Chestnut, a company created by Kimmeridge Carbon Solutions, recently celebrated a significant milestone with a 15-year offtake agreement with Microsoft, one of the longest contracted delivery schedules in the market. This deal stands out as it involves the planting of new trees, rather than just the preservation of forests. Technology companies like Microsoft are leading the way in longer-term credit purchases, driven by consumer demand for emissions progress and their lower emissions footprint compared to industrial peers. Carbon removal credits are becoming a larger part of their budgets, but there is a shortage of projects available in the market.
Carbon credits can be categorized into reduction, removal, or avoidance, with removal projects often seen as the most impactful but currently in low volume. Many companies have set 2030 as their net zero date, leading to an impending shortage of carbon removal credits. Chestnut and other companies are working quickly to provide a supply of high-quality carbon removal credits to meet this demand. Chestnut aims to offer durable carbon removal solutions to buyers in long-term offtake agreements, supporting corporate net-zero strategies and the development of the carbon credit market.
In response to negative press surrounding some nature-based solutions for carbon removal, Chestnut has taken steps to ensure transparency and credibility. By developing their project in the US and inviting buyers and investors to visit their Arkansas planting sites, they aim to demonstrate the integrity of their operations. Chestnut emphasizes the co-benefits of their project, including improving soil, air and water quality, supporting native wildlife, and providing economic benefits to local communities. These additional benefits set Chestnut apart in the carbon removal credit market.
Large tech companies are also investing in advanced carbon dioxide removal technologies, such as direct air capture and bioenergy with CCS, which offer higher permanence and are in high demand. While there is hesitancy among buyers due to negative publicity surrounding some projects, there is a growing need for scalable carbon removal solutions to mitigate climate change. Chestnut believes that solutions with a 100-year sequestration period can provide significant benefits in the fight against climate change, emphasizing the importance of taking action now.
As the world’s need for carbon removal solutions continues to grow, Chestnut is positioned as a leader in this space, having taken on the capital risk of their project and successfully finding buyer demand for their high-quality carbon removal credits. With the AI data center industry expanding rapidly, the demand for carbon removal solutions is expected to increase further. Chestnut’s unique approach of investing in a US-based afforestation pilot has paid off, and they are optimistic about the future of the carbon credit market and their role in addressing climate change.
