For the past few years, Microsoft has been the buyer of first and last resort for any company that sought to pull carbon dioxide from the atmosphere. In order to achieve an aggressive internal climate goal, the software company purchased more than 70 million metric tons of carbon removal credits, 40 times more than anyone else.<\/p>\n
Now, it\u2019s pulling back. Microsoft has informed suppliers and partners that it is pausing carbon removal buying, Heatmap reported<\/a> last week. Bloomberg<\/a> and Carbon Herald<\/a> soon followed. The news has rippled through the nascent industry, convincing executives and investors that lean years may be on the way after a period of rapid growth.<\/p>\n \u201cFor a lot of these companies, their business model was, \u2018And then Microsoft buys,\u2019\u201d said Julio Friedmann, the chief scientist at Carbon Direct<\/a>, a company that advises and consults with companies \u2014 including, yes, Microsoft \u2014 on their carbon management projects, in an interview. \u201cIt changes their business model significantly if Microsoft does not buy.\u201d<\/p>\n Microsoft told me this week that it has not ended the purchasing program. It still aims to become carbon negative by 2030, meaning that it must remove more climate pollution from the atmosphere than it produces in that year, according to its website. Its ultimate goal<\/a> is to eliminate all 45 years of its historic carbon emissions from electricity use by 2050. <\/p>\n \u201cAt times, we may adjust the pace or volume of our carbon removal procurement as we continue to refine our approach toward sustainability goals,\u201d Melanie Nakagawa, Microsoft\u2019s chief sustainability officer, said in a statement. \u201cAny adjustments we make are part of our disciplined approach \u2014 not a change in ambition.\u201d<\/p>\n Yet even a partial pullback will alter the industry. Over the past five years, carbon removal companies have raised more than $3.6 billion<\/a>, according to the independent data tracker CDR.fyi. Startups have invested that money into research and equipment, expecting that voluntary corporate buyers \u2014 and, eventually, governments \u2014 will pay to clean up carbon dioxide in the air.<\/p>\n Although many companies have implicitly promised to buy carbon removal credits \u2014 they\u2019re all but implied in any commitment to \u201cnet zero\u201d \u2014 nobody bought more than Microsoft. The software company purchased 45 million tons of carbon removal last year alone, according to its own data. <\/p>\n The next biggest buyer of carbon removal credits \u2014 Frontier<\/a>, a coalition<\/a> of large companies led by the payments processing firm Stripe \u2014 has bought 1.8 million tons total since launching in 2022.<\/p>\n With such an outsize footprint, Microsoft\u2019s carbon removal team became the de facto regulator for the early industry \u2014 setting prices, analyzing projects, and publishing in-house standards for public consumption.<\/p>\n It bought from virtually every kind of carbon removal company, purchasing from large-scale, factory-style facilities<\/a> that use industrial equipment to suck carbon from the air, as well as smaller and more natural solutions that rely on photosynthesis. One of its largest deals<\/a> was with the city-owned utility for Stockholm, Sweden, which is building a facility to capture the carbon released when plant matter is burned for energy.<\/p>\n That it would some day stop buying shouldn\u2019t be seen as a surprise, Hannah Bebbington, the head of deployment at the carbon-removal purchasing coalition Frontier, told me. \u201cIt will be inevitable for any corporate buyer in the space,\u201d she said. \u201cCorporate budgets are finite.\u201d<\/p>\n Frontier\u2019s members include Google, McKinsey, and Shopify. The coalition remains \u201copen for business,\u201d she said. \u201cWe are always open to new buyers joining Frontier.\u201d<\/p>\n But Frontier \u2014 and, certainly, Microsoft \u2014 understands that the real point of voluntary purchasing programs is to prime the pump for government policy. That\u2019s both because governments play a central role in spurring along new technologies \u2014 and because, when you get down to it, governments already handle disposal for a number of different kinds of waste, and carbon dioxide in the air is just another kind of waste. (On a per ton basis, carbon removal may already be price-competitive<\/a> with municipal trash pickup.)<\/p>\n \u201cThe end game here is government support in the long-term period,\u201d Bebbington said. \u201cWe will need a robust set of policies around the world that provide permanent demand for high-quality, durable CDR funds.\u201d<\/p>\n \u201cThe voluntary market plays a critical role right now, but it won\u2019t scale, and we don\u2019t expect it will scale to the size of the problem,\u201d she added.<\/p>\n Only a handful of companies had the size and scale to sell carbon credits to Microsoft, which tended to place orders in the millions of tons, Jack Andreasen Cavanaugh, a researcher at the Center on Global Energy Policy at Columbia University, told me<\/a> on a recent episode of Heatmap\u2019s podcast, Shift Key. Those companies will now be competing with fledgling firms for a market that\u2019s 80% smaller than it used to be.<\/p>\n \u201cFundamentally, what it will mean is just an acceleration of something that was going to happen anyway, which is consolidation and bankruptcies or dissolutions,\u201d Cavanaugh told me. \u201cThis was always going to happen at this moment because we don\u2019t have supportive policy.\u201d<\/p>\n Friedmann agreed with the dour outlook. \u201cWe will see the best companies and the best projects make it. But a lot of companies will fail, and a lot of projects will fail,\u201d he told me.<\/p>\n To some degree, Microsoft planned for that eventuality in its purchase scheme. The company signed long-term offtake contracts with companies to \u201cpay on delivery,\u201d meaning that it will only pay once tons are actually shown to be durably dealt with. That arrangement will protect Microsoft\u2019s shareholders if companies or technologies fail, but means that it could conceivably keep paying out carbon removal firms for the next 10 years, Noah Deich, a former Biden administration energy official, told me.