Exclusive — Microsoft backs nature-based carbon removal

• It demonstrates growing interest in nature-based solutions from large buyers of carbon-removal credits.

Driving the news: The new deal, the financials of which were not publicly disclosed, would deliver over seven million tons of carbon removal credits to Microsoft, Chestnut CEO Ben Dell told Axios in an interview.

• This would put it just behind a deal Microsoft struck with Brazilian investment bank BTG Pactual's forestry arm for 8 million carbon offset credits, which ranked as the largest such purchase to that date.
• The new agreement would involve the restoration of 60,000 acres of land by planting more than 35 million native, biodiverse hardwood and softwood trees, which would then capture and store carbon as they grow and mature.

The deal amounts to Microsoft's second-largest offtake agreement in its carbon dioxide removal portfolio, according to Brian Marrs, senior director for energy and carbon removal at Microsoft.

• It illustrates the steps that some tech companies are taking to reduce carbon emissions at a time of increasing energy use from AI-related data centers.

Zoom out: Microsoft, like other major tech companies, is in a race between building its energy-intensive AI capabilities and meeting its emissions reduction and other environmental commitments.

• It is entering into deals to power data centers with renewable energy sources, purchase carbon removal credits from a variety of sources and take other steps to try to rein in emissions.
• The company is the world's largest purchaser of carbon removal credits, and its removal investments grew by five times in 2023 compared to 2022.
• Microsoft has a previous, but smaller, offtake agreement with Chestnut that was announced in 2023.

Yes, but: Nature-based climate solutions have their critics, mainly over how well they account for carbon emissions sequestered by restored forests.

• Another criticism is whether the removals counted are in addition to what would otherwise have occurred on that land.
• Dell said Chestnut's approach involves clear methodologies that ensure that it only counts additional storage of carbon.
• "We buy non-performing farmland, we restore the open acres back to forests, and we measure that unit of stock, and we measure it on a regular basis," Dell said.

Dell noted the accuracy of measuring carbon is a challenge. But he said the company's projects are clearly removing carbon from the atmosphere that wouldn't have otherwise been sequestered.

The intrigue: Marrs compared the new Chestnut deal with power purchase agreements that companies like Microsoft enter into with renewable energy providers.

• "We are committing to purchasing carbon removal years into the future. This stability helps developers like Chestnut pursue financing from institutional investors and accelerate progress towards corporate action," he said in a statement to Axios.

The bottom line: The new contract shows nature-based carbon removal solutions are a growing alternative to the relatively high cost of more artificial ways to remove carbon from the air.