Microsoft Pauses Carbon Removal Purchases: What It Means for the Industry and Climate Goals

Microsoft’s decision to pause purchases of carbon removal credits has sent ripples through the still-nascent carbon removal industry, which the company has helped drive forward.

In fiscal year 2025 alone, Microsoft finalized agreements with 21 companies worldwide to remove a record 45 million tons of CO2. These deals included partnerships with Re.green, which is restoring a large section of the Amazon rainforest, and Vaulted, which captures carbon by burying organic waste. Last month, Microsoft added a contract with Liferaft, a company producing biochar from agricultural waste in the Midwest.

The carbon removal industry employs a variety of technologies to address one critical aspect of the climate challenge: while global emissions are reduced, removing existing CO2 from the atmosphere remains essential. In 2023, Microsoft accounted for nearly 90% of all purchases of “durable” carbon removal credits—projects that capture CO2 with long-term permanence, such as Vaulted’s waste burial method. Reforestation projects, where carbon can be lost to wildfires or natural decay, are not classified as durable.

Existing contracts will remain in effect, but startups aiming to enter the market through Microsoft, its largest buyer, are now uncertain about future opportunities. The company has not yet clarified its long-term strategy.

In a statement, Melanie Nakagawa, Microsoft’s director of sustainability, said:

“Our decarbonization approach combines reduction, removal and efficiency, and carbon removal is one piece of that equation. At times we may adjust the pace or volume of our carbon removal procurement as we continue to refine our approach toward sustainability goals.”

Some industry experts suggest Microsoft may have already secured enough carbon removal credits to meet its 2030 goal of becoming carbon negative—removing more CO2 than it emits. However, rising emissions from data centers are complicating this target. New projects initiated now may not be operational in time to contribute by 2030, prompting Microsoft to reassess its strategy for the longer term.

“2030 is now only four years away,” says Andrew Shebbeare, a partner at Counteract, a venture capital fund focused on carbon removal. “And it’s quite hard for a carbon removal developer to spin off a project inside four years that’s going to make a material contribution to the carbon budget of a company like Microsoft.”

Several companies in negotiations with Microsoft report they have not received official notice of a purchasing pause, with one being told any interruption would be temporary. Still, the reports have intensified discussions about funding stability in the industry.

The pause was not entirely unexpected. Industry leaders have long anticipated that Microsoft’s rapid purchasing pace could not continue indefinitely.

“I think the general sentiment has been, okay, the market has to be supported by a broader diversity of actors,” says Ben Rubin, executive director of the Carbon Business Council, which represents over 100 carbon management companies. “It can’t rest in the hands of just a few companies.”

While Microsoft’s scale has provided critical early support for the industry, its pause underscores the need for broader participation to sustain growth and innovation in carbon removal technologies.