For the past few years, Microsoft has been the buyer of first and last resort for companies looking to capture carbon dioxide from the atmosphere. To meet aggressive internal climate goals, the software company purchased more than 70 million tons of carbon removal credits, 40 times more than other companies.
Now it’s receding. Heatmap reported last week that Microsoft informed its suppliers and partners that it would suspend carbon removal purchases. bloomberg and carbon herald It soon followed. The news rippled through the nascent industry, convincing executives and investors that a period of rapid growth could be followed by a slow period.
“For many of these companies, their business model was ‘And Microsoft buys us,'” said Julio Friedman, the company’s chief scientist. carbon directis a company that advises and consults companies (yes, including Microsoft) on carbon management projects, he said in an interview. “If Microsoft doesn’t buy us, our business model will change dramatically.”
Microsoft told me this week that it is not ending the purchase program. According to its website, the group still aims to become carbon negative by 2030, which means more climate pollution will need to be removed from the atmosphere than will occur in the same year. the final goal By 2050, we aim to eliminate all carbon emissions from electricity use over the past 45 years.
“As we continue to refine our approach to our sustainability goals, we may also adjust the pace and amount of our carbon removal procurement,” Melanie Nakagawa, Microsoft’s chief sustainability officer, said in a statement. “Any adjustments we make are part of our disciplined approach and do not change our ambitions.”
But even a partial withdrawal would change the industry. Over the past five years, carbon removal companies have Over $3.6 billionaccording to independent data tracker CDR.fyi. Startups have invested their money in research and equipment in the hopes that voluntary corporate buyers, and eventually governments, will pay to clean up carbon dioxide from the atmosphere.
Many companies have made implicit commitments to purchase carbon removal credits, all of which imply a commitment to “net zero,” but no company has purchased as many credits as Microsoft. According to its own data, the software company purchased 45 million tons of carbon dioxide removal materials last year alone.
The next largest purchaser of carbon removal credits — frontier, union A number of large companies, led by payment processor Stripe, have purchased a total of 1.8 million tonnes since launching in 2022.
With such a massive footprint, Microsoft’s carbon removal team became the de facto regulator of the nascent industry, setting prices, analyzing projects, and issuing internal standards for public consumption.
Buy from almost any type of carbon removal company, Large factory type facility Solutions include using industrial equipment to absorb carbon from the air, and smaller, more natural solutions that rely on photosynthesis. One of the biggest deals An electricity company owned by the Swedish city of Stockholm is building a facility to capture the carbon released when burning plants for energy.
I hope it will happen someday Stop Hannah Bebbington, director of deployment at the Carbon Removal Purchasing Coalition Frontier, told me the purchase was not surprising. “For corporate buyers in this space, it’s inevitable,” she says. “Companies have limited budgets.”
Frontier members include Google, McKinsey, and Shopify. The coalition remains “open for business,” she said. “We always welcome new buyers to join Frontier.”
But Frontier, and certainly Microsoft, understand that the true purpose of voluntary purchasing programs is to further government policy. That’s because governments play a central role in promoting new technologies, and to get down to business, they already dispose of many different types of waste, and carbon dioxide in the air is just one type of waste. (carbon removal amount per ton) May already be price competitive Municipal garbage collection included. )
“The ultimate goal here is long-term government support,” Bebbington said. “A strong set of policies will be needed around the world that provide durable demand for high-quality, durable CDR funding.”
“The voluntary market currently plays an important role, but it is not increasing in size and we do not think it will increase in proportion to the scale of the problem,” he added.
Jack Andreasen Kavanaugh, a researcher at Columbia University’s Center on Global Energy Policy, said only a handful of companies had the size and scale to sell carbon credits to Microsoft, and Microsoft tended to order in the millions of tons. told me In a recent episode of Heatmap’s podcast “Shift Key.” These companies will now compete with startups for a market that is 80% smaller than before.
“Basically, all that means is an acceleration of something that would have happened anyway: consolidation or bankruptcy or dissolution,” Kavanaugh told me. “We don’t have a supportive policy, so something like this will always happen at this moment.”
Friedman agreed with this grim outlook. “You’ll see the best companies and the best projects succeed. But you’ll see a lot of companies fail and a lot of projects will fail,” he told me.
