Microsoft’s decarbonization plans aren’t dead after all

Microsoft is purchasing 650,000 metric tons of carbon removal credits from startup BioCirc, the company said today.

As decarbonisation deals go, it’s not a big buy. But it’s noteworthy because last month, two reports said the tech giant had paused carbon removal deals. BioCirc confirmed to TechCrunch that the purchase agreement was signed in May, weeks after Microsoft paused new deals.

For the decarbonisation industry – and the startups that depend on it – there is a big difference between pausing and recalibrating. Microsoft is said to be responsible for more than 90% of the decarbonization credit market, meaning purchasing decisions alone could determine whether startups in this space survive.

Microsoft has repeatedly denied that it has paused its decarbonization-related purchases. “Our decarbonization program is far from over,” Melanie Nakagawa, Microsoft’s chief sustainability officer, told TechCrunch in a statement. “At times we may adjust the pace or volume of our decarbonization purchases as we continue to improve our approach to sustainability goals.”

The new deal generates carbon removal credits from five BioCirc biogas projects. Biogas plants take biomass waste – often from agriculture – and use industrial bioreactors to convert it into methane and carbon dioxide. BioCirc captures carbon dioxide and stores it in an underground tank offshore. The methane is then burned in a power plant.

Microsoft’s sustainability goals have been impacted by the company’s move toward artificial intelligence. To power its data centers in Texas, Microsoft said last month it was working with Chevron and Engen No. 1 to build a natural gas power plant in the state that could eventually generate 5 gigawatts of electricity. The emissions from this project alone promise to dwarf the deal with BioCirc.

Internally, Microsoft employees have also been discussing whether to abandon the company’s goal of matching emissions-free electricity with energy use on an hourly basis. Today, the company matches on an annual basis. This approach gives Microsoft more flexibility, for example, to use more natural gas to power its data centers at night, but it also makes it harder to verify the company’s clean energy claims.

If Microsoft continues to pursue fossil fuel power plants, it will need to ramp up its decarbonization purchases to meet its 2030 goal of becoming a carbon negative company (one that removes more greenhouse gases from the atmosphere than it generates).

Last year, Microsoft signed several deals worth millions of tons of carbon removal credits. The program’s pause has set off alarm bells across the decarbonization industry, which is still in its infancy.

The new deal indicates that Microsoft is actually recalibrating its decarbonization program, not abandoning it. Whether that will remain true as AI pushes energy consumption even higher is something the industry will be watching.