Microsoft, the U.S. tech giant, has long stood at the forefront of corporate climate action, with pledges to hit carbon negativity by 2030 and erase all historical emissions dating back to its 1975 founding by 2050. To make progress on these goals, the company has leaned heavily on procuring carbon removal credits from third-party providers—covering reforestation, direct air capture (DAC), and soil carbon sequestration projects. Its 2022 Sustainability Report shows Microsoft procured 1.3 million metric tons of carbon removal credits that year—up 160% from 2021—from more than 20 partners, including Verra-certified REDD+ projects and DAC startups like Climeworks.
But in recent days, Microsoft has made a notable move: it’s told partners and suppliers it’s pausing all new carbon removal credit purchases. The message, sent this week, doesn’t set a timeline for resuming purchases but stresses the need to reevaluate its credit sourcing strategy. This shift signals a big change in Microsoft’s approach to carbon removal, sparking questions about the voluntary carbon credit market’s future and the company’s ability to hit its climate targets.
Several factors probably led to this call. For one, there’s growing worry about credit quality. A 2023 Guardian investigation with independent researchers found that 90% of Verra’s REDD+ credits—one of the voluntary market’s most widely used types—didn’t actually deliver carbon reduction or removal. These credits, which fund forest conservation, were often given to areas where deforestation wasn’t imminent—so the carbon savings weren’t extra compared to what would’ve happened without the credit money. Microsoft, which got 40% of its 2022 credits from REDD+ projects, would’ve been directly hit by this scrutiny—pushing it to reevaluate its portfolio.
Another factor is regulatory uncertainty. The European Union’s Carbon Border Adjustment Mechanism (CBAM), due to fully launch in 2026, will force companies importing goods into the EU to report and verify carbon credits under stricter standards—like proof of additionality and permanence (storing carbon for at least 100 years). As a global firm with major EU operations, Microsoft might be pausing purchases to align its credit strategy with these upcoming rules—sidestepping possible compliance headaches.
Finally, there’s a strategic shift toward permanent carbon removal solutions. The U.S. Inflation Reduction Act (IRA), passed in 2022, offers tax credits up to $180 per metric ton for carbon removal tech that stores carbon underground for 100+ years—like DAC. Microsoft already has skin in the game with DAC startups like Carbon Engineering, so the pause could signal a shift to prioritize direct investments in these more reliable technologies over third-party credits. That lines up with the company’s goal of erasing historical emissions—something that needs permanent storage solutions, not temporary offsets.
The pause will hit Microsoft’s partners right away. Startups like Pachama (a forest carbon credit provider) and Climeworks (DAC) count on Microsoft’s purchases as a key revenue stream. Climeworks, for instance, said Microsoft made up 15% of its 2023 revenue. But the pause might also push these partners to step up their verification processes, leading to a more robust and trustworthy carbon credit market down the line. For Microsoft, the pause isn’t a step back from its climate goals—it’s said it’ll honor existing contracts, so the immediate hit to its 2030 net zero target is small.
Microsoft’s move fits into a bigger trend in the tech sector. Google’s parent company, Alphabet, has pledged $1 billion to carbon removal by 2030, focusing on DAC and permanent storage. Amazon’s Climate Pledge Fund has put money into more than 100 climate tech startups—like Remora (truck exhaust carbon capture) and CarbonCure (concrete carbon sequestration). These companies are increasingly ditching voluntary credits in favor of direct investments in tech that delivers measurable, permanent carbon removal.
Recent regulatory changes are pushing this trend even more. In October 2024, the U.S. Environmental Protection Agency (EPA) proposed new rules for carbon removal credits, which require projects to show additionality, permanence, and transparency. The rules would establish a national standard for carbon credits, making it simpler for companies to check the impact of their buys. Competitors like Apple have also announced plans to cut back on voluntary credits, choosing instead to invest in on-site renewable energy and direct carbon removal projects.
Microsoft’s pause on carbon removal credit purchases is a turning point for the climate tech industry. It underscores the growing demand for high-quality, verified carbon solutions and shines a light on the need for stricter standards in the voluntary credit market. While the short-term hit to partners might be tough, the long-term effect will probably drive innovation and boost the integrity of carbon removal work. This move cements Microsoft’s role as a leader in responsible climate action, setting a precedent for other companies to prioritize effectiveness over quantity in their carbon removal strategies.
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