Climate consultancy South Pole and Japanese conglomerate Mitsubishi Corporation on Wednesday announced the first three carbon removal projects their joint advanced buying commitment, NextGen CDR Facility, will facilitate credit purchases from in the future. The joint venture called NextGen CDR Facility was announced last year at Davos.
NextGen’s founding buyers are Boston Consulting Group, LGT, Mitsui O.S.K. Lines, Swiss Re and UBS. They have promised to buy 193,125 metric tons of carbon dioxide removal from the following three projects: a direct air capture facility in Texas by 1PointFive, a direct air capture carbon removal offshoot of Oxy Petroleum; Summit Carbon Solutions’ biomass carbon removal and storage across Iowa, Nebraska, South and North Dakota and Minnesota; and Carbo Culture’s inaugural high technology biochar project in Finland. Mitisbushi itself is not purchasing any credits.
According to Philip Moss, NextGen’s chairman and global director of tech carbon removals at South Pole, this is only the first set of purchases; the organization plans to onboard more buyers toward the goal of purchasing 1 million carbon dioxide removals by 2025. Moss would not disclose the minimum purchase amount for these first five buyers.
This joint venture is not a marketplace but a fund facilitating an advanced buying commitment. NextGen joins the likes of Frontier, a similar commitment by Stripe, Alphabet, Shopify, Meta and McKinsey to purchase future carbon removals as a way to jump start the climate removal market.
Building a carbon capture facility is extremely expensive, and the banks seek a guarantee of a market for its services once it’s built.
"The issue right now is [CDR] companies don't have anyone to sell to," Moss said. "And so when you go to a bank to ask for a loan to build your project, they say, ‘Well, who's gonna buy it?’ What [NextGen] allows them to do is to say, ‘Look, we have a reliable revenue stream once we build this project.’ So then they can get financed [by the bank]."
In the year since the venture was initially announced in Davos last May, NextGen has been evaluating hundreds of projects for its buyers, according to Moss, who added that South Pole hadn’t done much volume on technological removals before this, only about five projects for select clients.
"We were moving into the field of technological projects," Moss said. "Mitsubishi as an investor has a lot of experience and technical expertise from that front." According to Moss, Mitsubishi’s engineers were able to assess the different technologies and determine whether the projects would deliver.
We look towards having gone through a transparent process to ensure that we can provide some comfort to the public around how we're approaching this with rigor.
South Pole also wanted to bring in a company based in Asia, which has largely been missing from global climate initiatives such as Science Based Targets. The Asia-Pacific region represents about 45 percent of global greenhouse gas emissions, according to McKinsey & Company.
While Moss was unable to provide specifics on how the projects were vetted, due to the non-disclosure agreements that protect patent-pending technology, he did tell GreenBiz that the projects were evaluated based on their carbon sequestration potential, ESG impacts, price and buyer interest.
"What we were hearing from corporates, as we tried to design something that met their needs, was that they cannot pay money and not know what's going to come from it," he said. "They can't pay these very, very high prices for projects. What they needed was something that was a little more accessible. And so that's why we run this as a portfolio."
NextGen is being touted as "the world’s largest diversified portfolio of permanent carbon dioxide removals" supporting five categories of carbon removals: biochar, biomass, carbon removal and storage, direct air capture and storage, product mineralization and enhanced rock weathering.
By investing in each form of removal, NextGen is able to keep the price for removals at $200 per metric ton of carbon dioxide removed, which is relatively low. In 2020, Stripe published the per-ton prices it paid for carbon removal: $100 to CarbonCure, $775 to Climeworks, $600 to Charm Industrial. In 2022, Shopify and Stripe reported prices ranging from $227 to $1,318 per ton.
Hovering over the NextGen announcement, South Pole has been caught in the line of fire around criticisms of carbon crediting generally. In January, Follow the Money’s investigation into South Pole’s forestry credits in Kariba, Zimbabwe, uncovered that the credits were grossly overestimated. According to that report, the forested areas South Pole used as the model for deforestation did not become as degraded as substantially as its original baseline predicted, causing an over-crediting by 14 times what it should be. South Pole says that the credits are still legitimate and benefiting the climate.
When asked about how the NextGen removal credits can be trusted, Moss responded that a gigaton of additional removals not available today need to be online by 2030 in order to limit the the planet’s climate to 1.5 degrees Celsius of warming.
"You can think of our current network as another quiver in the bow," he said. "We look towards having gone through a transparent process to ensure that we can provide some comfort to the public around how we're approaching this with rigor. And the fact that we are not necessarily trying to maximize value from particular projects, because it's going through this external process."
NextGen might avoid being caught in the same argument over the legitimacy of credits because it is focusing on technological removals over nature-based avoided deforestation credits, which have been the center of criticism. However, watchdogs have already criticized NextGen for purchasing credits from Summit Carbon Solutions, a carbon storage and transport business whose controversial 2,000 mile-long carbon pipeline proposed for the midwest is mired in legal battles and public opposition.