Biochar developers diversify beyond carbon credits as market evolves

Biochar developers are shifting strategy in the voluntary carbon market, pivoting from sole carbon credit sales to focusing on physical product revenues and diversified income streams.

The shift has come as financing challenges and buyer concentration force projects to rethink their business models.

Biochar developers traditionally relied on corporate voluntary carbon market buyers for project financing. However, credit issuance challenges, growing competition, and limited active buyers have caused projects to miss price targets and delivery timelines, voiding offtake agreements.

"Equity can be hard to secure without other supporting factors, such as an offtake agreement, existing profits or past track record of the team," said William Cowell de Gruchy, founder and CEO of Liferaft Carbon Capture, a US-based biochar developer. "Debt is only viable once projects demonstrate operational cash flows."

The limited number of buyers pursuing offtake agreements — primarily tech sector first movers — are increasingly stringent due to significant costs reaching millions of dollars.

Microsoft is "procuring over five million mt of CDR credits to become carbon negative by 2030," said senior program manager Steffi Olesi Muhanji at the North American Biochar Conference in September.

Offtakes not only offer price certainty but also guarantee buyers a dependable credit supply to meet their targets. As the 2030 net-zero deadline approaches, demand is expected to rise, driving interest in biochar projects. This trend benefits early movers while prompting developers to reevaluate their biochar strategies, sources have said.

Revenue diversification

Having buyers for the physical biochar product helps projects achieve bankability beyond carbon credits, sources have said.

Exomad, one of the world's leading biochar developers with an offtake agreement to Microsoft and others, previously told Platts that it provides physical biochar free of charge to the surrounding community.

"Exomad is not the general rule — it's one of many developers," said a Latin American developer discussing the broader shift toward monetizing physical biochar.

The developer added that they are targeting to offer their offtake at $80-$100/metric ton of CO2 equivalent for Isometric pre-certified credits while selling the physical biochar unbundled at a minimum of $120/mtCO2e.

Biochar credits are generated through pyrolysis, heating biomass in low-oxygen environments to capture CO2. This pathway dominates the technology segment.

Corporate buyers on the hunt for credits

Buyers evaluate multiple criteria beyond registry standards, including biomass conversion technology, feedstock quality and its source, end-use applications, and supply chain security. Safety standards for intended applications and delivery assurance are also key considerations.

The operational processes for bringing biochar supply to market and securing that supply chain efficiently is another consideration, Microsoft's Olesi Muhanji said.

The key issue in the biochar value chain is determining whether a suitable site or end use exists for the physical application of biochar, she added.

Beyond revenues, investors focus on risk, and buyers want delivery assurances, said Ryan Letourneau, CEO and co-founder of Grain Ecosystem, which connects carbon removal projects with investors and equipment manufacturers.

From a developer's perspective, revenue consistency poses one risk, but timing capital structure properly is critical, Letourneau said.

"Attempting to secure carbon revenues before obtaining equity funding rarely succeeds," Letourneau said.

"When you say you'll have a project ready in one year and expect credit revenue, having a buffer allows flexibility to deliver against those timelines," Olesi Muhanji said, adding that projects should also know the risks of project reversal.

A robust monitoring, reporting, and verification system can ensure long-term durability and build confidence across the value chain, she added.

Buyers also seek ancillary services in biochar projects, including carbon integrity aspects like additionality and the project's impact on local communities and the environment, sources have said.

Revenue streams for developers

Biochar projects depend primarily on four major revenue streams to repay their capital investments and deliver expected returns to investors, sources said. These revenues include tipping fees, physical biochar sales, or any byproduct such as bio-oil, carbon credits sold into the VCM, and energy generation.

"Not all revenues are created equal," Letourneau said, "but tipping fees are the place that we [developers] all need to start when we're thinking about the kind of waste that we're going to be managing and the opportunities that we decide to go after if we're building a business and raising funds from investors."

Letourneau said tipping fees allow companies to be paid upfront, and they help with cash flow timing.

"Tipping fees and biochar production are probably more relevant as a revenue stream for projects producing 1,000 metric tons of biochar or less," Cowell de Gruchy told Platts. "For larger projects, exceeding 1,000 metric tons, securing a reliable feedstock supply and generating revenue from the product itself becomes more crucial."

"Rather than paying for biomass delivery or charging tipping fees, it's beneficial to take waste off their hands. The more advantageous it is for them, the more likely they are to collaborate with you," Cowell de Gruchy said.

Platts, part of S&P Global Energy, assessed the current-year biochar US credit price at $150/mtCO2e on Oct. 21, and $140/mtCO2e for India origin.

According to Platts data, physical biochar byproducts from carbon credit generation have shown significant price variation across the US market. Platts has observed pricing ranging from $250/mt at the lower end to $600/mt, with premium retail soil amendment products.