Microsoft Acquires Over 7 Million Tons of Carbon Credits from Chestnut Carbon

Microsoft has announced a significant move to reduce its carbon footprint by purchasing over 7 million tons of carbon credits from Chestnut Carbon. This 25-year deal will enable Chestnut Carbon to reforest 60,000 acres of land across Arkansas, Louisiana, and Texas, as reported by Axios.

Microsoft’s Struggle to Reduce Carbon Emissions

The tech giant has been struggling to control its carbon emissions, which rose 29% since 2020 due to the surge in AI and cloud computing. This has put its 2030 goal to sequester more carbon than it produces at risk. In 2023, Microsoft reported generating 17.1 million tons of greenhouse gas emissions before offsets.

Understanding Carbon Credits

Carbon credits come in various forms, with Chestnut Carbon focusing on reforestation. The company facilitates tree planting and monitors the new forests to ensure they grow as planned and aren’t cut down. Currently, Chestnut Carbon has eight projects in the Southeast U.S., previously worked as farms or pastures.

The Quality of Carbon Credits

Not all forest-related carbon credits are created equal. Credits from projects that plant non-native, fast-growing trees are generally seen as lower quality and sell for less since they don’t support as much biodiversity, and the trees don’t tend to live as long. Projects that support diverse, native plantings typically sell at a premium since the ecosystems that result tend to be more resilient over time.

Comparing Carbon Credits to Direct Air Capture

Even premium carbon credits from afforestation, reforestation, and avoided deforestation are a relative deal compared to some alternatives. Chestnut Carbon sold credits last year for $34 per ton, whereas direct air capture, which uses fans and chemical sorbents to draw CO2 out of the atmosphere, costs around $600 to $1,000 per ton today. Despite the cost differential, Microsoft has also bought carbon credits from direct air capture startups.

Challenges with Nature-Based Carbon Credits

For all their strengths, nature-based carbon credits aren’t always perfect. Verra, which has the largest nature-based carbon credit portfolio, was the subject of an extensive investigation in 2023, which reported that the organization overstated the climate benefit of its projects. The scandal led to the CEO’s ouster and made the industry reassess the standards it uses. Chestnut Carbon, which previously used Verra to certify its carbon credits, now uses Gold Standard.