Mizuho joins NextGen as first Japanese bank to invest in carbon removal credits

Mizuho participates in NextGen CDR Facility and concludes long-term agreement for technology-based CDR credits. (Photo: Wikipedia Commons)

Mizuho Financial Group has announced its entry into the NextGen platform as a carbon credit buyer, marking a first for Japan’s banking industry. The bank has committed to long-term carbon removal credit procurement contracts at an average price of $200 per ton, demonstrating its confidence in the sector's growth.

As more corporations accelerate their carbon removal credit purchases, Megan Kemp, Global Head of Strategy at NextGen and South Pole, emphasized that 2025 will be a pivotal year for carbon removal development.

Carbon removal market gains momentum as Mizuho joins NextGen

Both NextGen and Mizuho stated that the bank’s involvement strengthens market confidence in high-quality, technology-driven carbon removal credits. By leveraging carbon markets, these investments provide stable funding for emerging technologies, facilitating scalability and commercialization while accelerating corporate net-zero goals.

Shinichi Tsunoda, Mizuho’s COO and General Manager, highlighted the significance of collective procurement alliances in creating initial demand and funding for nascent carbon removal technologies. He sees Mizuho’s participation in NextGen as just the beginning, with plans to expand decarbonization efforts in Japan.

Carbon capture technology company 1PointFive is constructing a Direct Air Capture (DAC) plant. (Image: NextGen, Mizuho Financial Group press release)

Carbon removal credit market attracts financial, consulting, and industrial players

NextGen, a joint venture between Mitsubishi Corporation and carbon trading firm South Pole, aims to become the world’s largest carbon removal credit trader, with deliveries expected to start as early as 2025. Current buyers include UBS, Boston Consulting Group (BCG), LGT Group, and Mitsui O.S.K. Lines. Mizuho, the latest addition, has total assets of approximately $2 trillion.

According to Kemp, three key factors are driving corporate investments in carbon removal credits: regulatory risk mitigation, sustainable branding, and strategic investment opportunities. She noted that financial institutions, consulting firms, and industrial players are proactively entering the high-quality carbon credit market ahead of regulatory mandates.

Despite increasing interest, Kemp outlined four major challenges slowing corporate investment in carbon removal technologies:

1. High costs – In 2023, technology-based carbon removal solutions averaged $350 per ton, a significant financial burden for companies. To scale the market, cost reductions are essential. Kemp emphasized the role of governments in accelerating corporate investment through subsidies, innovation funding, large-scale procurement, and contracts for difference (CfDs).
    
2. Unclear corporate claiming guidance – While the Science-Based Targets initiative (SBTi) has proposed integrating carbon removal into corporate net-zero strategies, Kemp supports further expanding its scope to cover Scope 2 and Scope 3 emissions.
    
3. Slow compliance market integration – Although the UK, EU, and Japan have pledged support for technological carbon removal, progress remains sluggish. High costs and a lack of large-scale adoption hinder market expansion, underscoring the need for regulatory frameworks to stimulate demand.
    
4. Market complexity and trust issues – With over 100 carbon removal methods and 30+ different standards, often involving multiple regulatory bodies, building a trusted and efficient carbon removal market remains a challenge.

Source: NextGen, Mizuho, Carbon Herald