Inside Citi's $72M Bet on Texas Biochar Removals

Citi has closed a $72 million, 3.5-year principal-protected note that funds Applied Carbon's biochar project in Texas upfront. Investors give up traditional coupon payments. Instead, they receive payments linked to the issuance and delivery of carbon credits the project generates. Citi calls it its first outcome bond tied to verified carbon removals.

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How Is Citi's $72 Million Note Structured?

Citi's $72 million note pays investors through carbon credit outcomes rather than interest. An upfront amount goes directly toward financing Applied Carbon's biochar project in Texas.

The note runs for 3.5 years and is principal-protected. Investors forgo the fixed coupon a conventional bond would pay. Their payments instead depend on the project issuing and delivering carbon credits.

Sonia Battikh, Global Head of Carbon Offsets Trading at Citi, said the voluntary carbon market needs new structures to connect investor capital with long-term project funding needs. She added that the note builds on Citi's earlier work linking bond performance to environmental outcomes.

Several terms remain private. Citi has not published expected credit volumes, credit prices, the payment formula, or the verification standard. Decarbonfuse covered Citi's announcement on October 22, and those details were not part of the release.

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How Does Applied Carbon Turn Crop Residue Into Biochar?

Applied Carbon, a Houston-based company founded in 2020, converts crop residue into biochar in a single field pass. Its mobile system combines pyrolysis and biochar application, according to Citi's release.

A tractor and forage harvester collect and chop residue such as corn stover or wheat straw. A self-contained trailer then heats it to about 500°C or higher without oxygen. The finished biochar is spread on the field and worked into the soil.

Producing biochar on site removes the need to haul bulky residue to a plant and ship biochar back. The system also runs in edge-of-field mode, which adds feedstock flexibility across the farming cycle.

Applied Carbon says its biochar meets lab-tested metrics that peer-reviewed research links to 1,000+ years of soil storage, according to its XPRIZE profile. Over 90% of durable carbon removal sold to commercial buyers in 2023 came from biochar, according to Applied Carbon's July 2024 Series A announcement.

Biochar now sits at the center of a growing credit market. Projects like Terraton's recent first credits from agricultural waste show how residue-based removals are reaching buyers.

Who Are Citi, Nuveen, and Microsoft in the Deal?

Citi structured the $72 million note, Nuveen invested, and Microsoft provides long-term credit demand. Each party covers a different gap in carbon removal finance.

• Citi: designed the note and tied investor payments to credit issuance and delivery.
• Nuveen: TIAA's investment manager, which reports over $24.2 billion deployed in impact strategies as of June 30, 2025.
• Microsoft: signed a 2022 offtake agreement for a portion of the project's credits.

Microsoft's role matters because it is the largest buyer in the market. Microsoft has bought 41% of all carbon dioxide removals globally since 2020, according to BloombergNEF data reported in August 2026.

That demand gives the credit-linked payments a clear buyer. Microsoft still accounted for almost half of all carbon removal transactions through mid-July 2026, according to the same BloombergNEF data.

Aramburu added that the structure will help scale deployments for farmers across Texas. Applied Carbon raised a $21.5 million Series A in July 2024, led by TO VC, with Microsoft's Climate Innovation Fund participating.

How Does an Outcome Bond Compare With Other Carbon Removal Financing?

The outcome bond brings institutional bond capital into carbon removal while protecting investor principal. Most removal projects rely on buyer purchases, equity, or debt instead.

Buyer-led deals remain active. Frontier's $11.7 million mineralization agreement with 44.01 is one recent example. The table below compares the main approaches in general terms.

Financing Model	Who Supplies Capital	How Capital Is Repaid	Who Carries Delivery Risk
Advance purchase or prepayment	Corporate credit buyer	Credits delivered later	Mainly the buyer
Offtake-backed financing	Developer equity or lenders, supported by a buyer contract	Buyer pays on credit delivery	Mainly the developer and its funders
Conventional project finance	Banks or bond investors	Scheduled interest and principal	Developer, which must service debt
Citi Carbon Removal-Linked Note	Note investors, including Nuveen	Principal protected, payments linked to credit delivery	Investor payments depend on delivery, full allocation not disclosed

Compared with a standard bond, the note swaps fixed coupons for outcome-linked payments. Compared with a prepayment, it draws on fixed income portfolios rather than a corporate climate budget.

Liberatore also cited the bond's relative valuation and its commitment to impact reporting. He pointed to credits being taken by a well-known hyperscaler as support for cash flow.

What Could This Signal for Carbon Removal Finance?

The note shows that verified removal credits can underpin a bond product built for institutional investors. That widens the pool of capital available to removal developers.

Buyer demand for biochar is tightening supply. More than four-fifths of high-quality biochar removal supply for 2026 had been committed by July 2026, according to a market report cited by Carbon Pulse.

Applied Carbon brought specific strengths to this deal. It holds granted patents, closed a $21.5 million Series A in 2024, and has had a Microsoft offtake since 2022. Other developers may need similar anchors before using the same model.

Policy support is also building. Carbon180 recently released a federal roadmap to scale agricultural carbon removal, which covers pathways like biochar.

Infrastructure for durable carbon storage is expanding too. Operating global CCS capacity reached 68 million tonnes per annum, according to the Global CCS Institute. Federal agencies are opening about 649,438 acres of Wyoming pore space, and Colorado now runs its own Class VI permits.

For the carbon removal sector, the headline is simple. A $72 million note, a principal guarantee, and a single delivery metric just gave bond investors a direct route to Texas farm fields. The next milestone to watch is the project's first credit issuance under the note.

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