Summit Carbon ventures into private carbon credit market with NextGen deal
“Apparently the private property rights of South Dakotans are just a minor detail to be overlooked when you’re pushing the D.C. liberal climate agenda," one state representative said.
SIOUX FALLS — Summit Carbon Solutions, the company behind a planned 2,000-mile carbon sequestration pipeline tracing a footprint through five Midwestern states including South Dakota, has announced a “landmark” carbon credit sale to a joint venture called NextGen.
It's a major signal of what the coming international carbon economy could look like in practice, with carbon capture firms selling carbon offset credits that are then bought by companies in pursuit of "net-zero" and other climate goals.
Combined, the Summit Carbon pipeline and two other carbon capture projects, one in the United States and one in Finland, plan to sell 193,000 metric tons of carbon to NextGen in the form of carbon dioxide removal credits, or CDRs.
“This transaction exemplifies a dramatic shift in global carbon markets. Sophisticated CDR investors are looking to deploy capital to viable tech removal projects, especially those delivering quality, permanence, and scale,” Jim Pirolli, the chief commercial officer at Summit Carbon Solutions, said in an April 26 press release from the company.
NextGen has not disclosed Summit Carbon’s share of the total deal or the exact per-ton price offered by NextGen, according to a Summit Carbon spokesperson. Delivery of this batch of credits is scheduled to be completed by 2030.
Those opposed fail to see the significance of the sale, especially as Summit Carbon still has some work to do signing South Dakota landowners to voluntary easements as well as overcoming federal, state and local permitting and legal hurdles.
“You would think that Summit Carbon Solutions would need to secure the permission of landowners to build their pipeline before selling credits to multinational corporations,” Rep. Jon Hansen, of Dell Rapids, told Forum News Service about the deal. “Apparently the private property rights of South Dakotans are just a minor detail to be overlooked when you’re pushing the D.C. liberal climate agenda funded by a windfall of federal tax credits.”
The company as of March 27 has reached easement agreements representing 70% of the total route.
In short, the pipeline plans to capture carbon from ethanol plants in the region by liquifying the carbon that’s given off during the fermentation stage of production.
It’s set to strike a 450-mile path through the eastern part of South Dakota on its way to permanent geological storage in North Dakota, burying anywhere from 9 to 12 million metric tons of carbon per year.
The footprint also includes ethanol plants in Iowa, Minnesota and Nebraska, as well as other carbon emitters like the GEVO jet biofuel plant planned in Lake Preston.
The major carrot for investing in this carbon-harvesting technology comes from the federal government in the form of the 45Q tax credit, which would offer Summit Carbon and other carbon companies hundreds of millions in federal tax dollars each year.
However, the captured tons of carbon overseen by Summit Carbon and other companies with similar designs also have value in a growing set of private carbon markets, which will likely supplant these federal revenue sources in the next few decades.
One type of private carbon market is “compulsory,” meaning it’s created by government regulation. In California, for example, the Cap-and-Trade Program sets hard emission caps for companies that emit greenhouse gases.
Companies that run over these caps are required to purchase “offsets” to remain within compliance, a vehicle by which these polluting companies invest in certain programs that quantifiably reduce carbon emissions until their emissions are below the mandatory cap.
Essentially, for each metric ton of greenhouse gases a company emits above these caps, they must invest in an equal and opposite reduction of greenhouse gases.
While Summit Carbon’s carbon sequestration technology is not currently eligible for California’s offset program, in the future it may be one option for companies in similar compulsory carbon markets, such as the European Union’s Emissions Trading System, which is looking to make the continent “carbon-neutral” by 2050, in part through these types of carbon offset credits.
In practice, Summit Carbon's 10 or so million tons of sequestered carbon from Midwestern ethanol plants each year could be used to, on paper, offset an equal tonnage of emissions around the world.
The other major type of carbon offset market is “voluntary.” Rather than a market created by government intervention where buyers of carbon offsets are direct polluters themselves, in the voluntary carbon offset market, carbon credits are available to anyone: a frequent traveler looking to offset their carbon footprint or a company looking to market itself as “net-zero,” for example.
Summit Carbon’s news release says that NextGen, a joint venture between South Pole and the Mitsubishi Corporation backed by several other international investors, is looking to purchase over 1 million tons of CDRs by 2025, which would give the venture a strong foothold in the voluntary carbon offset market.
“Summit Carbon Solutions, the world’s largest technological CDR project, is providing critical infrastructure at the scale needed to support the build-out of the carbon removal industry in the USA, and we look forward to seeing the successful implementation to reduce historic emissions and help limit the growing impacts of climate change,” Philip Moss, the global director of tech carbon removals at South Pole and the chairman of the board at NextGen, wrote in the release.
Even among some environmentally minded onlookers, it’s hard to see the “landmark” deal — among the largest ventures to date into the voluntary carbon market — as a victory.
“This is a plan that puts NextGen at the profit center of a massive carbon offset scam,” Jim Walsh, the policy director for Food & Water Watch, an environmental nonprofit that opposes the carbon pipelines, told Forum News Service. “NextGen wants to corner the market on greenwashing bogus carbon capture, and Summit and their buddies are all too willing to buy into it.”
Jason Harward is a Report for America corps reporter who writes about state politics in South Dakota. Contact him at 605-301-0496 or firstname.lastname@example.org.