Microsoft's Announcement Suggests Shift in Global Carbon Removal Market Strategy

Microsoft's Carbon Removal Plans Cause Market Jitters

In the early days of April, a group of mid-level employees at Microsoft Corp. started making calls that sent tremors through the global market for carbon removals. Employees told at least three carbon-removal project developers that contracts under negotiation were being shelved, according to people familiar with the matter who asked not to be identified discussing private conversations.

Microsoft employees speaking on the calls appeared to be delivering a single message: The company on which the entire carbon-removal market relies is pulling back. At least one other developer was told to check the terms of their existing contracts to be ready to challenge any future effort from Microsoft to cut them off, a separate person said.

The employees' actions seemed to be premature, as the proposal was not meant to be made public until later this year. It was unclear whether the employees did this deliberately to warn the market or whether there was an internal miscommunication. Microsoft told at least one partner that it's following up internally on how the communication went so awry, according to one of the people familiar with the matter.

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A spokesperson for Microsoft declined to comment. The company's ultimate decision on the projects matters due to its juggernaut-status in bankrolling technologies for capturing carbon. Many projects around the world have developed a "Microsoft or bust" business model, says Lee Bostock, founding partner at Vuelta Carbon.

"If Microsoft were to pause or retreat, that would cause untold pain," Bostock said. Microsoft has sought to reassure stakeholders that it's not planning anything drastic. "Our carbon removal program has not ended," Microsoft Chief Sustainability Officer Melanie Nakagawa said in an emailed comment on April 13.

At least three carbon developers have been told by Microsoft that the company plans to honor their existing contracts, according to people close to those talks. Senior Microsoft leadership has been involved in efforts to reassure partners, one of the people said.

The three project developers who learned their contracts were being shelved were at varying stages of a months-long vetting process, and specialized in technologies spanning direct air capture to enhanced rock weathering. The calls weren't attended by any senior managers and weren't followed up with written confirmation, the people familiar said.

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In some cases, staffers read from a transcript but then weren't able to provide clear answers explaining the decision, saying only that it was made higher up in the organization. On at least two calls, Microsoft employees said financial pressures were to blame, the people said.

Microsoft's capital expenditure is increasingly focused on building out and powering data centers for artificial intelligence. While Microsoft hasn't publicly detailed how much money it has spent to procure the world's biggest portfolio of carbon removals, people familiar with the matter estimate the company is on track to invest somewhere between $4 billion and $10 billion over the lifespan of existing contracts.

Microsoft's carbon removal program was originally created to help it achieve a self-imposed goal of being a net negative carbon emitter by 2030. In practical terms, that means the company has said it will remove more carbon from the atmosphere than it emits. Ultimately, Microsoft has said it even wants to remove enough carbon to compensate for all its historical emissions since its 1975 founding.

Here's a comparison of Microsoft's carbon removal investments and its market share:

No other company has invested anywhere near as much as Microsoft in carbon removals. Figures from CDR.fyi, a data platform, show it accounts for 79% of the total metric tons of durable carbon removal contracted since 2020. BloombergNEF estimates that in 2025, Microsoft's purchases accounted for over 90% of the entire market.

In her April 13 statement to Bloomberg, Nakagawa said the company is continuing "to both build on and support our existing portfolio of both nature-based and technology-based solutions." She also said that Microsoft may at times "adjust the pace or volume of our carbon removal procurement as we continue to refine our approach toward sustainability goals."

For now — more than two weeks after Microsoft staff started making their calls — several project developers are uncertain of the status of their contracts, people familiar with the matter said. In some cases, emails to Microsoft employees have gone unanswered and calls have been pushed back.

For project developers banking on Microsoft's continued commitment to their market, the doubts that now surround the company's plans are a wake-up call, said Bostock. "The folly of that approach has just been exposed," he said. "A market with one buyer isn't a market."

Microsoft's next procurement cycle for carbon removal contracts is due to begin in July, according to people familiar with the matter. "No single company has done more for CDR than Microsoft," said Brennan Spellacy, founder and CEO of carbon markets platform Patch. Concern that it may now be scaling back its program "reflects how reliant the market has been on Microsoft's pace, not a break in the underlying thesis," he said.

The thesis for carbon removal projects is simple. To meet the goal of the Paris Agreement to hold the rise in global temperatures below 2C, as much as 9 gigatons of CO2 will need to be removed annually by 2050, according to researchers at Oxford University. The current pace of removals is nowhere close to that.