ANALYSIS: Carbon offtakes hit record, equity investments fall in second quarter of year
Quantum Commodity Intelligence - Publicly announced agreements to buy carbon credits in long-term contracts have jumped to an all-time high in the second quarter, reflecting ongoing appetite from big technology and financial groups, data collected by Quantum showed this week.
On the other side of the coin, equity investments into carbon market companies fell to multi-year lows as venture capitalists stayed on the sidelines amid a complex geopolitical environment, highlighting tight financing for many companies.
While carbon credit offtake agreements help secure a project's future by enabling developers to secure loans from banks, for example, they typically include little, if any, upfront payment, according to sources in the industry.
During Q2, Quantum reported on 48 carbon offtake deals, up from the previous record of 45 in Q3 2024.
As in previous quarters, the vast majority of deals (39) concerned the CO2 removal (CDR) industry, followed by the nature-based sector (five) and other technologies (four).
No fewer than 18 individual deals were announced by Milkywire on June 26.
Technology giant Microsoft continued to dominate purchases, with around 40 million tonnes of CO2 equivalent secured during the quarter, more than double the company's previous record in Q2 2024, the Quantum data showed.
The Seattle-based company announced large deals focussed on afforestation, reforestation and revegetation (ARR) with Rubicon and Anew, as well as on bioenergy with carbon capture and storage with Stockholm Exergi, CO280 Solutions and Hafslund Celsio.
There were also two biochar deals (Carba and Exomad Green) and two soil carbon agreements (Agoro Carbon and Indigo Ag).
Other prominent buyers during Q2 included Bregal Sphere, Burges Salmon, Climate Impact Partners, Cygnum Capital, EmitIQ, Enowa, Ethereum, Frontier, Gevo, Google, JP Morgan, Key Carbon, Mitsui OSK Lines, New Forests, Rubicon Carbon, SAP and Wild Assets.
Musk
Meanwhile, the Musk Foundation awarded $80 million to six CDR developers, of which $55 million went to companies focussing on enhanced rock weathering (Mati Carbon and Undo).
The soil carbon sector is maturing, with a total of seven deals announced, a new quarterly record.
This included an offtake agreement worth an estimated $15 million involving 500,000 credits from project developer Boomitra and an even larger transaction of 2.6 million credits from Agoro Carbon to Microsoft.
Lithuania's InSoil, formerly known as HeavyFinance, received a €3.7 million ($4.4 million) investment from Key Carbon, with the two companies highlighting that the partnership has the potential to expand to €100 million over the next few years.
In addition, two developers, Brazil's NaturAll and Japan's Jizoku, raised equity, and a third, Australia's Carbonlink, is in the process of doing so.
However, total equity investments into the carbon market fell to $197 million, the lowest figure since Quantum started collecting data in 2022.
This was also down from $384 million in Q1 and $334 million in Q4 2024, confirming that venture capitalists have tightened funds allocated to the sector.
"The world feels a lot more confrontational since Donald Trump's election, which isn't good for the climate cause. This has spooked equity investors. It's become very difficult to raise in the last few quarters," said an industry insider.
The data shows most money went to companies focussed on CDR rather than avoidance credits.
The largest equity deals were announced by direct air capture firm Aircapture ($50 million), ARR developer Mombak ($30 million) and UK-based technology platform Treefera (also $30 million).
Switzerland-based project developer Allcot was acquired by Canadian platform Karbon-X for an undisclosed sum, while US-based dClimate hired key staff from geospatial specialist Mantle Labs, continuing a wave of consolidation in the sector.