<\/p>\n The pause, in other words, spells an end to new dealmaking, but it does not stop the flow of revenue to carbon removal companies that have already signed contracts with Microsoft. \u201cThe big question now is not who will the next buyer be in 2026,\u201d\u2019 Deich said. \u201cIt is who is actually going to deliver credits and do so at scale, at cost, and on time.\u201d<\/p>\n Deich, who ran the Energy Department\u2019s carbon management programs, added that Microsoft has been as important to building the carbon removal industry as Germany was to creating the modern solar industry. That country\u2019s feed-in tariff<\/a>, which started in 2000, is credited with driving so much demand for solar panels that it spurred a worldwide wave of factory construction and manufacturing innovation.<\/p>\n \u201cThe idea that a software company could single-handedly make the market for a climate technology makes about as much sense as the country of Germany \u2014 with the same annual solar insolation<\/a> as Alaska \u2014 making the market for solar photovoltaic panels,\u201d Deich said, referencing the comparatively low amount of sunlight that it receives. \u201cBut they did it. Climate policy seems to defy Occam\u2019s razor a lot, and this is a great example of that.\u201d<\/p>\n History also shows what could happen if the government fails to step up. In the 1980s, the U.S. government \u2014 which had up to that point been the world\u2019s No. 1 developer of solar panel technology \u2014 ended its advance purchase program. Many American solar firms sold their patents and intellectual property to Japanese companies.<\/p>\n Those sales led to something of a lost decade for solar research worldwide and ultimately paved the way for East Asian manufacturing companies \u2014 first in Japan, and then in China \u2014 to dominate the solar trade, Deich said. If the U.S. government doesn\u2019t step up soon, then the same thing could happen to carbon removal.<\/p>\n The climate math still relied upon by global governments to guide their national emissions targets assumes that carbon removal technology will exist and be able to scale rapidly in the future. The Intergovernmental Panel on Climate Change says that many outcomes where the world holds global temperatures to 1.5 or 2 degrees Celsius by the end of the century will involve some degree of \u201covershoot,\u201d where carbon removal is used to remove excess carbon from the atmosphere. <\/p>\n By one estimate<\/a>, the world will need to remove 7 billion to 9 billion tons of carbon from the atmosphere by the middle of the century in order to hold to Paris Agreement goals. You could argue that any scenario where the world meets \u201cnet zero\u201d will require some amount of carbon removal because the word \u201cnet\u201d implies humanity will be cleaning up residual emissions with technology. (Climate analysts sometimes distinguish \u201cnet zero\u201d pathways from the even-more-difficult \u201creal zero\u201d pathway for this reason.)<\/p>\n Whether humanity has the technologies that it needs to eliminate emissions then will depend on what governments do now, Deich said. After all, the 2050s are closer to today than the 1980s are.<\/p>\n \u201cIt\u2019s up to policymakers whether they want to make the relatively tiny investments in technology that make sure we can have net-zero 2050 and not net-zero 2080,\u201d Deich said.<\/p>\n Congress has historically supported carbon removal more than other climate-critical technologies. The bipartisan infrastructure law of 2022 funded a new network of industrial hubs specializing in direct air capture technology, and previous budget bills created new first-of-a-kind purchasing programs for carbon removal credits. Even the Republican-authored One Big Beautiful Bill Act preserved tax incentives for some carbon removal technologies. <\/p>\n But the Trump administration has been far more equivocal about those programs. The Department of Energy initially declined to spend some funds authorized for carbon removal schemes, and in some cases redirected<\/a> the funds \u2014 potentially illegally \u2014 to other purposes. (Carbon removal advocates got good news on Wednesday when the Energy Department reinstated<\/a> $1.2 billion in grants to the direct air capture hubs.)<\/p>\n Those freezes and reallocations fit into the Trump administration\u2019s broader war on federal climate policy. In part, Trump officials have seemed reluctant to signal that carbon might be a public problem \u2014 or something that needs to be \u201cremoved\u201d or \u201cmanaged\u201d \u2014 in the first place.<\/p>\n Other countries have started preliminary carbon management programs \u2014 Norway, the United Kingdom,<\/a> and Canada<\/a> \u2014 have launched pilots in recent years. The European carbon market will also soon publish rules guiding how carbon removal credits can be used to offset pollution.<\/p>\n But in the absence of a large-scale federal program in the U.S., lean years are likely coming, observers said.<\/p>\n \u201cI am optimistic that [carbon removal] will continue to scale, but not like it was,\u201d Friedmann said. \u201cMicrosoft is a symptom of something that was coming.\u201d<\/p>\n \u201cThe need for carbon removal has not changed,\u201d he added. <\/p>\n","protected":false},"excerpt":{"rendered":"For the past few years, Microsoft has been the buyer of first and last resort for any company…\n","protected":false},"author":2,"featured_media":403860,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[246,61,60,82],"class_list":{"0":"post-403859","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-environment","8":"tag-environment","9":"tag-ie","10":"tag-ireland","11":"tag-science"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/403859","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=403859"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/403859\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/403860"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=403859"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=403859"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=403859"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}