By Rebecca Ungarino and Avi Salzman

JPMorgan Chase is pitching itself as the bank of choice for companies and investors seeking access to the carbon-credit markets, as the firm solidifies a new long-term agreement with a start-up active in the energy-intensive pulp and paper industry.

The bank and CO280, a Vancouver-based company that funds technology to keep carbon dioxide from being emitted into the atmosphere, signed a carbon-removal offtake agreement connected to a project to capture and store carbon emissions from a mill in the U.S. Gulf Coast.

Under the agreement, CO280 will put together a system to capture carbon emissions emitted by the paper mill, liquefy that carbon, and then pump it through a pipeline to an underground storage site. JPMorgan plans to purchase credits for 450,000 metric tons of carbon dioxide-equivalent for below $200 apiece over the course of 13 years, according to the companies.

JPMorgan's agreement with CO280 builds on a nonbinding memorandum of understanding between the two companies in 2023, when the bank invested more than $200 million to purchase credits from multiple firms.

Retrofitting mills to capture carbon dioxide "is a multi-billion-dollar market opportunity for the U.S. forest products industry," JPMorgan Chief Risk Officer Ashley Bacon said in a statement to Barron's. "The additional revenue stream from selling carbon credits enables mill owners to invest in their business and support local job creation."

The contract underscores an ambition at the largest U.S. bank to invest in carbon markets and win business from clients in search of advice and capital, even as American corporations broadly retreats from sustainability pledges under the Trump administration.

At the same time, carbon markets are still taking shape and some experts are skeptical of their efficacy. Voluntary carbon market pricing is opaque, while revelations of lax carbon-accounting standards and charges of fraud have upended the wider market several times in recent years.

Yet even under Trump, financial firms around the world are making big, yearslong bets on ways to facilitate economies' transitions to a sustainable, lower-carbon environment. JPMorgan and its competitors walk a fine line: Seizing on investment and advisory opportunities while trying to avoid alienating clients and shareholders who disagree with their approach.

Carbon capture technology has been used in the oil-and-gas industry for years, but it's still a rarity at industrial plants like paper mills, which create CO2 during operations. To make paper products, mills cook wood chips until the useful cellulose fibers separate from the resins that hold the wood together, forming a substance called black liquor. Burning the black liquor creates steam that helps generate electricity for the factory, but it also emits considerable amounts of carbon dioxide.

That's where CO280 comes in. It uses technology designed by a venture between the energy-services provider SLB and Norwegian firm Aker Carbon Capture, according to CO280 Chief Executive Jonathan Rhone, which diverts and filters out that stream of CO2, where it will then be liquefied and directed through a 35-mile pipeline to an underground storage site. Once it's pumped underground the liquid solidifies. It's expected to stay secure underground for millennia instead of being emitted into the atmosphere, where it would have exacerbated global warming.

Only a few companies have tried this type of project before in the U.S. One is agricultural giant ADM, which says it has captured and stored millions of tons of carbon produced by a corn-processing plant in Illinois.

Paying for the carbon capture is even more complex. The voluntary carbon market is a disjointed one, where uneven pricing has long dogged participants. The value of credits remains a puzzle, because carbon has no single price to measure against. Though carbon is traded like a commodity around the world, prices vary widely, based on whether the markets are mandatory or voluntary and on methods of carbon abatement or removal. The market price for carbon credits in Europe recently has been around $72 per ton. The bank is paying "under $200" per ton for the carbon that the paper plant produces, though it's difficult to tell whether that's a fair price.

To become more efficient, carbon markets need more transparency and infrastructure, said Taylor Wright, JPMorgan's head of operational decarbonization. "There are challenges with the market today, in terms of comparability at the project level," she said. "There are questions about quality and impact. Not to say that you can't find high-quality credits at a good price."

As far as vetting CO280's projects, the companies say the carbon dioxide removal credits will be verified through third-party assessments. CO280 has lined up several other buyers for CDRs, but hasn't yet built carbon-capture facilities, which can't be built until the agreements are in place to finance the construction.

That may be about to get more difficult. The federal government offers tax credits for the process worth as much as $85 per ton -- enough on its own to make some of these projects profitable, according to some analysts. But the House of Representatives is now debating whether to keep those credits as it works through a sweeping piece of legislation that would reduce subsidies to clean energy. Rhone says in an interview that he is optimistic that Congress will keep the carbon capture credits, and that there are other ways to finance the project.

"It is a vitally important part of our economics, but we're not wholly dependent on it," Rhone says. "So we're less vulnerable."

The other main way to pay for it is selling credits to companies like JPMorgan that want to reduce their carbon footprints. CO280 has signed other large deals. An offtake agreement it announced last month with Microsoft -- under which the tech company will purchase 3.685 million tonnes of carbon dioxide removal, or CDR, credits -- is one of the largest engineered CDR purchases to date. Rhone says CO280 is in talks with some 50 other companies about carbon-credit deals.

Corporate sustainability leaders at JPMorgan see their role as a carbon-credit buyer as a competitive edge. Wright says that it has "given us the chance to build relationships and expertise and tools for due diligence," like expertise with offtake agreement contracts.

The firm sees opportunities to make money across the ecosystem. Its bankers, for instance, might arrange financing for carbon-removal project developers or advise on an acquisition in the space.

JPMorgan is among the largest financiers of both the fossil fuel and clean-energy industries, a status that has drawn criticism from environmental advocates and conservative lawmakers alike in recent years.

The bank and powerful investment firms such as BlackRock and Blackstone know there's money to be made in both realms, however, while they set out to reduce their own carbon footprints.

Write to Rebecca Ungarino at rebecca.ungarino@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 20, 2025 07:00 ET (11:00 GMT)

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