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Microsoft will pay to restore parts of Brazil’s Amazon and Atlantic forests in exchange for hundreds of millions of dollars’ worth of carbon credits, becoming the latest Big Tech player to bet that nature-based solutions can offset an artificial intelligence-driven surge in greenhouse gas emissions.
The $3.2tn US company told the Financial Times it has signed a deal to buy 3.5mn credits over 25 years from Re.green, a Brazilian start-up which buys up farming and cattle land. It restores the land by planting native tree species, in projects financed through carbon credits and timber sales.
Neither company disclosed a value for the deal, but recent market analysis suggests it could be worth around $200mn. Microsoft’s recent dealmaking has made it one of the biggest buyers of nature-based carbon removals globally.
The deal comes as groups including Microsoft, Google and Amazon invest heavily in data centres to cope with the huge demand stemming from the growth of generative AI. But the build out is leading to a surge in their energy usage and complicating their pledges to investors to curb emissions.
President Donald Trump’s incoming administration has downgraded curbing climate change as a priority and instead declared an “energy emergency” to boost fossil fuel production in the US, citing the challenges faced by data centres in meeting energy demands.
But US-based tech companies are still for the moment “the biggest buyers” of carbon credits linked to nature restoration projects through agreements to buy credits in future decades, said Thiago Picolo, chief executive of Re.green. “They’re not alone but they’re at the leading edge.”
Increasingly energy intensive data centres still obtain power from grids where oil, coal and gas are burnt for fuel. This means tech companies seeking to meet their green pledges rely on buying credits that represent a tonne of greenhouse gases removed or reduced.
Tech groups also buy renewable energy credits representing investments in wind or solar at home or abroad. Amazon, Google and Microsoft have all also invested in nuclear energy.
Microsoft’s carbon footprint in 2023 was more than 17mn tonnes of CO₂ and other greenhouse gases, a 40 per cent increase compared with around 12mn tonnes in 2020.
It arrived at this number after using renewable energy investments and credits to cancel out some emissions from its energy use. The company wants to become “carbon negative” by the end of the decade by cutting emissions and investing in carbon removal credits.
Microsoft had in recent years led a focus by tech companies on technologies that store CO₂ underground for hundreds or thousands of years, and signed a deal with US oil producer Occidental to buy 500,000 such credits last year.
These technologies are likely to store CO₂ for longer than trees, which benefit communities and ecosystems but are vulnerable to the fires and droughts that are set to accelerate as climate change intensifies. Tech-based removals are however more expensive, at hundreds of dollars per tonne, and the industry has been slow to scale.
Major buyers of carbon removal credits have been exploring nature-based credits, which are cheaper than tech based removals. Google, Meta, Microsoft and Salesforce said last year they planned to buy 20mn tonnes of these by the end of the decade.
The carbon credits market globally has been beset by scandals, including about how to verify each tonne of CO₂.
Microsoft and Re.green reached a similar deal last May for 3mn credits. Microsoft also said last year it would buy 8mn credits from BTG Pactual Timberland Investment Group.
Climate tech start-up Pachama, which helps map carbon projects, estimated this type of credit issued for 2023 could cost up to $82 a tonne. MSCI Carbon Markets said some nature restoration credits sold for $20 a tonne last year, with prices potentially rising in coming years.
A person close to a carbon registry said Microsoft was “leading the pack” among buyers and had paid more than $50 a tonne in recent deals for high-quality nature-based removals, significantly more than others in the market.
