Investment Demonstrates Growing Confidence in Climate Tech and Innovative Tax Credits
Bank of America today announced a historic, groundbreaking investment of $205 million in carbon capture technology, among the largest investments into the sector. This deal, done in partnership with Harvestone Low Carbon Partners, is a monumental leap in the war against climate change. The investment would attach an ethanol plant to capture 200,000 metric tons of carbon dioxide annually, equivalent to those emitted by around 42,000 gasoline-powered cars.
Investment in Carbon Capture Breakthrough
The investment is singularly notable for its structure, having entailed a first-of-its-kind tax credit deal. Under the pact, Bank of America will benefit from the tax credits associated with the captured CO2, which is stored underground. Such agreements demonstrate growing confidence that carbon capture is starting to become a workable solution to cut emissions from industries facing some of the toughest challenges in trying to switch to renewable energy sources.
Carbon capture has had its setbacks over the years, but recent policy changes create a whole new set of opportunities,” said Noah Zerance, director of sustainable finance at Bank of America. “There needs to be an element of trying to address the emitters that exist in today’s market and help them decarbonize.”
Strategic Tax Credits – and Future Potential
The sector received a much-needed shot in the arm with the 2022 climate law that expanded tax credits for carbon capture and storage. Capturing and storing CO2, the North Dakota plant contributes to the reduction of greenhouse gas emissions and shows the use of tax credits in making such investments viable. This transaction underlines strategic confidence in the long-term viability of both the North Dakota project and wider sustained policy support over the coming years.
The tax credits involved in this deal give investors financial security, with generally unpredictable government policies. It could be one of the most innovative financing structures there is to help unlock more investments in carbon capture, particularly for those hard-to-decarbonize industries.
Overcoming Barriers to Carbon Capture
The nature of operations by the ethanol plant operated by Harvestone is such that it is particularly well suited to carbon capture, with its gas streams containing high concentrations of CO2. Another propelling factor is the regulatory environment in North Dakota. The fact that it can grant its carbon storage permits-the timeline is shorter, around nine months, whereas under federal oversight of the Environmental Protection Agency, it would take a couple of years-points out the added advantages. Favorable geology in the region eliminates the use of long and expensive pipes, normally the highest barrier in most carbon capture projects.
The ability to have a successful project speaks to the ability for us as an industry and us as a nation to execute these types of initiatives,” said Jeff Zueger, CEO of Harvestone Low Carbon Partners. “We’re seeing how local regulatory environments and technology advancements are combining to make carbon capture a viable solution.”
Outlook: Expansion of Vision
The success of that initial project has Harvestone building two more carbon capture facilities in North Dakota and Indiana. These also would attract more investors as the market for carbon capture technology grows. New clean-fuels tax credit rules, still pending, could further improve financial prospects for those endeavors.
What’s more, Bank of America’s position would favorably enable it to take advantage of any future changes in subsidies related to clean fuels, which could be far more lucrative. All this flexibility in investment strategy reveals a pretty forward-thinking approach on the bank’s part to be agile in the changing landscape of climate technology.
A Turning Point for Carbon Capture
This may be the landmark agreement that serves as the inflection point for Bank of America in carbon capture. Having substantial skin in this game for the technology, together with the use of innovative tax credit structures, this investment is likely to lead to further capital deployment and substantial further advances in emissions reduction. It is representative of what is possible in carbon capture for emissions generated by hard-to-decarbonize industries and opens the door to similar investments in climate technology.
As different parts of the world continue to grapple with the effects of climate change, initiatives like this drive home the point that private sector investment is as important as supportive policy frameworks in attaining environmental objectives. This agreement between Bank of America and HarvestOne Low Carbon Partners marks a serious step toward the goal of finding sustainable solutions, using both financial innovation and technological advancement in addressing one of the most important challenges facing our current era.