Citi Closes $72M Carbon Removal Note for Texas Biochar

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Citi has closed a $72 million, 3.5-year Carbon Removal-Linked Note that finances a biochar project in Texas run by Applied Carbon. The bank announced the deal on Wednesday, Oct. 21.

The note works differently from a standard bond. Investors give up regular coupon payments, and an upfront amount goes to the project. Their return depends on the carbon credits the project issues and delivers. The principal is protected.

Citi calls it its first outcome bond tied to verified carbon removals. Nuveen took part as an investor, and no other investors were named.

How the project makes biochar

Applied Carbon runs a mobile pyrolysis system that turns crop residue into biochar, a stable, carbon-rich material. It processes the residue directly in the field, combining pyrolysis and biochar application in a single pass. The system can also operate at the edge of a field.

Microsoft signed an offtake agreement with the company in 2022 for part of the project's carbon credits. Citi said this gives long-term demand support to the carbon removal work.

"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.

Applied Carbon founder and CEO Jason Aramburu said the deal shows that biochar and engineered carbon removal projects can be structured and financed like any other asset.

A first outside the World Bank

Kumo said in a separate Oct. 21 release that this is the sixth carbon outcome bond it has tracked since 2023. All were arranged by commercial banks, but this is the first not issued by the World Bank.

Stephen Liberatore, head of ESG and impact for global fixed income at Nuveen, said the firm was glad to take part given the bond's relative valuation, its underlying project and its commitment to impact reporting. According to CDR.fyi, Applied Carbon has at least 198,190 tons of carbon dioxide removals contracted so far.

Source: Citi