Microsoft's Carbon Credit Deal to Offset AI-Driven Emissions Surge

Microsoft aims to offset AI emissions with carbon credits

Microsoft is forking out for even more carbon credits to offset spiralling AI-fuelled carbon dioxide emissions from its datacenters. The latest agreement signed with Re.green is for 3.5 million tons of carbon removal credits over 25 years. The Brazilian company says it works with landowners to restore degraded land such as farmland back to natural ecosystems by replanting native species. According to the Financial Times, the arrangement could be worth around $200 million. Microsoft and Re.green first struck an agreement in May 2024 for approximately 3 million tons of carbon removal credits over a 15-year period. Microsoft confirmed to The Register that this is effectively the same deal, although the numbers have clearly changed. The contract, as disclosed in 2024, involved Re.green planting at least 10.7 million seedlings over 16,000 hectares across Brazil, and at the time was hailed by Re.green CEO Thiago Picolo as validation of its efforts to restore forests via the use of carbon credits. "This collaboration serves as tangible evidence that this market not only exists but has significant potential for growth in Brazil. We are committed to forging additional partnerships of this calibre," he said. Microsoft is just one of many large corporations struggling to meet commitments regarding reduction of greenhouse gas (GHG) emissions. In its most recent Environmental Sustainability Report, Microsoft admitted its overall emissions had swelled by nearly 30 percent since 2020, despite setting the amibtion to be carbon-negative by 2030. That reversal was blamed on an increase in indirect (Scope 3) emissions from the construction and outfitting of more datacenters - a carbon-intensive process - to meet customer demand for cloud services, especially AI development. This trend looks likely to continue in the near future, with Microsoft confirming earlier this month it has budgeted to invest $80 billion this year on building more infrastructure to train and deploy AI models. Microsoft has sought to address its emissions problem through a number of approaches, including renewable energy and nuclear power generation, as well as other carbon credit schemes, such as one announced last year with Occidental Petroleum. Nevertheless, carbon credits have been criticized by some as "elaborate greenwashing mechanisms" and "a licence to pollute" as the buyer simply carries on emitting GHGs while securing credits from others to offset their activities. A study published by financial services biz Morgan Stanley last year estimated that global GHG emissions caused by datacenters will be three times higher - between now and the end of the decade - than if generative AI had not been developed. Microsoft was accused of greenwashing last year, when it was revealed the company had identified fossil fuel industries as a key growth target for its AI and cloud services so these could be used to aid exploration and production of new resources. ®

Microsoft secures deal to restore Amazon rainforest and offset AI emissions

Microsoft will pay to restore parts of Brazil's Amazon and Atlantic forests in exchange for hundreds of millions of dollars' worth of carbon credits, becoming the latest Big Tech player to bet that nature-based solutions can offset an artificial intelligence-driven surge in greenhouse gas emissions. The $3.2tn US company told the Financial Times it has signed a deal to buy 3.5mn credits over 25 years from Re.green, a Brazilian start-up which buys up farming and cattle land. It restores the land by planting native tree species, in projects financed through carbon credits and timber sales. Neither company disclosed a value for the deal, but recent market analysis suggests it could be worth around $200mn. Microsoft's recent dealmaking has made it one of the biggest buyers of nature-based carbon removals globally. The deal comes as groups including Microsoft, Google and Amazon invest heavily in data centres to cope with the huge demand stemming from the growth of generative AI. But the build out is leading to a surge in their energy usage and complicating their pledges to investors to curb emissions. President Donald Trump's incoming administration has downgraded curbing climate change as a priority and instead declared an "energy emergency" to boost fossil fuel production in the US, citing the challenges faced by data centres in meeting energy demands. But US-based tech companies are still for the moment "the biggest buyers" of carbon credits linked to nature restoration projects through agreements to buy credits in future decades, said Thiago Picolo, chief executive of Re.green. "They're not alone but they're at the leading edge." Increasingly energy intensive data centres still obtain power from grids where oil, coal and gas are burnt for fuel. This means tech companies seeking to meet their green pledges rely on buying credits that represent a tonne of greenhouse gases removed or reduced. Tech groups also buy renewable energy credits representing investments in wind or solar at home or abroad. Amazon, Google and Microsoft have all also invested in nuclear energy. Microsoft's carbon footprint in 2023 was more than 17mn tonnes of CO₂ and other greenhouse gases, a 40 per cent increase compared with around 12mn tonnes in 2020. It arrived at this number after using renewable energy investments and credits to cancel out some emissions from its energy use. The company wants to become "carbon negative" by the end of the decade by cutting emissions and investing in carbon removal credits. Microsoft had in recent years led a focus by tech companies on technologies that store CO₂ underground for hundreds or thousands of years, and signed a deal with US oil producer Occidental to buy 500,000 such credits last year. These technologies are likely to store CO₂ for longer than trees, which benefit communities and ecosystems but are vulnerable to the fires and droughts that are set to accelerate as climate change intensifies. Tech-based removals are however more expensive, at hundreds of dollars per tonne, and the industry has been slow to scale. Major buyers of carbon removal credits have been exploring nature-based credits, which are cheaper than tech based removals. Google, Meta, Microsoft and Salesforce said last year they planned to buy 20mn tonnes of these by the end of the decade. The carbon credits market globally has been beset by scandals, including about how to verify each tonne of CO₂. Microsoft and Re.green reached a similar deal last May for 3mn credits. Microsoft also said last year it would buy 8mn credits from BTG Pactual Timberland Investment Group. Climate tech start-up Pachama, which helps map carbon projects, estimated this type of credit issued for 2023 could cost up to $82 a tonne. MSCI Carbon Markets said some nature restoration credits sold for $20 a tonne last year, with prices potentially rising in coming years. A person close to a carbon registry said Microsoft was "leading the pack" among buyers and had paid more than $50 a tonne in recent deals for high-quality nature-based removals, significantly more than others in the market.