David has been writing about carbon removal technologies for the past several years.
Over the last several years, Microsoft almost single-handedly established the market for carbon dioxide removal technologies, a nascent field that aims to scrub the planet-warming gas from the atmosphere to counter climate change.
But now, Microsoft is stepping back from the industry it helped create, telling some companies that it is pausing future purchases of carbon removal credits, according to two people familiar with the matter who asked to remain anonymous because they were not authorized to speak publicly. The news was first reported by Heatmap.
The development could be a major blow to the hundreds of start-ups developing carbon removal technologies, which have raised more than $5 billion in recent years.
Though the field is in its infancy and hundreds of companies are pursuing different strategies, proponents of the technology say that because there is so much carbon dioxide in the atmosphere, it's not enough to reduce emissions; excess amounts also have to be removed to stave off the worst consequences of global warming.
Melanie Nakagawa, Microsoft's chief sustainability officer, said the company's carbon removal program had not ended.
"Our decarbonization approach combines reduction, removal and efficiency, and carbon removal is one piece of that equation," she said in a statement. "At times we may adjust the pace or volume of our carbon removal procurement as we continue to refine our approach toward sustainability goals."
Microsoft was one of the first big companies to make an ambitious climate pledge. Then in 2020, the company said it intended to remove "all the carbon the company has emitted either directly or by electrical consumption since it was founded in 1975."
But as big tech companies, including Microsoft, have raced to build data centers for artificial intelligence, their emissions have increased in recent years, making it harder to achieve those goals.
Early optimism
The market for carbon removal emerged only in the past decade, as more than 1,000 major corporations announced their intention to eliminate or offset all of their planet-warming emissions.
To make good on those promises, companies were expected to spend billions of dollars buying credits from companies that could reliably capture and store carbon dioxide, a heat-trapping gas that is a leading cause of global warming.
Sensing a major opportunity, entrepreneurs raced to develop a variety of new technologies. Among the most popular are direct air capture, which uses giant machines to scrub CO2 from the sky; biochar, a form of charcoal that stores carbon dioxide; and enhanced rock weathering, which involves spreading finely crushed stone on agricultural land.
One of the biggest investors in the field is Breakthrough Energy Ventures, a venture capital firm founded by Bill Gates, the Microsoft co-founder. Breakthrough Energy Ventures, which has backed at least four carbon removal companies, did not respond to a request for comment.
With so many big corporations making ambitious pledges, banks and consultants projected the growth of a huge new industry. McKinsey estimated that the market for carbon removal could be worth as much as $1.2 trillion by 2050.
But that demand has not yet materialized.
Carbon removal setbacks
After several years when big companies were eager to promote their sustainability efforts, much of that talk has gone quiet. President Trump has called climate change a "hoax," and his administration has moved to hinder clean energy and promote fossil fuels, leading many big corporations to scale back their sustainability efforts.
In the absence of laws requiring companies to offset their emissions, the market for carbon removal remains entirely voluntary.
While some well-known companies besides Microsoft, including Morgan Stanley, SAP and Airbus, have made carbon-removal purchases, the orders have been relatively small.
And last year, after Mr. Trump returned to office, the carbon removal industry suffered a series of setbacks. The Energy Department terminated awards worth $3.7 billion, including many earmarked for carbon capture and storage projects. Applications for new carbon capture and sequestration permits in the United States plummeted.
And Climeworks, one of the most prominent direct air capture companies, last year cut 22 percent of its staff in anticipation of slower growth.
Alex Rink, chief executive of CDR.fyi, a company that tracks the carbon removal industry, said it was unsurprising that Microsoft had taken a step back. "Microsoft was running so far ahead of the pack in terms of the volume of purchases, we expected some sort of a reset," he said.
The tech giant is responsible for 79 percent of the purchases made to date, which are worth a combined $11.9 billion, according to CDR.fyi.
Frontier, a coalition of companies including Stripe and JPMorgan, represents many of the other major buyers of carbon removal credits, accounting for roughly 4 percent of all sales. Frontier companies signed $264 million worth of deals last year, down from $287 million in 2024.
Hannah Bebbington, head of deployment at Frontier, said the carbon-removal market was showing strong signs of demand, despite Microsoft's moves.
"Deliveries are starting to increase," she said. "And perhaps importantly, we we're seeing sort of success in a diversity of technologies."
Even if the world manages to transition away from using fossil fuels for transportation, energy production and heavy industry, some processes, such as petrochemicals and agriculture, are still very likely to produce planet-warming emissions. In order to prevent additional global warming, experts say some form of carbon removal will be needed.
"There's no path to net zero without carbon dioxide removal," Mr. Rink said.
But to have a significant impact on the planet, carbon removal will have to scale up in a huge way.
So far, various projects in the industry have removed 1.3 million tons of carbon from the atmosphere, according to CDR.fyi. That is a minuscule fraction of the roughly 40 billion metric tons of carbon dioxide that the world emits each year.