Citi launches $72 mln carbon removal financing in Texas

The financing structure directs an upfront amount toward the project, with investors forgoing traditional coupon payments in favor of payments tied to the issuance and delivery of carbon credits generated by the project.

Linking returns to carbon removal:

The note marks Citi’s first outcome bond tied to verified carbon removals, according to the bank. It aims to channel private capital into carbon removal projects that require long-term funding.

“The voluntary carbon market requires new financial structures to bridge the gap between investor capital and the long-term funding needs of carbon removal projects,” said Sonia Battikh, Citi’s global head of carbon offsets trading.

Turning agricultural waste into biochar:

Applied Carbon uses a mobile pyrolysis platform to convert agricultural crop residue into biochar, a stable, carbon-rich material that stores carbon and offers soil health benefits.

Its technology processes crop residue directly in the field, combining pyrolysis and biochar application in a single pass. It can also operate at field edges, allowing flexibility in feedstock sourcing throughout the agricultural cycle.

The financing will help Applied Carbon scale its deployments across Texas, said Jason Aramburu, the company’s founder and CEO.

In 2022, Microsoft signed an offtake agreement for part of the carbon credits generated by the project, providing long-term demand support for its carbon removal output.

Nuveen backs project financing:

Nuveen participated in the bond, citing its valuation, the underlying project and its commitment to impact reporting.

“The funding of equipment to produce biochar from agricultural waste through in-field processing is an excellent fit for our portfolios,” said Stephen M. Liberatore, head of ESG/Impact for Global Fixed Income at Nuveen.

He added that the investment combines measurable carbon sequestration with the generation of carbon credits purchased under an offtake agreement by Microsoft.