Microsoft anticipated such an eventuality to some extent in its acquisition plans. The company has entered into long-term “pay-at-delivery” pick-up agreements with companies. This means that the payment will only be made if it is proven that the ton will actually be processed permanently. The deal would protect Microsoft shareholders if the company or technology fails, but means it could continue paying carbon removal companies for possibly the next decade, said Noah Deitch, a former energy official in the Biden administration.
In other words, the moratorium would put an end to new business, but it would not stop revenue flowing to carbon removal companies that already have contracts with Microsoft. “The big question now is not who will be the next buyer in 2026,” Deich said. “Who is actually going to provide the credit and do it at scale, at cost, and on time.”
Deich, who was in charge of the Department of Energy’s carbon management program, added that just as Germany has helped create the modern solar power industry, Microsoft has also played an important role in building the carbon removal industry. that country Fixed price purchase systemThe project, which began in 2000, is credited with hugely increasing demand for solar panels and sparking a wave of factory construction and manufacturing innovation worldwide.
“The idea that a software company could single-handedly create a market for climate change technology makes as much sense as Germany, which has the same amount of solar power per year.” solar radiation “We’re creating a market for solar panels, just like Alaska,” Deich said, noting the relatively small amount of sunlight it receives. Climate policy seems to largely defy Occam’s razor, and this is a great example. ”
History also shows what happens when governments fail to strengthen. In the 1980s, the U.S. government, previously the world’s number one developer of solar panel technology, ended its advance purchase program. Many US solar power companies have sold their patents and intellectual property to Japanese companies.
These sales led to something of a lost decade for solar power research around the world, Deich said, and ultimately paved the way for East Asian manufacturers (first Japan, then China) to dominate the solar power trade. The same thing could happen with carbon removal if the U.S. government doesn’t act soon.
The climate mathematics that governments still rely on to guide national emissions targets assumes that carbon removal technologies exist and can be scaled up rapidly in the future. The Intergovernmental Panel on Climate Change has said that much of the world’s chance of limiting global temperatures to 1.5 or 2 degrees Celsius by the end of the century will involve some “overshoot” in which carbon removal is used to remove excess carbon from the atmosphere.
in one estimateTo meet the goals of the Paris Agreement, the world needs to remove 7 billion to 9 billion tons of carbon from the atmosphere by mid-century. You could argue that Any Scenarios in which the world reaches ‘net zero’ will require some level of carbon removal. Because the word “net” implies that humans use technology to clean up residual emissions. (Climate analysts sometimes distinguish between “net-zero” and more difficult “net-zero” pathways for this reason.)
Whether humanity has the technology needed to eliminate emissions by then depends on what governments do now, Deich said. After all, the 2050s are closer to today than the 1980s.
“It’s up to policymakers to make relatively small technology investments to ensure we get to net zero in 2050 rather than net zero in 2080,” Deich said.
Congress has historically supported carbon removal over other climate-critical technologies. The Bipartisan Infrastructure Act of 2022 funds a new network of industrial sites specializing in direct air capture technology, and previous budget proposals created a new first-time purchase program for carbon removal credits. The Republican One Big Beautiful Bill Act maintained tax breaks for some carbon removal technologies.
But the Trump administration has been far more ambivalent about these programs. The Department of Energy initially refused to spend some of the funds authorized for carbon removal programs, and in some cases redirected The funds are used (potentially illegally) for other purposes. (Carbon removal advocates got good news Wednesday from the Department of Energy. returned $1.2 billion in grants for direct air capture hubs. )
These freezes and redistributions fit into the Trump administration’s broader war on federal climate policy. In part, Trump officials seem reluctant to suggest that carbon might be a public problem or something that needs to be “removed” or “managed” in the first place.
Other countries have also launched preliminary carbon management programs – Norway; England, and Canada — We recently started a trial run. Europe’s carbon market will also soon publish rules guiding how carbon removal credits can be used to offset pollution.
But without a large federal program in the U.S., observers say recession years are likely ahead.
“I’m optimistic [carbon removal] “It’s going to continue to grow, but not as much as it used to. Microsoft is a sign of things to come,” Friedman said.
“The need for carbon removal has not changed,” he added.
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