Founded by Kristjan Lepik and Lisett Luik in early 2022, Arbonics tries to unlock new income sources for forests and landowners whilst enabling nature-based solutions to combat climate change and improving the voluntary carbon market. Interviewed for the latest issue of Life in Estonia, the founders dig into their previous experiences and the mission to unite forests with cutting-edge tech.
Lisett Luik, how did the company get started?
Myself and Kristjan Lepik worked in forest land investment and started to explore the field further. There are several layers of value in forests: timber is very important, but there is also carbon sequestration potential and biodiversity. We asked around to see if anyone was helping landowners to decipher these other layers of value apart from timber, and found that no one was doing it, so we decided to set up our own company.
We aim to assist landowners in realising the full value of their land by helping them to use the land for carbon sequestration through afforestation. If a landowner has empty low-value arable land, we investigate whether it is suitable for planting new forest and how much carbon it could sequester.
What has carbon credit got to do with it?
I sometimes talk about trees as a 370-million-year-old carbon-sucking machine that has evolved perfectly. Trees take CO2 from the atmosphere and convert it into carbon in the wood. Nowadays, we try to imitate this with technology, but this is not nearly as efficient. The idea is that, since trees sequester carbon, this sequestration should be compensated to them or, more precisely, to landowners.
Today, the best way to do this is through the voluntary carbon market, where companies buy ‘notional’ tons of carbon from those who bind it: landowners, forest owners, but also farmers or developers of a technology. This seems to us to be the best available way to unlock value and help landowners. New forest needs to be planted and cared for to sequester carbon. However, this requires investment, time and money and should be compensated.
Within a month of setting up Arbonics, you already had quite a few clients. How did you reach them?
At the beginning, we were in a ‘stealth phase’ for more than half a year, secretly building up the company, and then there were no clients. In that time, we had our first product: a data-driven platform. It allows us to analyse any plot of land very quickly and easily, so that any landowner with any cadastral number in Estonia can come to us. We can tell them whether or not it is appropriate to plant a forest on their land, where it is appropriate, and how much carbon it will sequester.
Who are your customers?
Landowners of all sizes in Estonia, Latvia and Finland, from small landowners to large forest foundations. All of them are united by a desire to do something for the planet, to sequester carbon, to grow and care for forests, and Arbonics can help them realise their land’s positive climate impact.
How does your service work from the customer’s point of view?
First, we perform an analysis on a specific plot of land. The bioinformaticians at the University of Tartu did an incredible job helping us develop our first product, a data platform with over 50 different data layers for analysis. Based on this, we can immediately see if the land is suitable for afforestation. For example, a wetland is not suitable because it is naturally valuable and already sequesters carbon. The landowner will receive a report on the land, which will tell them which areas are suitable for afforestation and which are not, and we will also give a recommendation on what could be planted there and in what combination. We also give a first-modelled view of how much carbon it could sequester and what its value to the landowner in the future.
If the owner wants to move forward, they will contract us. He can concentrate on planting and forest maintenance, we take care of everything related to earning carbon credits and, if the owner wants, reselling them. We also take care of the certification, monitoring and paperwork, and take that worry off the landowner’s shoulders.
So, the landowner gets money for working with you?
Yes, if the landowner comes with an empty plot of land suitable for reforestation, the first trees can be planted in the autumn. As they grow slowly, it will take 4-5 years for the first credits to come in. Thereafter, they will start to come regularly and annually until the trees are halfway through their growing season. The owner can choose to sell the credits himself or sell them through us. Large forest funds, for example, want to hold on to their credits because they believe they will increase in value in the future.
What are the main challenges in this business?
The whole world of carbon markets is very new and still evolving, and we’re excited to be in a fast-developing phase. However, it means that some market rules are not yet very clearly established, and this makes things complicated. For example, we here (and other companies involved in carbon projects in Europe) apply much stricter rules to our operations than those elsewhere in the world. As a result, those elsewhere can sell credits at a much cheaper price because they are less demanding and careful. On the one hand, we can help make these rules as good as possible. On the other hand, it means that we sometimes go into competition with other players who perhaps do not think about saving nature in the way we do.