Microsoft & Chestnut Carbon: Major Carbon Credit Deal

Microsoft's Significant Carbon Credit Purchase

Microsoft revealed on Thursday an agreement to purchase more than 7 million tons of carbon credits from Chestnut Carbon.

Reforestation Initiative

This 25-year agreement will support Chestnut Carbon in the reforestation of 60,000 acres of land spanning Arkansas, Louisiana, and Texas, as reported by Axios.

The tech giant has recently faced challenges in controlling its carbon footprint, largely due to the increased demand for data centers driven by advancements in AI.

Rising Emissions and Sustainability Goals

Microsoft’s emissions increased by 29% since 2020, a consequence of the expansion in AI and cloud computing services.

This rise threatens the company’s 2030 objective of removing more carbon from the environment than it emits.

In 2023, Microsoft reported generating 17.1 million tons of greenhouse gas emissions prior to applying offsets.

Understanding Carbon Credits

Carbon credits vary in their approach. Chestnut Carbon specializes in reforestation, overseeing tree planting and subsequent monitoring to ensure successful growth and prevent deforestation.

The company currently manages several projects, including eight located in the Southeastern United States, previously utilized as agricultural land or pastures.

Quality and Diversity in Reforestation

Trees naturally absorb carbon dioxide during their growth process, but the quality of forest-related carbon credits differs.

Credits originating from projects that plant non-native, rapidly growing trees are generally considered lower quality and are sold at a lower price point.

This is because these trees often lack the biodiversity support and longevity of native species.

Projects prioritizing diverse, native plantings typically command a higher price due to the increased resilience of the resulting ecosystems.

Cost Comparison with Alternative Methods

Even high-quality carbon credits from afforestation, reforestation, and preventing deforestation represent a cost-effective solution when compared to alternatives.

Chestnut Carbon sold credits for improved forest management last year at $34 per ton.

In contrast, direct air capture – a technology utilizing fans and chemical sorbents to remove CO₂ from the atmosphere – currently costs between $600 and $1,000 per ton.

Despite this cost difference, Microsoft has also invested in carbon credits from direct air capture startups.

Challenges and Verification Standards

While beneficial, nature-based carbon credits are not without their limitations.

Verra, a major player in the nature-based carbon credit market, underwent a thorough investigation in 2023.

The investigation revealed that the organization had overstated the climate benefits of its projects, leading to the removal of its CEO and a reevaluation of industry standards.

Chestnut Carbon, which previously used Verra for certifying improved forest management credits, now utilizes Gold Standard for its afforestation, reforestation, and revegetation credits.

Note: Details regarding carbon credits and verification processes have been clarified.