• On Thursday, biotech company C16 Biosciences is announcing the launch of Palmless, a palm oil alternative created with yeast.
• Palm oil found in more than half of the packaged products Americans use, including ice cream, lipstick, soaps and detergents, according to the World Wildlife Fund.
• Farmers in developing nations are burning rainforests to make way for palm oil plantations, removing a vital carbon sink and reducing biodiversity in the process.

In July 2013, Shara Ticku traveled to Singapore on a work trip for Goldman Sachs. The investment bank made her bring N95 masks to protect her from the terrible air quality at the time.

"I land in Singapore, and the air quality index is over 400. Air quality index: anything over 300 is considered super toxic. In New York right now, it's probably in the 20s, and that's for a big city," Ticku told CNBC in a video interview on Tuesday. "They closed schools, they told pregnant women they can't walk outside. It was crazy. And I had no clue what was going on."

Ticku asked her local colleagues who informed her that neighboring countries Indonesia and Malaysia were burning rain forests to make palm oil. "By the way, we deal with this every year," they told her.

That was the first time Ticku ever heard about palm oil but the experience would stick with her.

Ticku went on to work for in health issues, first at the Clinton Health Access Initiative, then at the fertility benefits management company Progyny, and then at the United Nations as the Secretary General's Special Envoy for Health and Malaria.

She also went back to school and got her MBA at Harvard, where she met Harry McNamara, who was then getting his PhD in physics at Harvard and his PhD in health sciences and technology at Massachusetts Institute of Technology, and David Heller, who was studying biological sciences at the Massachusetts Institute of Technology. The three came together in a interdisciplinary class at the MIT Media Lab whose goal was for students to use their knowledge base to collaborate and solve a global challenge.

McNamara shared his experience of visiting Costa Rica with some friends to see the rainforest and seeing rows of systematically planted oil palms. When McNamara told Ticku and Heller about his experience, Ticku had a distinct feeling of déjà vu.

These experiences became the catalyst for the company that is now C16 Biosciences, which has raised $24 million from investors including Breakthrough Energy Ventures, the climate tech investing firm funded by Bill Gates.

On Thursday, C16 Biosciences is announcing the launch of Palmless, a palm oil alternative it's invented and been able to produce at scale.

C16 Biosciences, named after the 16-carbon fatty acid that is of the primary components of palm oil and its microbial alternative, has completed a 50,000 liter, industrial-scale fermentation to produce its commercial-grade product. The company says it will begin appearing in beauty products next year, but declined to identify any of its customers.

What is palm oil and why is it a climate hazard?

Part of what makes palm oil so dangerous is its ubiquity: It's found in more than half of the packaged products Americans use, including ice cream, lipstick, soaps and detergents, according to the World Wildlife Fund. It makes up 40 percent of traded vegetable oils, according to a paper published in CABI Agriculture and Bioscience, and the industry produces 81 million tonnes per year — almost as much as the next two largest vegetable oil crops, soybean and rapeseed, combined.

Palm oil grows best in the regions right around the equator, so palm oil producers chop down rainforest and clear that felled vegetation by burning it, making it a prime target of conservation organizations like the Rainforest Rescue and the World Wildlife Fund.

"It's truly slashing and burning: Burn the trees, cut down the trees, and then they burn the peatlands that the trees sit on top of, which makes it a double whammy for carbon dioxide emissions because the trees hold carbon and the peatlands hold carbon," Ticku said. Peatlands are marshy, boggy, wet land which are known to be tremendous carbon sinks.

Burning the forests also releases greenhouse gases, as does creating the fertilizer used by these plantations.

Palm oil plantations also affect biodiversity. The rainforest that gets cleared to make palm oil is home to endangered species including rhinos, elephants and tigers, according to the WWF. Clearcutting land in Borneo and Sumatra for palm oil agriculture is the greatest threat to orangutans, according to the Orangutan Foundation International.

"The thing about deforestation is nobody wants you to know that they're doing it. People really try to hide it," Ticku told CNBC. That makes it hard to track greenhouse gasses associated with palm oil production.

A 2018 analysis from the International Council on Clean Transportation estimated that land use changes in Indonesia and Malaysia emitted approximately 500 million tonnes of carbon dioxide equivalent each year. At the time, that was 1.4 percent of global net CO2 equivalent emission, which was almost as much as the aviation sector and more than the state of California emitted, the ICCT said.

Nonetheless, the industry continues to grow. The global palm oil market was valued at $63.7 billion in 2021 is expected to continue to grow to reach $98.9 billion in 2030, according to a report published in May from Grand View Research, a global market research firm.

That's because palm oil is relatively inexpensive and "so damn good at what it does," Ticku said. "Palm oil is used in most candies that have a chocolate coating, and it is truly the thing that is responsible for making chocolate melt in your mouth and not in your hand, because it's got a melting profile that melts at body temp and not at room temperature."

Using yeast to solve the problem

When the C16 team was getting started in 2017, the idea of using biotechnology to make consumer products was relatively new, but Impossible Foods had just released its burger, which uses fermentation of yeast to make heme, the protein that makes a product taste meat-like.

"People began to really think long and hard about what what does it mean to consume and use products that were developed with biotechnology," Heller told CNBC in an interview at C16 Biosciences' company headquarters in Manhattan on Tuesday.

Investors are betting that customers are ready for those alternatives. "Consumers are increasingly more aware of the climate problem, which includes the deforestation involved in palm oil production, and are looking for ways they can contribute with their purchasing power," Carmichael Roberts, one half of the investing committee for Gates' climate investing firm, told CNBC. 

To make its palm oil alternative, C16 Biosciences uses a wild type yeast microbe that makes a functional equivalent to palm oil with a kind of fermentation process. And fermentation — which is what has been used to make wine, beer and cheese for ages — is a "really, really robust, scalable process," Heller said.

The firm was able to move so fast in part because microbes speed up research and development.

"We can design an experiment and start it and get a learning about whether that helped us produce better and more oil within about seven days," Heller said. "It takes about one week from end to end." By comparison, trying a new seed at a palm oil plantation takes more like seven years.

Chemically, the palm oil that C16 Biosciences makes is not identical to the palm oil that is grown in industrial agriculture farms. However, "it contains the same fatty acids, which are the molecular fingerprints of fats and oils, that palm oil does," Heller told CNBC. "And that's a really important characteristic that allows our oil to function in the same kind of end products in the food and beauty and personal care space as palm oil does."

While C16 Biosciences is launching in 2023 with beauty products, it's not yet applied for approval from the United States Food and Drug Administration to be included in food products.

Right now, C16, with 35 employees and $24 million in total venture capital, is laser-focused on scaling up its palm oil alternative and simultaneously bringing the price down.

"But what we are building is a platform technology that can produce all different kinds of microbial oils," Heller told CNBC. "So it's definitely possible that we're able to make other kinds of vegetable oil replacements in the future."

Correction: C16 Biosciences has produced a 50,000-liter industrial-scale fermentation process, which it will then use to produce its final product.