3 lessons Microsoft learned from its quest to be carbon negative

When Microsoft announced in 2020 that it planned to be carbon negative by the end of the decade, the company said that it would need to rely on carbon removal solutions—that is, ways to reliably pull CO2 from the atmosphere—to reach the goal. By 2050, the company also plans to offset all the emissions it produced before its announcement, requiring even more carbon removal. In the first year of the new program, it paid to remove 1.3 million tons of CO2. But the market for carbon removal is still in the early stages. In a new editorial in the scientific journal Nature, the company shares three challenges that need to be solved for the market to work.

We need to define ‘net zero’

As hundreds of companies make “net zero” pledges, it still isn’t clear what that actually means. “We need a commonly accepted, globally aligned definition of ‘net zero’ so we can all mean the same thing when we say the phrase,” says Lucas Joppa, chief environmental officer at Microsoft. (“Carbon negative,” a step beyond net zero, also needs a clear definition.)

At a global level, we’ll reach net zero when all of the CO2 emissions from humans each year (which ideally have been reduced dramatically) can be balanced out with CO2 capture from nature and new technology, so the total concentration of CO2 in the atmosphere stops growing. But when companies say that they’re aiming for net zero (also known as carbon neutrality), the definition is murkier. Should a company claim that it has reached net zero if it relies mainly on offsets and not reducing its own emissions? If a company pays someone else to avoid emissions—something that can slow down the build-up of CO2 in the atmosphere, but won’t remove it—how much should that count, compared to actions that physically reduce CO2 levels? How should a tree’s ability to capture carbon be measured against permanent solutions like direct air capture and storage?

Joppa argues that companies need a common framework that outlines how much carbon removal needs to happen along with emissions reduction. “The world needs to be intellectually honest with itself about what net zero means, and have a quantitative framework that everybody can hold themselves accountable to,” he says. “Until we have that framework, the only framework that I know is aligned with net zero is to reduce your own emissions as much as possible—not through paying other people to reduce theirs, but reduce your own as much as possible—and then remove the rest. We know that’s net zero. Everything else we just know is potentially helpful.”

We need better ways to measure carbon

Although tools are improving, companies still need much better ways to measure both the CO2 they’re emitting and the emissions that they’re helping offset. So-called Scope 3 emissions, or everything in a company’s value chain outside of its own control, is especially challenging to measure. (Scope 3 emissions make up the vast majority of emissions for most companies.) If a company builds new offices, for example, the emissions from making the steel used in the construction are typically calculated using an industry average, not actual data from the specific steel mill they used. That makes the company’s total carbon footprint less accurate, and it also gives companies less incentive to shift to something like steel made with renewable energy, Joppa says.

Offsets also need to be better measured and tracked to understand how much particular projects are helping. Microsoft is developing some solutions itself, including low-cost tools for measuring how much carbon is stored in soil on farm fields, and supporting startups with other tools, like Pachama, which uses technology to track changes in remote forests that are being used in carbon offset schemes.

The carbon removal market needs to grow

“We have an immature, dysfunctional market,” Joppa says. When Microsoft issued a request for proposals of carbon removal projects in mid-2020, the company received applications from organizations running 189 different projects, representing the removal of 154 megatons of CO2 removal. But only 2 megatons of that met the company’s criteria for high-quality carbon removal. Few projects store carbon permanently, something that Microsoft is looking for. (Forests do an excellent job of sequestering carbon, but also risk burning down.)

Right now, the price of various offsets doesn’t necessarily reflect the quality. “Avoided” emissions, such as improving energy efficiency, are cheap, but it’s often difficult to prove that those actions wouldn’t have happened anyway. Nature-based solutions like reforestation are also relatively inexpensive, but not necessarily long-lasting. The most permanent solutions, like direct air capture and sequestration, are still in their infancy and most expensive. “Not everybody agrees with me, but I think that having a common unit of climate impact would help, particularly based on the duration and the certainty of storage,” says Joppa. People would have to pay for a bigger quantity of nature-based solutions to get the same credit for impact, and the higher value for direct air capture could help the industry grow.

Demand is for carbon removal is already growing quickly, which will help spur startups in the industry forward. “Last year, we bought 1.3 million metric tons of carbon removal, one of the largest purchases we’ve ever been made aware of,” says Joppa. “We were one of the only players in the market. One year later, the markets are well oversubscribed. To be fair, it doesn’t take much to oversubscribe these immature markets. But it is at least directionally telling.”

It’s important to solve all three challenges—defining net zero, finding better tools for measurement, and growing the market, Joppa says. “If you can fix them, they are the foundation upon which a global net zero carbon economy in 2050 will be built,” he says. “We’re out there trying to do that early economic work. And we’re just saying, Hey, there’s some big problems here.”