Microsoft has agreed to fund the extraction of 18 million tonnes of carbon dioxide from the atmosphere, and is set to be one of the biggest purchases of carbon removal credits.
Cloud computing and AI Behemoth has signed an agreement with Rubicon Carbon, a company run by former Bank of America executive Tom Montag, and is supported by TPG’s Rise Climate Fund. The deal will require the delivery of carbon credits generated from projects sequestering CO2 by planting trees and restoring degraded land, according to a statement Thursday.
It is essential to pull huge amounts of carbon from the atmosphere if the planet could have an opportunity to avoid catastrophic levels of overheating. It drives a wave of startups exploring a variety of techniques to reduce CO2. For Big Tech, it is an increasingly relevant solution as AI development brings an insatiable craving for energy.
The partnership with Microsoft, which has not been revealed, is Rubicon’s biggest deal since it was founded two and a half years ago.
Montag, who is on the Goldman Sachs board, said in an interview that it was a good time to make “trade of this size.”
The ability to remove carbon from the atmosphere around the world is just a small part of what scientists say today. Startups trying to fill that hole are exploring techniques ranging from what is known as direct air capture to carbon capture and storage to what is called bioenergy using biochar.
Microsoft, who says they want to be carbon negative by 2030, is an early advocate for the carbon removal industry and has signed several deals across a variety of technologies. According to industry tracker CDR.FYI, the company is the largest investor in remove credits, buying more than 20 million tonnes across its portfolio.
“The transaction illustrates the long-term demand for carbon removal needed to mobilize infrastructure-grade investments and world-class execution,” said Brian Marrs, senior director of energy and carbon removal at Microsoft.
Unfinukan, who chaired Rubicon’s board of directors and formerly vice-chairman of Bank of America, says the nonprofit that has shaped how the carbon market has evolved in recent years “provides a very good framework for integrity.”
“However, the market mechanisms so devised do not follow the doctrines of the financial services industry, and are unlikely to gain hold and scale,” she said in an interview. “Finance markets need to intervene right now,” and carbon credits “can be a real market solution.”
Montag said it hopes that the deal between Rubicon and Microsoft will help the carbon market attract more investors. The deal with a 15-year off-take agreement could be particularly suited to infrastructure investors, he said.
Montag is one of a prominent Wall Street figure group that promotes offsets on what is called a voluntary carbon market, which Bloombergnef is expected to expand to more than $1 trillion by 2050.
“The spontaneous carbon market is still small,” and “it’s not growing as fast as we want,” Montag said.
The 18 million tonne transaction is nearly triple the scale of the larger sales, next to carbon removal credits in CDR.FYI’s database, but that data does not cover reforestation projects. Meanwhile, Microsoft deals with startup chestnut carbon, offering 7 million tonnes of credit from US tree planting, and another 8 million credit deal with BTG Pactual Timberland Investment Group, appearing to be the largest deal in the market for nature-based removal before the Rubicon transaction.
In an agreement with Microsoft, Rubicon will raise credits from a variety of planting, planting and revival projects around the world. The company plans to implement due diligence, quality assurance and ongoing credit monitoring. The selected project must meet Microsoft’s science and quality standards.
Each transaction is configured to provide credit over a period of 15 or 20 years and is expected to be delivered first around 2027, Montag said.
The goal, he said, is to “bring scale and expertise into a market where it can be used.”
