Carbon removal lessons from Microsoft’s Chief Environmental Officer

Photo: Roderigo De Medeiros | Courtesy of Microsoft

To hear Lucas Joppa tell it, taking action to save the climate is an easy decision for Microsoft. “For Microsoft to do well, we need the world to do well,” says the company’s first Chief Environmental Officer. “And it is very clear that if we don’t begin to stabilize our climate systems, the world won’t do well.”

Joppa joined Microsoft in 2009 as a computational ecologist with a long-term view. “When I came into the company, my mandate was to think 50 years out at the intersection of environment and computing. Not a lot of organizations have that belief system and very few have the resources to be able to invest in thinking that way.”

For Microsoft, climate change is more than an existential threat, Joppa says. “It’s also clear that there’s a significant business opportunity. We think we can help the world do well, and do well ourselves.”

Reaching “net zero” – that is, removing as much carbon from the atmosphere as we emit – is a planetary goal. However, Microsoft believes those who can take the biggest, fastest steps have an obligation to do so. That’s why, in January of 2020, President Brad Smith announced the company’s ambitious goals not only to be carbon negative by 2030, but to remove their historical emissions by 2050.

“Our commitments see us operating as a carbon negative, water positive, zero-waste company all by 2030,” outlines Joppa. “We are also building out the infrastructure of what we’re calling a planetary computing platform to help organizations monitor, model, and then ultimately manage Earth’s natural systems.

“On the carbon negative commitment, it’s pretty simple: we’re going to reduce our emissions by half or more and physically remove the rest of our emissions from the atmosphere. And from 2030 to 2050, we’ll go back in time and remove all of the emissions we are associated with since we were founded in 1975.”

Impressive goals, but what do they look like in practice? “The reduction side is the most important,” stresses Joppa. Notably, in 2012 Microsoft implemented an internal carbon fee. The fee, which taxes business units for their emissions, has since doubled with proceeds going toward the company’s sustainability efforts. Still, no reductions are too small to consider. “Switching from diesel generators to less emission-intensive energy backup systems at our data centers is incredibly important, even though it makes up a tiny fraction of our overall emissions.”

Indeed, operational emissions represent a small proportion of the company’s output. It is in Microsoft’s energy use and supply chains – its so-called scope 2 and 3 emissions, respectively – that they release the most carbon. The company aims to reduce scope 3 emissions by more than half by 2030, in large part by expanding the internal carbon tax to cover those emissions. They are also implementing new procurement processes that incentivize suppliers to reduce their own emissions.

“You start in the places where you have the most direct influence,” Joppa explains, “where you have a significant portion of your emissions and the markets are mature. Renewable energy is a fantastic example of that, especially for a company like Microsoft, which has a large proportion of its emissions associated with scope 2. And even when we look at our scope 3 supply chain, a large part of the emissions coming from there are energy-related emissions as well.”

Emission reductions are only half of the story. “There’s no credible economic model that doesn’t see the world overshooting its carbon budget and having to rely on significant carbon removal in order to achieve net zero,” cautions Joppa. For Microsoft to meet its goals, carbon removal must be on the menu. And there is a long way to go before the market can satisfy Microsoft’s – let alone the rest of the world’s – appetite.

Climate solutions require cooperation and a systems-wide approach, and Joppa is keenly aware that Microsoft’s actions, no matter how sizeable, are not enough. That’s why they are signalling to the carbon removal market: it’s time to scale up.

It started with a request for proposals in the summer of 2020 for a million metric tons of carbon removal. They have since released a second request for the upcoming fiscal year. From hundreds of proposals, Microsoft selected fifteen projects representing 1.3 million metric tons of carbon removal. “We are at the moment the largest carbon removal customer in the world.”

It’s an astonishing feat, but Joppa has a more measured assessment: “On the upside, we got started. We sent a signal to the market. But the downside is that we purchased 1.3 of what we assess to be 1.5 real million metric tons of carbon removal opportunity in that year.”

That does not leave a lot of carbon removal credits on the market. To curb warming to below 2 degrees Celsius, gigaton-scale carbon removal is required – with more buyers than just Microsoft. Joppa: “That really just highlighted the hard work ahead of maturing these markets, getting projects online, getting them cost affordable and effective and the markets more fluid.”

As an early mover, Microsoft has been actively sharing what they have learned about decarbonization and carbon removal, including in a detailed report published this January. They hope their transparency will encourage others to act.

One thing Microsoft learned is that there is still a lack of understanding about what a carbon removal credit represents. “No matter how many times you say you want to purchase carbon removal, people are going to try to sell you avoided emissions,” for example, paying someone not to cut down trees on their land. “That’s indicative of one of the major problems that we observed in the market.”

Currently, explains Joppa, carbon offsets are sold as a single thing – a “carbon credit” – where one credit could represent something vastly different than the next. “They’re not the same from an atmosphere perspective or a permanence perspective, but the asset is being listed as the same. The only thing that differs is the price. Why would consumers spend ten times more for what appears to be an identical product?”

“There is an obvious need for a credible, coordinated, international carbon accounting system,” he continues. “I think the most important thing that carbon removal projects can do is be able to differentiate their asset by the things that matter.”

For example, Microsoft wants to know that it is purchasing scientifically-verified carbon removal – not avoided emissions. And it must be “additional,” that is, removal that wouldn’t have happened otherwise. Joppa believes contract innovation could spur the market toward maturation: “There are lots of things a customer can demand of the producer through contracts.”

Microsoft is betting on a range of carbon removal solutions, including technologies like direct air capture. But for now, 99 percent of the carbon removal the company has purchased is nature-based, representing carbon stored largely in soil and trees. Project Acorn, for example, a carbon removal project in partnership with Rabobank, enabled smallholder farmers in developing countries to plant trees on their farmland.

Nature-based solutions like Project Acorn will remain important to Microsoft. “We only win if every market meets its full potential,” maintains Joppa. “The volume of carbon removal that is potentially available through soil carbon sequestration is incredible – if it can be monitored and verified.”

The potential may be high, but today’s demand for nature-based credits vastly outstrips supply. Joppa sees a huge opportunity for farmers looking to shift to carbon farming. “It should be an exciting time. There are willing purchasers and headroom to grow in. If you want to get into the market and can do it well, you should be able to profit from it.”

For businesses looking to translate climate goals into action, Joppa offers this key piece of advice: “This is a decades-long commitment that requires you to start acting now. If you think that you’re going to benefit from these markets ten years from now and you’re not already an active participant, I think you’re going to be rudely surprised in 2030. Now is the time to start getting involved in these markets – either as a supplier, or a consumer.

“It’s not like going down to the grocery store and buying a banana. It requires some knowledge. And that knowledge will serve you well in being competitive in the markets over the coming decade or more.”

Lucas Joppa leads sustainability at Microsoft, as the company’s first Chief Environmental Officer. In this role, he works to advance Microsoft’s core commitment to sustainability through ongoing technology innovation, program development, policy advancement, and global operational excellence. Lucas is also on the Rabo Carbon Bank advisory board.