“Our 15-year offtake agreement with Microsoft remains one of the longest contracted delivery schedules in the market today”, said Shannon Smith, Chief Commercial Officer of Chestnut, referencing the deal inked at the very end of last year. Easy to miss with all the noise around Microsoft and cleantech, but this deal was unique as it represented one of the larger purchases to incentivize planting new trees, not just the preservation of forests.
Technology companies are driving the majority of longer-term credit purchases, given a consumer base that wants to see emissions progress, combined with an emissions footprint lower than industrial peers, making it not financially prohibitive to offset. Carbon removal credits make up more of their budgets as those projects become available but there is a lack of projects. Chestnut was created by Kimmeridge Carbon Solutions to fill this gap in the market for high-quality carbon removal credits.
Carbon credits can be broken down into reduction, removal, or avoidance. Removal is obviously the most certain in having an impact, but due to the complexity of those projects the volume of removal credits remains small. Combine that with the fact that a lot of companies picked 2030 as their net zero date, because people like round numbers and it seemed distant when announced, and you can see an incoming shortage. Chestnut and others are working quickly to provide supply.
“Chestnut was created as a US-based afforestation developer of carbon removal credits of the highest integrity,” said Shannon. “We have registered our project on the Gold Standard, which we view as the most rigorous of the carbon credit registries. Our goal is to deliver an additional, durable carbon removal solution to discerning buyers in long-term offtake agreements, supporting both corporate net-zero strategies and the development of the carbon credit market. We took the unusual step of developing this project in the United States, believing this increases our transparency – buyers and investors alike have visited our Arkansas planting sites – and brings the ecological and economic co-benefits to communities here at home.”
The steps by Chestnut make a lot of sense when you think about the recent negative press for nature-based solutions. Lack of verification, exaggerated claims by certain participants, and an inability to halt broader deforestation pressures, leading to substitution, have been some of the problems. Many projects don’t deserve this negative press and it’s been upsetting for the reliable developers in the space. Chestnut solves this by having American companies walk through their American site and is proud of the additional benefits for the community. “Chestnut’s co-benefits are a critical part of our value proposition of delivering impact right here in the United States. Our restored native forest ecosystems improve the soil, air and water quality; support the return of native wildlife; and provide livelihoods and recreational access for local communities,” said Shannon.
Large tech companies have also invested in tech-heavy carbon dioxide removal, with both direct air capture (”DAC”) and bioenergy with CCS (“BECCS”) remaining highly coveted. They offer higher permanence which is often the main driver for premium pricing.
“There is still some hesitancy among buyers to purchase NBS, due to the negative publicity earned (fairly) by a handful of bad actors. There is also an extreme position held by some organizations promoting only carbon removal solutions with permanence of 1,000+ years. We don’t need a 1,000 year solution right now. We need carbon removal solutions that can scale quickly and sequester effectively for meaningful periods of time – 100 years of carbon removed from the atmosphere gives us a lot of benefit in mitigating climate change today,” said Shannon.
Realistically, every day that goes by means the world is going to require more carbon removal solutions and the AI data center boom will likely only increase these needs. There is lots of room for multiple solutions and it’s exciting to see Chestnut emerge as a leader given they took on the capital risk of their project compared to others. “In 2022, when Kimmeridge founded Chestnut, a robust corporate buyer market for bankable, long-term carbon offtake agreements didn’t exist. So they decided to invest equity funding in a unique US-based afforestation pilot, believing that if they brought a high-quality carbon product to market, they would find buyer demand. Fortunately, they were right,” said Shannon.