Microsoft hits the pause button, so the rest of us can hit play

By Donald Addu · Director of Climate Partnerships, Climate Vault Solutions

Several outlets have reported that Microsoft plans to pause the purchase of new carbon removal credits. Congratulations are in order as this is really a chance for Microsoft’s sustainability team to take a victory lap. Thanks to their due diligence and forward thinking to procure long term offtake agreements they have secured enough removal credits to be poised to reach their carbon negative goal by 2030.

As catalytic as Microsoft has been for the carbon dioxide removal (CDR) industry, one company does not make a market, and they know it. In fact, they function as a monopsony, purchasing 90% of current and future CDR supply and therefore setting the standards for the entire production side of the carbon removal equation. Future CDR buyers can take comfort in the quality standards Microsoft has set, however every company is different with their own unique decarbonization challenges and carbon removal needs. Addressing Scope 3 emissions from liquid crystal display screens is very different from financed emissions or agricultural supply chains. As Microsoft steps back, the opportunity for new buyers to enter and influence the market will have a positive impact on the diversification of CDR projects.

What does this mean for the future of the CDR market? It feels like a blow having the biggest purchaser step back, but the reality is Microsoft is not stepping back, they have simply procured what they need to procure for the foreseeable future. The key is Microsoft has entered into 5, 10 and 15 year offtake agreements providing for project stability, preferred pricing and guaranteeing credit availability. Microsoft will undoubtedly continue to make changes to their portfolio and a Microsoft spokesperson confirmed as much saying “We continually review and assess our carbon removal portfolio along with market conditions for the optimal balance on our path to carbon negative.”

The future of the CDR market is in question as the industry faces challenging headwinds. The Trump administration’s open hostility to renewable energy and climate action has thrown cold water on companies purchasing credits, especially those with exposure to US government contracts. Global economic forecasts are shaky as energy prices spike and inflation remains a persistent concern, making carbon credits feel more like a luxury good.

In spite of these obstacles, there is a lot of reason for optimism. The EU’s Carbon Border Adjustment Mechanism (CBAM) entered its compliance phase in January, while Australia will expand its mandatory emissions disclosure requirements for all companies with 250 employees starting July 1st. Japan’s emission trading system moves from voluntary participation to mandatory participation this month. And it’s not just governments — well over half of Fortune 2000 companies have made Net-Zero commitments and they have the chance to follow the trail that Microsoft has blazed. With MS’s goals achieved, its vacuum will create space for a multitude of companies to fill the gap.

The door is open and the path to corporate climate success has been laid. Now is the time for companies that want to take climate action to make their mark on this emerging market. Fortunately, one-person sustainability departments don’t have to go it alone. Climate Vault Solutions provides the buyer-side diligence infrastructure that makes confident CDR procurement possible — and today supports more than 50 corporate buyers navigating this market.