Key takeaways
- The company has shifted to large purchases that deliver over many years — many in 2030 or later.
- Recent buys focus on biomass projects, but the company is targeting a broad portfolio in the longer-term.
- Many other large companies will need similar amounts of removals to hit net zero, experts told Trellis.
When news broke last week that Microsoft had agreed to a deal for an eye-popping 6.7 million tons of carbon removal credits, the reaction was relatively muted. Why did the largest-ever purchase of durable credits not make a bigger splash?
The answer might be that record-breaking buys have become the norm for the tech giant. Just a few days earlier, Microsoft announced a 3.7 million ton deal. In less than a week, the company’s two agreements exceeded the durable credits purchased by all companies in 2024. And they build on around 8 million tons of additional durable removals Microsoft bought in smaller deals over the past two years, according to data from Allied Offsets, a carbon markets intelligence firm.
This extraordinary spree raises important questions. Why has Microsoft, far more than any other company, made so many big bets on removals? And what does it mean for the future of the market?
Net zero by 2030
When Microsoft committed in 2020 to becoming carbon negative by the end of the decade, removals were always intended to be used to address emissions it could not eliminate. After making its commitment, the company supported the then-nascent removals market by sharing lessons learned from its discussions with project developers and by buying credits from a number of early-stage companies. “Durable” projects, usually defined as storing carbon for hundreds to thousands of years, were a focus, albeit not an exclusive one.
Microsoft reaffirmed its carbon-negative goal earlier this year, despite its emissions increasing from 12 million tons of carbon dioxide equivalent (tCO2e) in 2020 to 17 million tCO2e in 2023, in part because of the need to build more data centers to power AI products. And by the time 2030 arrives, Microsoft expects to need “single-digit millions” of removal credits annually to meet that commitment, said Brian Marrs, the company’s senior director of energy and carbon removal.
That’s a big requirement for a single company by the standards of today’s carbon markets. But it’s also the kind of volume that many large companies may need to purchase in order to hit net zero. What makes Microsoft stand out, noted Robert Höglund, co-founder of CDR.fyi, a provider of carbon removal data, is that the company is moving faster than others: “This is what a major company would need to meet these kind of early net zero targets.”
Long-term portfolio approach
The roughly 18 million tons of durable removals that Microsoft has purchased over the past two years is concentrated in three project types: direct air capture, and capture of emissions from both bioenergy power plants and the pulp and paper industry. The biomass projects are notable because they involve combining carbon removal equipment with proven technologies, which can speed up development times.
Marrs cautioned against reading too much into the recent focus on large purchases from biomass-based projects, noting that the company has also invested in earlier-stage removal approaches, including enhanced rock weathering, which was the method used by two of the recent winners of XPRIZE Carbon Removal.
“We’re very clear-eyed that there are limits to the amount of sustainable biomass and limits to the amount of traditional industry that we can augment in that way,” he said. “So we’re going to need to take more bets.”
The company bases its due diligence for removals on four quality criteria: whether a project genuinely requires credit revenue to proceed, the ability to accurately measure the quantity of carbon removed, the permanence of the removals and community benefits. In parallel, the tech giant also weighs commercial considerations, including cost and time to delivery. Over time, those criteria will push Microsoft to create a portfolio of large investments, said Marrs.
Many of Microsoft’s recent agreements are also long-term and due for delivery years from now. The deal with the pulp and paper mill project, for example, spans 12 years. “Nearly 100 percent of the carbon removal purchases announced in our current fiscal year will be delivered between 2030 and 2050 via long-term offtake agreements,” said Marrs. “We’re not looking at this sustainability report to sustainability report.”
Will others follow?
Microsoft has long dominated the carbon removal market when measured by volumes purchased. With its most recent deals, the company has now bought five times more durable credits than the next nine largest buyers combined, according to CDR.fyi.
It’s also likely to be far ahead in terms of dollars spent. The next largest buyer on the CDR.fyi leaderboard is Frontier, a coalition of companies that has committed to spending at least $1 billion on durable carbon removal by 2030. Microsoft does not disclose what it pays for removals, but publicly available pricing data for similar projects puts the cost of its two largest projects alone at more than $2 billion.
“If they decide that they want to stop making these purchases,” said Peter Minor, CEO of Absolute Climate, a removals standard-setter, “then it’s unclear what happens to the industry after that.”
That said, other companies are stepping in. Recent first-time removal buyers include Lego, TikTok and two large Japanese companies, which may be followed by others in the country due to government incentives. But Höglund described the pace of new arrivals as a “trickle.” He and others have pointed out that a recent proposed revision to the Science Based Targets Initiative’s net-zero standard will do little to push companies to invest more in removals in the near term. And the fate of U.S. government funding for removals, which surged under President Biden’s administration, is in doubt under President Trump.
These developments leave removals advocates with mixed feelings about the future, praising Microsoft for its leadership while wondering when others will step up. “What Microsoft is doing is what every company should be doing,” said Noah Deich, a former deputy assistant secretary for carbon management at the Department of Energy who is now a climate fellow at Stripe, the payments company. “It shouldn’t be seen as extraordinary.”
