Microsoft buys more carbon credits in reforestation in Brazil

(Bloomberg) — Microsoft Corp. is working with a former Brazilian central banker and a billionaire family to reforest large parts of Latin America’s largest country.

The US tech giant has agreed to buy 3 million tonnes of removal credits over 15 years from re.green, a two-year-old reforestation company. It is Microsoft’s second agreement in the past six months to purchase nature-based carbon credits in Brazil, underscoring the country’s potential to supply voluntary carbon markets.

A tropical climate and vast tracts of degraded agricultural land give Brazil the opportunity to plant fast-growing forests on a large scale. According to BloombergNEF, the country could offset a total of 30.5 billion tons of carbon dioxide equivalent by 2050, making it the world’s largest potential carbon sink through avoided deforestation, reforestation and sustainable agriculture.

“Brazil has a huge competitive advantage given the amount of land we have and the climate,” Thiago Picolo, Chief Executive Officer of re.green, said in an interview, adding that he plans to cover an area the size of Puerto within 15 years To have Rico under management. . “The leading restoration company is not from New York or London. It will come from Brazil.”

Arminio Fraga, former president of Brazil’s central bank, is on the board of re.green, and the asset manager he founded, Gavea Investimentos, is one of re.green’s investors. The billionaire Moreira Salles family has also invested in the reforestation company.

The fast-growing carbon offset industry is also facing some headwinds. In recent years, cases of greenwashing have undermined confidence in Brazil and beyond. For example, Brazilian federal prosecutors have opened investigations into carbon credit projects for allegedly harassing indigenous groups and failing to keep promises to local communities.

Rio de Janeiro-based re.green already has 13,000 hectares of land available and will need to acquire approximately 3,000 more hectares to fulfill its supply agreement with Microsoft. The credits are generated by planting native species in areas that were once part of Brazil’s Amazon and Atlantic forests, and the company is looking for buyers other than Microsoft.

About 8% of re.green’s forests will be cut down over about 25 years and then replanted with permanent forests, according to a different methodology for calculating carbon credits. This harvest makes it economically feasible to restore areas where the value of the credits themselves would not be sufficient to cover costs, Picolo said.

The company is in the process of registering its projects with Verra, a carbon offset verifier. The deal with Microsoft should serve as a vote of confidence that helps re.green find more investors and even access debt markets to expand, Picolo said.

“We think this will be very important for us to raise additional capital,” he said.

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