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Microsoft’s quest to go ‘carbon negative’ inspires $1B fund

Bold new commitment will see the tech giant charge an internal carbon fee not just on emissions from its direct operations, but on those of its supply chain.

Given the scope of the climate crisis, Microsoft no longer believes it’s enough to be carbon neutral.

That philosophy is reflected in the software giant’s bold new pledge to become "carbon negative" within the next 10 years, with a stretch goal to remove all of the carbon it has emitted "either directly or by electrical consumption" since the company was co-founded by Bill Gates and the late Paul Allen back in 1975. Not only is it unusual for companies to focus on past carbon debt in their removal strategies, it’s a pretty tall order when you consider that Microsoft expects to emit 16 million metric tons of carbon this year alone.

What’s more, the company is putting $1 billion into a new investment fund meant to accelerate carbon reduction, capture and removal technologies.

The new commitments, outlined in a blog post Thursday by Microsoft President Brad Smith, also will see the company extend the internal carbon fee it already charges business divisions to cover not just those contributed by direct operations plus those related to electricity and power consumption (Scope 1 and Scope 2) but also to reflect those generated by the company's supply and value chains. 

Under that measure, effective July 1, the beginning of the company’s fiscal year, Microsoft will bill individual business units for all Scope 3 emissions (not just those related to travel, which it already includes as part of its calculations). Among the sorts of activities that will be subject to that fee are the impact of materials embodied in buildings, employee commuting, leased assets, the emissions associated with product manufacturing by supply chain partners, the footprint associated with the use of its various products and services and so forth. For perspective, Scope 3 activities will account for 12 million metric tons of Microsoft's carbon debt this year alone, far more than the impact of the company's direct operations.

Given the current state of technology and pricing, we will initially focus on nature-based solutions, with the goal of shifting to technology-based solutions between now and 2050.
Microsoft’s current carbon fee is $15 per metric ton. Initially, it plans to charge a lower price for Scope 3 emissions, although that amount was not disclosed. Eventually, the company will charge the same fee for all Scope 1, 2 and 3 emissions, according to the blog.

"While we at Microsoft have worked hard to be 'carbon neutral' since 2012, our recent work has led us to conclude that this is an area where we’re far better served by humility than pride," wrote Smith in the blog. "And we believe this is true not only for ourselves, but for every business and organization on the planet."

So, what’s in the game plan?

Microsoft defines "carbon negative" to mean that a company is removing more carbon dioxide emissions than it emits each year. In contrast, here’s how it defines the concept of being "carbon neutral":

Given common usage, companies have typically said they’re "carbon neutral" if they offset their emissions with payments either to avoid a reduction in emissions or remove carbon from the atmosphere. But these are two very different things. For example, one way to avoid a reduction in emissions is to pay someone not to cut down the trees on the land they own. This is a good thing, but in effect it pays someone not to do something that would have a negative impact. It doesn’t lead to planting more trees that would have a positive impact by removing carbon.

To reach its new, more aggressive goal, Microsoft plans:

  • To step up its already aggressive renewable energy procurement activities, so that its contracts for solar, wind and other sources are equal to the carbon-emitting electricity it uses in its data centers, building and campuses by 2025.
  • To electrify its campus vehicle fleet by 2030.
  • To pursue both LEED Platinum and International Living Future Institute Zero Carbon status for the retrofits going on at its Silicon Valley and Puget Sound campuses.

According to the detailed blog about the new plan, it also will invest in a portfolio of "negative emissions" approaches including afforestation, reforestation and soil carbon capture; and emerging technologies such as bioenergy with carbon capture and storage, as well as direct air capture systems. Microsoft’s key criteria for deciding which of these to use: scalability; affordability; commercial availability; and verifiability. For that reason, it will focus on nature-based solutions first and pivot to emerging technologies over time.

"Given the current state of technology and pricing, we will initially focus on nature-based solutions, with the goal of shifting to technology-based solutions between now and 2050, when they become more viable," Smith wrote.  

Of keen interest to its suppliers, Microsoft will begin to adopt a new procurement strategy by July 2021 that motivates them to reduce Scope 1, 2 and 3 emissions. It has offered resources to assist with the work of getting there but did not provide details in the blog published Thursday.

"We believe that Microsoft’s most important contribution to carbon reduction will come not from our own work alone but by helping our customers around the world reduce their carbon footprints through our learnings and with the power of data science, artificial intelligence and digital technology," Smith wrote. 

We believe that Microsoft’s most important contribution to carbon reduction will come not from our own work alone but by helping our customers around the world reduce their carbon footprints through our learnings.
To that end, Microsoft’s new commitments were accompanied by two product launches. The first is the Microsoft Sustainability Calculator, a business intelligence dashboard that will provide customers of its Azure cloud services with a measurement of the carbon impact of their computing workloads. Microsoft is also giving customers the option to opt for a green energy source for cloud services, through a service called Vattenhall. Both products are available.  

The business of carbon removal solutions

Microsoft’s plan to invest $1 billion in carbon removal technologies over the next four years underscores the burgeoning opportunity it sees for solutions in this area — both for itself and other companies.

The new Climate Innovation Fund will make decisions about where to invest using the following questions as a compass:

  1. Can the strategy drive "meaningful decarbonization, climate resilience or other sustainability impact"?
  2. Can the technology accelerate current or potential solutions?
  3. Can it help Microsoft address both its "unpaid climate debt" as well as future emissions?
  4. Does it consider climate equity in both established and emerging economies?

Microsoft will continue to fund the AI for Earth program, which supports more than 450 grantees in more than 70 countries.

About those oil and gas industry customers

In recent months, Microsoft’s ongoing relationships with companies in the oil and gas sector, such as Chevron and Schlumberger, have been criticized by both employees and activists who suggest the software company should divest those customers to accelerate the transition to a clean economy. Google and Amazon have been subject to similar criticism.

"While there is a lot to celebrate in Microsoft's announcement, a gaping hole remains unaddressed: Microsoft's expanding efforts to help fossil fuel companies drill more oil and gas with machine learning and other AI technologies," said Elizabeth Jardim, senior climate campaigner with Greenpeace. "Teaming up with Exxon, BP, Chevron and others to extract more oil and gas is a major disconnect and makes the climate crisis worse."

In the blog, Smith doubles down on Microsoft’s position that it needs to keep working with the fossil fuels sector in order to help them evolve. "Continued improvement in standards of living around the world will require more energy, not less," he wrote. "It’s imperative that we enable energy companies to transition, including to renewable energy and to the development and use of negative emissions technologies like carbon capture and storage, and direct air capture."

That said, you can expect to see the software company become increasingly transparent about its progress on carbon removal and more vocal on matters of carbon-related public policy including the need to support more applied research on breakthrough carbon technologies, and the use of carbon markets and pricing that help customers and business make more informed decisions. It has talked about making this commitment before, and lobbied before on behalf of things such as more progressive utility policies, so eyes will be on the company to see how it follows through. 

Elizabeth Sturcken, managing director of EDF+Business, described Microsoft's new commitment as an audacious goal. The NGO was encouraged by Microsoft's pledge to use its political might on behalf of climate-related causes. 

"Microsoft is at the helm of what could be a new movement toward negative emissions," Sturcken said in a statement. "It's a big step beyond what most companies have committed to. But to really shift the need on climate change, we need 1,000 other Microsofts to follow suit and turn rhetoric into action."

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