Global technology provider Microsoft has signed a deal with carbon dioxide removal company Heirloom to provide permanent carbon removal, Heirloom said Aug. 9.
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The initial deal will see Microsoft purchase carbon removal credits for delivery in 2025, with plans to pursue future purchases as Heirloom rolls out further technology.
"Long-term commitments to purchasing high quality carbon removals are vital to scaling direct air capture technology and early adopters like Microsoft will catalyze the supply of high-quality carbon removal solutions," Heirloom said in a statement.
The deal is an important part of Microsoft's commitment to permanent, durable carbon removal, according to Rafael Broze, carbon removal program manager at Microsoft.
"The purchase of carbon removal credits will be an important catalyst to the growth and development of the Direct Air Capture industry," Broze said, quoted in the Heirloom statement.
The company did not specify the volume of carbon credits involved in the latest deal with Microsoft, or the price paid. However, Heirloom is building Direct Air Capture facilities with a "real path" toward removing 1 billion mt/year of CO2 by 2035, it said.
Recent political developments in the US have given a boost to businesses providing sustainability solutions, the company said.
"This purchase by Microsoft comes at an exciting time for the direct air capture industry," said Alexa Dennett, head of marketing and communications at Heirloom.
"The Inflation Reduction Act that just passed the Senate is set to turbo-charge the market for CO2 removal technologies like Heirloom, with significant tax incentives unlike anything we've seen before," Dennett said in emailed comments.
"We're already seeing an uptick in interest, and the bill has not yet become law. Once it does, we expect more companies to join the likes of Microsoft in seeking carbon removal credits," she said.
The price of credits from technology-based carbon removal projects has consistently traded at a significant premium compared with other types of removal credits.
Tech-based carbon capture credits were pegged at $131/mtCO2e at the close Aug. 9, down from an all-time high of $170/mtCO2e on Jan. 24, according to Platts assessments published by S&P Global Commodity Insights.
That compared with $14.10/mtCO2e for standard carbon removal credits on Aug. 9, according to Platts assessments.
The sharp price premium on tech-based credits reflects a much higher cost of implementing projects, but also a perception of lower risks linked to issues such as environmental integrity, additionality and permanence.
Heirloom is building Direct Air Capture facilities that rapidly accelerate the natural ability of minerals to absorb CO2 from the air from a timespan of decades to days, it said.
"Heirloom's carbon removal credits are some of the most additional and durable methods of carbon dioxide removal that exist today: once removed from the atmosphere, the CO2 is stored safely and permanently underground for over a thousand years," the company said.
To limit global warming to 1.5 degrees Celsius by 2100 and avoid irreversible climate damage, CO2 removal technologies are needed urgently, it said.
The world has already warmed by 1.2 C, leaving a shrinking carbon budget left to avoid crossing that limit, the company said.
For even the most aggressive emissions reduction projections, the world will still need to remove 6 billion-10 billion mt/year of CO2 by 2050 to avoid crossing 1.5 C, it said.