Microsoft signs multi-year DAC deal with Heirloom Carbon

(Photo by Matthew Manuel via Unsplash)

Tech giant Microsoft has signed a multi-year agreement to purchase carbon removal credits from the San Francisco startup Heirloom Carbon, the companies announced on August 9.

In a press release published on Businesswire, the companies said that Microsoft will buy carbon removals through 2025 and agreed to explore further removal purchases beyond that year as Heirloom’s facilities expand.

The companies did not confirm the value of the deal, nor the volume of carbon credits being traded.

“Microsoft has been a worldwide leader in sustainability and we’re very excited to add them as a customer,” Shashank Samala, CEO of Heirloom Carbon, said in the press release. “Their patronage and investment will fuel the scale of our technology and our ability to help the world meet its climate goals.”

Heirloom’s removals are based on direct air capture technology (DAC), one of the most commonly touted kinds of tech to limit global warming.

According to the U.N.’s Intergovernmental Panel on Climate Change, the world needs to remove billions of tons of carbon from the atmosphere to have a chance to prevent temperatures from rising more than 1.5C by 2050 compared to pre-industrial records, a target outlined in the 2015 Paris Agreement.

“Unless affordable and environmentally and socially acceptable removal becomes feasible and available at scale well before 2050, 1.5C-consistent pathways will be difficult to realize,” the panel said in its 2018 Special Report: Global Warming of 1.5.

DAC differs from other popular carbon removal technologies like carbon capture and storage (CCS) because it sequesters carbon dioxide from the atmosphere. CCS, on the other hand, removes it from the air as it’s about to be emitted—for example at liquefied natural gas extraction sites. Since it can pull previously emitted carbon, DAC can be carbon negative, whereas CCS can be carbon neutral at best because it can only prevent carbon from being emitted.

After removing carbon from the atmosphere, DAC typically uses several methods to store it, usually in underground rock formations or repurposing it for use in biofuels, construction materials or other objects. When it’s injected underground, carbon bonds with minerals over the years to form stone in a process called carbon mineralization.

Heirloom says its technology speeds up carbon mineralization greatly, allowing minerals to absorb CO2 in a matter of days, not years. This, the company says, makes its carbon removals more permanent because it can take thousands of years for stone to release carbon back into the atmosphere.

Heirloom says it is on a mission to build DAC facilities providing permanent carbon removal on a cost-effective basis. It says it aims to remove 1 billion tons of CO2 by 2035—though since the company started its operations recently, it’s unclear if they are on track to reach that goal.

Microsoft has been among the world’s most active companies in the purchase of removal credits. In 2020, it established a $1 billion Climate Innovation Fund to accelerate the development of DAC and similar technologies. In March 2022, Microsoft also invested in Heirloom’s Series A funding round. And in July, it signed a 10-year deal to buy DAC credits with Swiss company Climeworks.  

“Our deal with Heirloom is an important part of Microsoft’s commitment to permanent, durable carbon removal,” Rafael Broze, carbon removal program manager at Microsoft, said in the press release.

“The purchase of carbon removal credits will be an important catalyst to the growth and development of the Direct Air Capture industry”, he added.

His words echo those of other corporate executives and officials who have recently underscored the need for companies and investors to commit to engineered carbon removal credits through long-term deals to provide stability and funding for the relatively nascent industry.

Speaking via video call at the Climeworks Direct Air Capture Summit 2022 in Zurich on June 30, Lucas Joppa, Microsoft’s chief environmental officer, said his company is a strong believer in DAC technology for its ability to sequester CO2 permanently. But he said the biggest problem with the industry was its diminutive size and lack of supply.

“The best way to mature a market is to get out and put money into that market,” he said, adding that Microsoft was interested in signing multi-year contracts, such as the one it then signed with Climeworks and Heirloom to help the industry mature.

Joppa also said he would like to see carbon markets differentiate between cheaper and less-effective avoidance credits and permanent removal credits. Avoidance credits are often based on projects preventing new carbon emissions, for example through forest preservation projects or delivering more efficient cooking appliances to rural populations in developing countries. Because it can be hard to prove if they prevent new emissions or to quantify their impact, they’re often considered to have lower integrity than removal carbon credits.

“Avoided emissions are often significantly cheaper than carbon removal,” Joppa said in June. “When the two things end up falling in the same category, it makes it very difficult to advocate for purchasing more expensive solutions.”

Joppa added that he believes that DAC credits will become more affordable once demand causes supply to rise.

In 2020, Microsoft pledged to become carbon negative by 2030, meaning that it aims to pull more carbon from the atmosphere than it emits. The company says it will hit this target by halving its emissions from a 2019 baseline and physically removing the remainder of its emissions from the atmosphere.

Microsoft claims to have been carbon neutral globally since 2012. It also says that by 2050, it aims to have removed from the atmosphere the equivalent to the company’s total emissions since it was founded in 1975.

As of 2021, Microsoft powers around half of its data centers with renewable energy, either through Microsoft-owned plants or power purchase agreements (PPAs) with energy companies, according to company records. In 2021, it said it aimed to become 100% powered by renewables by 2025.