Microsoft signs massive carbon credit deal with reforestation startup Chestnut Carbon

Microsoft announced Thursday that it’s buying over 7 million tons of carbon credits from Chestnut Carbon.

The 25-year deal would enable Chestnut Carbon to reforest 60,000 acres of land across Arkansas, Louisiana, and Texas, Axios reported. Recently, the tech company has struggled to rein in its carbon emissions as AI has driven a surge in data center construction and use. 

Microsoft reported last year that its emissions rose 29% since 2020 as a result of the boom in AI and cloud computing, imperiling its 2030 goal to sequester more carbon than it produces. In 2023, the company reported generating 17.1 million tons of greenhouse gas emissions before offsets.

Carbon credits come in a range of flavors. Chestnut Carbon focuses on reforestation, in which the company facilitates tree planting and then monitors the new forests to ensure they grow as planned and aren’t cut down. The company currently has eight projects in the Southeast U.S., which were previously worked as farms or pastures. 

Trees naturally sequester carbon as they grow, though 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 tend to 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.

Even premium carbon credits from afforestation, reforestation, and avoided deforestation are a relative deal compared with 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.

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, today uses Gold Standard.