be effective.
The mechanism is most powerful when the technology needed is well-defined enough to specify requirements but uncertain enough that markets won’t develop it without intervention. If a technology is too speculative, even an AMC might not be enough to overcome the technical risks. If it’s nearly certain to be developed anyway, an AMC might just transfer value to companies that would have done the work regardless.
There’s also the challenge of getting commitments large enough to matter. Frontier’s nearly billion-dollar commitment sounds massive, but it’s actually relatively modest compared to the scale of investment needed to fully commercialize carbon removal technologies. For an AMC to truly catalyse a new industry, it needs to be large enough to justify the substantial fixed costs of developing novel technologies and building new manufacturing capacity.
The design of the specifications and verification mechanisms requires sophisticated technical and legal expertise. Set the bar too high and no one can meet it, making the commitment meaningless. Set it too low and you might purchase technologies that don’t actually solve the problem. Finding that sweet spot requires deep domain knowledge and often extensive consultation with potential suppliers and technical experts.
There’s also a timing consideration. AMCs work by creating certainty about future demand, but that only helps if innovators believe they can meet the specifications within a reasonable timeframe. If the commitment is too far in the future, it loses its power to mobilize resources today. If it’s too near-term, it might not allow enough time for genuine innovation to occur.
A Tool for Ambitious Futures
Despite these challenges, advance market commitments represent something rare and valuable: a mechanism that can reliably convert ambition into reality. They’re a tool for translating our collective desire for solutions into the market incentives needed to create them.
What excites me most about AMCs is how they embody a particular kind of optimism. They’re based on the belief that if we can clearly articulate what we need and create the right incentives, human ingenuity will find a way to deliver it. They don’t require us to know exactly how problems will be solved, only to know what a solution would look like and be willing to pay for it.
In a world facing challenges as complex as climate change, pandemic preparedness, and technological risks, we need tools that can operate at the appropriate scale and speed. We need mechanisms that can mobilize private sector innovation while serving public interests. We need ways to make long-term thinking economically rational rather than financially foolish.
Advance market commitments do all of this. They’re not magic, but they might be the closest thing we have to a systematic way of making the future we want more likely to arrive. They transform vague hopes into concrete commitments, and concrete commitments into functioning markets, and functioning markets into real technologies that solve real problems.
As I think about the next decade of my career, I find myself drawn to this space not despite its challenges but because of them. There’s something deeply appealing about working on the infrastructure of innovation itself, about building the bridges that let inventors and markets meet. The potential to facilitate even one successful AMC that brings a crucial technology into existence feels like it could be among the most leveraged contributions a person could make.
Because ultimately, advance market commitments are about more than economics or innovation policy. They’re about our collective capacity to solve hard problems that matter. They’re about creating the conditions where the future we need becomes the future we get. And in a world that desperately needs more solutions to seem economically viable, that feels like work worth doing.