Nature-based carbon removal startup Chestnut Carbon has raised $160 million in Series B financing, the company announced, as it seeks to capitalize on the growing demand for high-quality carbon credits. The funding round, which included investments from Canada Pension Plan Investment Board, Cloverlay, and DBL Partners, among others, will enable Chestnut Carbon to significantly expand its operations and accelerate its mission of planting native trees on marginal farmland and harvesting carbon credits.

The startup's innovative approach involves buying marginal and degraded farmland, planting native trees, and harvesting the resulting carbon credits. This approach not only helps to offset carbon emissions but also promotes biodiversity and ecosystem restoration. With the new funding, Chestnut Carbon plans to grow its carbon credit capacity to 100 million metric tons by 2030, which will require hundreds of thousands of acres to be transformed back into forests.

The demand for high-quality carbon credits has been driven in part by the rapid expansion of data centers serving cloud and AI customers, which has led to skyrocketing emissions. Tech companies, in particular, have been eager to offset their emissions by purchasing carbon credits. Last month, Chestnut Carbon made a significant sale of 7 million carbon credits to Microsoft, which will help the startup rehabilitate 60,000 acres in Arkansas, Louisiana, and Texas over the next 25 years.

Chestnut Carbon's approach is notable not only for its potential to offset carbon emissions but also for its focus on projects developed by the company, rather than simply managing existing forests. The startup currently owns more than 35,000 acres of marginal and degraded farmland and pasture in the southeastern United States, and the new funding will enable it to expand its holdings significantly.

The company's goal of 100 million metric tons of carbon credits by 2030 may seem ambitious, but it represents only a fraction of a percent of annual carbon emissions, which hit 37.4 billion metric tons in 2023, according to the International Energy Agency (IEA). However, if Chestnut Carbon can secure its foothold in the carbon credit market, afforestation and reforestation hold great potential to rein in the effects of climate warming pollution.

A study in 2019 found that the world can support 2.2 billion acres more forest than it has today. Once those forests mature, they would hold 205 billion metric tons of carbon, or about a quarter of the carbon currently in the atmosphere. Chestnut Carbon's efforts, therefore, have the potential to make a significant impact on the global carbon balance.

With its innovative approach and significant funding, Chestnut Carbon is well-positioned to play a leading role in the growing carbon credit market. As the world continues to grapple with the challenges of climate change, startups like Chestnut Carbon are providing much-needed solutions to help mitigate its effects.