Financing model applies infrastructure-style lending to voluntary carbon market

A USD 210 million carbon removal initiative backed by Microsoft and JP Morgan is set to expand forest-based climate mitigation projects across the United States. The funding, structured as a non-recourse project finance deal, was arranged by carbon removal firm Chestnut Carbon and is being described as a first for the US voluntary carbon market.

The transaction applies traditional infrastructure financing methods—commonly used in energy and transport—to nature-based carbon removal. Unlike earlier carbon market initiatives that relied on grants or early-stage equity, this deal aims to demonstrate the viability of long-term, revenue-backed investments in large-scale afforestation.

Microsoft has signed a 25-year offtake agreement to purchase more than 7 million tonne of carbon credits generated from afforestation projects in the Southern US The credits are intended to support the company’s broader carbon removal goals. Microsoft has stated it plans to be carbon negative by 2030.

Brian Marrs, Senior Director of Energy & Carbon Removal at Microsoft, said the long-term agreement provides financial predictability that can help support new supply. The offtake arrangement has been cited as a factor enabling the financing to move forward.

The funding was arranged through JP Morgan’s Center for Carbon Transition, with participation from CoBank, Bank of Montreal, and East West Bank. According to the bank, the deal is designed to test the applicability of conventional finance models to the voluntary carbon market, where projects have often struggled to attract large-scale institutional capital due to market uncertainties and verification challenges.

Vijnan Batchu, who leads the Center for Carbon Transition, described the financing as a way to lower barriers for project developers by offering access to long-term capital at more stable costs.

Chestnut Carbon’s model involves acquiring low-productivity or degraded land and converting it to managed forests expected to generate verified carbon removal credits. The company has stated its ambition to remove 100 million tonne of CO₂ by 2030.

Greg Adams, CFO of Chestnut Carbon, said the financing structure may be useful in attracting capital for future carbon removal initiatives, provided such deals can be replicated and scaled. He cautioned that the long-term impact of the model depends on broader uptake across the sector.

Observers note that while the deal is significant in size, it remains to be seen how widely project finance structures can be applied across other carbon removal efforts. Persistent concerns around the durability, verification, and market acceptance of carbon credits continue to shape the landscape of voluntary carbon markets.