Tech giant Microsoft, a key driver of demand in the emerging carbon removal market, has informed its current partners and suppliers this week that it plans to pause the purchase of new credits.
According to a source close to the matter, the company hasn’t provided additional details and clarity on the reasons behind the move or why it’s happening in such an abrupt manner, News.Az reports, citing foreign media.
The duration of the pause also hasn’t been confirmed, nor whether there’s a timeline for resuming work. A spokesperson from the company has shared with media that “We continually review and assess our carbon removal portfolio along with market conditions for the optimal balance on our path to carbon negative.”
Supply and Microsoft
2025 saw the company register a significant jump in offtake agreements, engaging with almost the full spectrum of technologies that fall under the umbrella of carbon removal.
2026 started in a similar fashion with four major deals, including the largest soil CDR purchase from Indigo Ag, the largest U.S. biochar offtake, and a substantial 626,000-ton bioenergy with carbon capture (BECCS) agreement in Canada with Svante and the Meadow Lake Tribal Council from this week.
The move could be attributed to the moving goal posts of the company’s target to become carbon negative.
Despite its efforts to source CDR credits where it can—and essentially seed the different approaches in the industry—the rapid deployment of energy-hungry data centers has meant Microsoft’s carbon footprint has actually become larger.
This graph from 2020 shows a planned steady decline for emissions that would ultimately be overtaken by carbon removal. But 2024 saw a 23.4% increase and a similar number is expected for 2025.
Many companies and countries have been reassessing their approach to decarbonizing with market conditions in mind and it appears that CDR’s persistently high costs (with a blended range between $50-500/t for nature-based and technological approaches) might have led to a partial rethink in Microsoft’s HQ.
Broader implications for the carbon removal industry
Despite the lack of clarity surrounding the situation, existing agreements appear intact. A spokesperson for Svante shared with Carbon Herald that “…our recently announced CDR offtake agreement is not/will not be impacted.”
The main question now is what the pace of purchases will look like in 2026 and beyond.
Many in the industry have already been voicing concerns that if funding remains the same (ie even with Microsoft’s contribution), the next stage of cost reductions will be slowed down and the next crop of startups and technologies won’t have enough funding to develop in time to have an impact.
The political backdrop for CDR in the U.S. also doesn’t look favorable. The Trump administration has cut funding almost across the board, scuppering plans for direct air capture hubs.
On the positive side the preservation of the 45Q tax credit was seen as a win for projects that combine carbon capture and removal. R&D will aso be funded after recent wins in Congress.
But at least in the near-term, the reality is that if the single strongest market signal from Microsoft fades, then nothing will appear on the radar of investors, policy makers and the public for a while.
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