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Microsoft buys carbon removal credits in shift to carbon negative

© Shutterstock / Jacob_Da mineral rock

Tech giant Microsoft has signed a deal with start-up Heirloom to purchase carbon removal credits after investing in the company earlier in 2022. This could signal a shift in emissions targets from neutral to negative strategies.

Microsoft (NASDAQ:MSFT) will purchase carbon removal credits from Heirloom as part of its strategy to become carbon negative by 2030.

Carbon removal solutions are growing globally, but there has been criticism that they are a delay tactic to meaningfully reduce emissions.

While carbon removal has a role to play on the road to net zero, carbon reduction should continue to be a priority for company’s sustainability strategies.

After investing in carbon removal start-up Heirloom in March 2022, Microsoft has now signed a deal to purchase carbon removal credits through direct air capture (DAC) for delivery through 2025.

While the value or volume of the purchased credits have not been confirmed, Microsoft has said they will continue to explore the provision of further carbon removal credits as Heirloom continues to expand its facilities.

Heirloom says it is in the process of “building DAC facilities that permanently and cost-effectively remove CO2 from the atmosphere, with a real path towards removing 1b tonnes of CO2 per year by 2035.”

“Our deal with Heirloom is an important part of Microsoft’s commitment to permanent, durable carbon removal”, said Rafael Broze, carbon removal program manager at Microsoft. “The purchase of carbon removal credits will be an important catalyst to the growth and development of the Direct Air Capture industry”, he explained.

Microsoft –  carbon neutral to carbon negative

Understanding what is meant by the differences between being carbon neutral, net zero and carbon negative can be a challenge. Carbon negative can be understood to be ‘climate positive’ in that the activity goes beyond net zero. In order to achieve this, companies must offset more than their emissions, or capture and store the equivalent to those emissions.

Microsoft claims to have been carbon neutral globally since 2012 and has committed to becoming carbon negative by 2030.  By 2050, it also intends to have removed the equivalent to the company’s historical emissions since it was founded in 1975.

The company’s sustainability transition began with the reduction of carbon emissions in its operations, products, and supply chain. As of 2021, Microsoft powers around half of its data centres with renewable energy, either through Microsoft owned generation or power purchase agreements (PPAs).  The company announced plans in 2021 to become 100% renewable powered by 2025.

In the company’s 2021 sustainability report, Microsoft reported that the company reduced its Scope 1 and Scope 2 emissions by 58,654 metric tonnes of GHGs in 2021. However, their Scope 3 emissions increased by 22.7% in the same year.

Clearly there are challenges inherent in achieving business growth and cutting emissions at the same time. That means in order to become carbon negative, the company must also explore carbon removal solutions.

Microsoft has said that it has already contracted 2.5 million metric tons of carbon removal in 2021 and 2022 combined – it signed a ten-year supply deal with DAC rival Climeworks in July 2022. It also set up a $1 billion Climate Innovation Fund to accelerate the global development of carbon reduction and removal.

While it seems that Microsoft is on the right path to become more sustainable compared to many of its heavy-emitting peers, the impact of the company’s sustainability strategy will depend on if it will continue to emphasise carbon reduction as it develops more and more carbon capture solutions.

What is carbon removal?

There is a proliferation of new carbon removal technologies and processes being developed across the world, both natural and mechanical. These range from turning carbon into rocks (mineralisation), to direct air capture, to burying carbon in depleted oil and gas reservoirs.

Carbon removal is not the same as carbon capture and storage (CCS) technologies. Carbon removal directly takes out existing carbon from the atmosphere or biomass, whereas CCS technologies are about the storage or use of CO2 that is in the process of being emitted. This approach has proven particularly appealing to heavy emitting sectors like fossil fuels but it remains relatively uncommercial.

What are the challenges with carbon removal?

There are a number of issues that have arisen with regard to the integrity of carbon removal. For some it is seen as a further distraction from the job of emissions reduction, an excuse to continue emitting.

Three issues usually arise with regard to whether or not carbon removal is of benefit: questions about how permanent the carbon storage is; how accurate can any measurement be in terms of actual climate impact; confusion about the difference between carbon removal and the more common carbon offsets.

What is Heirloom doing differently?

In the case of Heirloom, the company is building DAC facilities leveraging natural carbon sinks for carbon removal. Carbon will naturally bind to minerals through air and water over long periods of time, eventually turning the minerals permanently into stone in a process known as carbon mineralisation.

Heirloom claims to have developed a technology that speeds up this process, helping mineral to absorb carbon in days instead of years. They then work with partners to inject to trapped carbon into geological structures. The minerals used to absorb the carbon are part of a looping process that recycles minerals to limit reliance on mining. The company also says it uses 100% renewable energy in its operations.

This process is understood to be more scalable and sustainable compared to other carbon removal processes, which can be highly energy intensive and expensive. Overall, the company claims that their technology will remove 1 billion tonnes of carbon from the atmosphere by 2035.

In addition to Microsoft, Heirloom has other big emitters lining up to purchase carbon removal credits to subsidise their own emissions, including Stripe, Shopify, Wise and Klarna.

Why do we need carbon removal?

While the world saw a drop in carbon emissions during the peak of the COVID pandemic, emissions are now increasing to above pre-pandemic levels. In 2021, global carbon emissions rebounded by 4.1% reaching 34.9 gigatonnes of carbon, according to a study published in Nature.

These emissions ate up 8.7% of the remaining carbon budget for limiting global warming to 1.5° Celsius, the goal established in the Paris Agreement to avoid the worst impacts of climate change. The study predicts that if current trajectories continue, there is a 67% chance that the rest of the carbon budget will be burnt through in the next 9.5 years.

Although countries across the world are ramping up ambitions to reduce carbon emissions, there is a risk that the reductions will not come fast enough. With such a slim margin for error and a continually reduced carbon budget, carbon removal technologies have a role to play in giving the world a better chance of achieving net zero by 2050 and limiting global warming.

The Intergovernmental Panel on Climate Change (IPCC) estimates that billions of tonnes of carbon will need to be removed from the atmosphere to stay on track to achieving the Paris Agreement goals.

In its 2018 Special Report: Global Warming of 1.5 it stated,  “Unless affordable and environmentally and socially acceptable [carbon] removal becomes feasible and available at scale well before 2050, 1.5C-consistent pathways will be difficult to realised”.

As a carbon offset, carbon removal can offer more permanent solutions compared to the highly popular forest carbon offset, which in some cases can actually emit more carbon than it claims to remove. For example, wildfires in California have destroyed the state’s natural carbon sinks and the established carbon offset system cannot balance out the emissions released from the burning of trees.

It is important not to overestimate the role that carbon removal should play on the path to net zero, and it should not act as a substitute to making carbon reductions. Investments in carbon removal, similarly to carbon capture and storage (CCS), are often used by the world’s largest emitters to seem like they are making efforts to decarbonise, without actually reducing emissions.

This could pose a problem considering that carbon removal technologies are still very costly and not yet deployable at scale, unlike clean energy technologies that can reduce emissions and be deployed today.

While there is undoubtedly a role for carbon removal to play in helping the world achieve net zero, carbon reduction should continue being a priority as companies build their sustainability strategies.

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