Citi closes $72 million carbon removal-linked note for Texas biochar project

Citi closed a $72 million, 3.5-year principal-protected Carbon Removal-Linked Note financing Applied Carbon's biochar project in Texas, ESG News reported. The bank describes the structure as its first outcome bond tied to verified carbon removals.

The note replaces a conventional coupon with payments linked to carbon credits the project issues and delivers. Investors give up the fixed coupon; what they receive instead depends on verified removal volume. Sonia Battikh, Citi's global head of carbon offsets trading, described the gap the structure is meant to close: "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."

Applied Carbon runs mobile pyrolysis equipment that converts agricultural crop residue into biochar, a carbon-rich material stored in soil. The units process residue in the field, combining production and application in one pass, and can sit at field edges, which the company says widens where it can source waste. The $72 million directs upfront capital to those operations. Applied Carbon says it plans to scale deployments across Texas with Citi and Nuveen.

In August this publication reported that Microsoft cut its carbon-removal purchases by 80% through mid-July and that global carbon-removal credit sales fell 66%. A note whose payments track issued and delivered credits inherits that demand risk. The note is principal-protected, with the variable piece in the removal-linked payment, placing verification and offtake at the centre of the underwriting rather than the use-of-proceeds label.

Nuveen participated in the note, citing relative valuation, impact reporting and potential carbon credit generation. Stephen M. Liberatore, head of ESG/impact for global fixed income at Nuveen, said the firm was "excited to have participated in Citigroup's inaugural outcome bond given its attractive relative valuation, unique underlying project and commitment to robust impact reporting."

The closing sits alongside Citi's broader sustainable-finance count. In August this publication reported the bank counted $647.2 billion toward a $1 trillion sustainable-finance target after a December framework change added nuclear power, nature projects and data-center lending to what qualifies. The tally is a classification metric; this note's payments are tied to delivered credits.

Jason Aramburu, Applied Carbon's founder and CEO, said the financing shows biochar and engineered carbon removal "can be structured and financed like any other asset."