Microsoft Signs Third Nature-Based Carbon Removal Offtake Agreement

Ponterra, Rubicon Carbon, and Carbon Streaming have embarked on a monumental 10,000-hectare project in Panama, which will provide Microsoft with 1.6 million tonnes of carbon removal credits over the next 30 years.

This initiative, the ARC Restaura Azuero Project (ARC Project), is a nature-based carbon removal effort on Panama's Azuero Peninsula. Spanning an initial 10,000 hectares, it represents one of the largest fully financed projects globally and stands out as a significant environmental endeavor in Central America.

The ARC Project is poised to generate 3.24 million tonnes of carbon removal credits over three decades, with Microsoft set to receive 1.6 million tonnes through a mix of a credit streaming agreement and an offtake deal. This project marks Microsoft's third long-term nature-based carbon offtake agreement.

Moreover, the ARC Project is one of six initiatives under validation with Verra's new Afforestation, Reforestation, and Revegetation (ARR) methodology VM0047. It also serves as a pilot project for Verra's new SD VISta Nature Framework.

With significant upfront investments from Rubicon Carbon, Carbon Streaming, and Microsoft, the ARC Project will see the planting of over six million trees from more than 75 native species in an area that has suffered from decades of cattle ranching.

"To scale carbon removal at a pace in line with IPPC guidance, more investors need to become comfortable with underwriting risks that are unique to nature-based solutions," said Brian Marrs, senior director of energy and carbon removal at Microsoft. "This novel collaboration with Rubicon, Carbon Streaming, and Ponterra is a big step in the right direction in terms of both socio-ecological impact and market capacity building."

Under Ponterra's model, the project leases land from local landowners rather than purchasing it outright. This approach allows for joint operation and revenue sharing between partners and landowners, ensuring the latter are compensated for the project's success.

It's estimated that local communities will receive more than $70 million in direct and indirect benefits over the first 30 years of the ARC Project. These benefits will come from lease payments, a share of carbon credit sales, salaries to local workers, and donations to local NGOs for environmental education programs.

Ponterra plans to hire over 100 local community members this year. These hires will be involved in biomass and biodiversity measurement, ecological research, seed collection, sapling production, planting, maintenance, accounting and reporting, and health and safety programs.

The firm hopes the ARC Project will eventually expand to more than 50,000 hectares. Additionally, Ponterra has identified a million hectares of suitable land across six countries in Latin America and Africa and has four more projects in the pipeline. Ultimately, it aims to implement 35 similar schemes over the next decade to meet the growing demand for nature-based carbon removals.

"Ponterra's mission to restore biodiversity and uplift local communities by designing and operating high-integrity nature projects comes to life today," said CEO Celia Francis. "We are thrilled to be working with some of the most respected buyers of nature-based carbon credits in the market to reach the scale needed to meaningfully impact the twin biodiversity and climate crises."

The deal marks the latest step in Microsoft's ambitious plan to become a carbon-negative business by 2030 and to remove the equivalent of all the CO2 the company has emitted since its founding in 1975 by mid-century.

This move follows a recent agreement with Chestnut Carbon to remove 2.7 million tonnes of CO2 from the atmosphere over 15 years, inked at the beginning of the year. It also comes roughly 12 months after Microsoft acquired 2.76 million carbon removal credits from Danish energy giant Ørsted and approximately 5,000 tonnes of CO2 removal credits from UK-based enhanced rock weathering specialist UNDO.

Additionally, this announcement follows Microsoft's plans to access more than 10.5GW of new solar, wind, and other "carbon-free" energy sources in Europe and the US. This initiative, part of a five-year deal with Brookfield Asset Management and Brookfield Renewable signed earlier this month, aims almost to double Microsoft's renewable energy capacity.

The transaction is more than eight times the size of any publicly disclosed power purchase agreement to date and, based on current market conditions, is estimated to be worth more than $10 billion.