JPMorgan Chase's decision to invest in removing atmospheric emissions is drawing mixed reviews from climate finance advocates and experts.
The nation's largest bank by asset size said this week that it plans to buy more than $200 million in credits that will finance the extraction of already-released carbon dioxide from the atmosphere.
Some observers compared that plan favorably with the carbon offset credits that numerous banks have been using to combat climate change.
But others noted that JPMorgan's planned purchase is small in the context of its emissions-reduction goal. The bank, which has a goal of achieving net-zero emissions by 2050, said that its investment could result in the reduction of 800,000 metric tons of emissions.
The carbon-removal purchases are "insignificant" compared with the overall emissions reduction that the bank needs to meet its net-zero goal, said Patrick McCully, a senior analyst at the climate advocacy group Reclaim Finance.
In an email, McCully noted that "these carbon removals are only to offset the bank's operational emissions, which are vanishingly small compared to the bank's overall climate footprint."
But other observers said that carbon-removal strategies hold much more promise than the carbon-offset approach that banks have previously used.
Investment opportunities in carbon-removal technologies are "potentially enormous," while carbon offset strategies have "significant shortcomings when it comes to really moving the needle on overall emissions," said Ulysses Smith, an ESG senior advisor at the law firm Debevoise & Plimpton.
"Combine that with increasingly promising technical breakthroughs around carbon removal, and the case for increased investment in those technologies becomes clearer and clearer," Smith wrote in an email.
JPMorgan's commitment is one of the largest carbon-removal pledges to date, according to the bank, which said it will back four companies developing technologies to reduce and store emissions.
The investment will help scale new climate technologies, according to JPMorgan. Those technologies represent a potential path to abate emissions that are driving global warming.
The bank also plans to use the purchase of carbon-removal credits to help shrink its own carbon footprint. It stated that the investment is intended to match every ton of JPMorgan's operational emissions through 2030.
"Alongside reducing emissions, the world needs significant investment in durable carbon removal solutions with gigaton-scale potential," Ashley Bacon, JPMorgan's chief risk officer, said in a press release.
In recent years, banks have invested in carbon offset credits to reduce the impact of hard-to-abate operational emissions. That strategy has drawn criticism from some climate activists, who say that carbon offset credits provide companies cover to continue financing the fossil-fuel industry.
Purchases of carbon offset credits allow banks and other corporations to offset the impact of their business activities by reporting contributions to third-party reduction initiatives.
Markets for carbon offset credits, which finance projects that help avoid emissions, have developed faster than carbon removal credits. They are also less costly.
Typical carbon offset credits cost around $15 per metric ton of carbon dioxide equivalents, according to the ratings agency S&P Global. JPMorgan's investment in carbon-removal credits appears to work out to around $250 per metric ton.
JPMorgan is not abandoning carbon offset credits. In its latest climate report, the bank reported over 129,000 metric tons of CO2 equivalents as an offset to its Scope 3 indirect emissions.
Voluntary carbon offsets are important for "optimizing investments to reduce emissions," JPMorgan said in the climate report.
Alexis Normand, CEO and co-founder of the Paris-based carbon accounting company Greenly, views carbon removal credits as a better option for climate-minded investors than carbon offset credits.
Many carbon offset credits focus on "avoidance projects" such as preventing deforestation, Normand said.
"If you pay today to avoid future emissions, you're only partially solving the problem," Normand said.
