Microsoft Signs Large Carbon Removal Deal with Heirloom

Microsoft symbol on a keyboard button

(Credit: Canva Pro)

by | Sep 8, 2023

Microsoft symbol on a keyboard button

(Credit: Canva Pro)

Microsoft will purchase up to 315,000 metric tons of carbon dioxide removal as part of a deal with direct air capture company Heirloom.

The multi-year deal is one of the largest carbon removal deals to date and follows Heirloom’s recent selection by the U.S. Department of Energy as a Direct Act Capture (DAC) Hub, with up to $600 million in matching funding. Heirloom’s Project Cypress was one of just two DAC hubs that qualified for the highest levels of funding from the DOE. The project will be located in Southwest Louisiana.

The CO2 removal credits purchased by Microsoft as part of the deal supports the company’s goal to be carbon-negative by 2030 and removal of all its carbon ever emitted by 2050.

The carbon removal credits purchased as part of this agreement will be generated at Heirloom’s next two commercial deployments in the U.S. and will support Microsoft’s goal to be carbon-negative by 2030, as well as its ambition to remove all of the CO2 the company has ever emitted by 2050.

The deal with Microsoft also represents one of the first “bankable” carbon removal projects, according to the company, enabling Heirloom to finance future direct air capture facilities. This is in line with how other major infrastructure projects have been financed over the years. 

“Microsoft’s agreement with Heirloom is another important step in helping build the market for high-quality carbon removal and supports our path to become carbon negative by 2030,” Microsoft Senior Director of Energy and Carbon Brian Marrs said in a statement. “As an investor in and customer of Heirloom, we believe that Heirloom’s technical approach and plan are designed for rapid iteration to help drive down the cost of large-scale Direct Air Capture at the urgent pace needed to meet the goals of the Paris Agreement.”

The deal provides Heirloom with predictable and durable cash flows that are critical to the project’s financing for upcoming DAC facilities. The funding mechanism is considered the catalyst for rapid scaling and commercialization of renewable energy sources, such as wind, solar, and other techniques. 

According to Heirloom, the largest investments needed in the renewable energy sector are driving interest from major banking institutions, including J.P. Morgan, which is targeting $2.5  trillion for sustainable development and climate action by 2030.

“It is incredibly encouraging to see agreements of this magnitude because corporate buyers, like Microsoft, can unlock a significantly lower cost of capital for Direct Air Capture companies that are seeking to finance infrastructure projects, such as future carbon dioxide removal facilities,”  Robert Keepers, managing director, J.P. Morgan Green Economy Banking, said in a statement.

According to Microsoft and Heirloom, the deal also aligns with the goals of the First Movers Coalition, which was launched at the World Economic Forum in 2022 by the Biden administration to leverage private companies’ purchasing power to create markets for clean technologies focused on emissions reduction and removals.

Microsoft published its third annual report on its carbon removal efforts, outlining its focus on agroforestry and the emerging carbon removal market.

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