Microsoft’s carbon removals land-grab: catalytic or concentration risk?

• Microsoft now dominates engineered carbon removals (c.80% of lifetime tech-based credits; 92% of H1-2025 purchases), paying well above nature-based prices to back long-duration storage.

• Deal cadence accelerated in 2025 (BECCS in Louisiana; waste-to-energy CCS in Oslo; underground organics via Vaulted Deep) even as Microsoft’s total emissions rose ~23% vs 2020 on AI/data centre build-out.

• Good for market formation, but a single buyer propping up price discovery and offtake finance is a fragility. Policy support and a broader buyer base are the swing factors.

What happened

In mid-September 2025, the FT reported that Microsoft has extended its dominance in the engineered carbon removals market, adding new offtakes spanning direct air capture, BECCS and waste-to-energy CCS to offset fast-rising AI-related emissions.

Context & data

• Market share & spend: Microsoft accounts for ~80% of all credits ever purchased from technology-based removal projects and 92% of purchases in H1-2025; FT cites AlliedOffsets and pegs cumulative spend at ~$8bn of a ~$9.5bn market (Sep 2025). Prices: tech-based ~$180/t vs nature-based ~$35/t.

• BECCS (US): On 15 April 2025, Microsoft agreed to buy 6.75Mt of removals over 15 years from AtmosClear/Fidelis’ Louisiana BECCS project (Reuters, Apr 2025).

• Waste-to-energy CCS (Norway): On 1 July 2025, it contracted 1.1Mt over 10 years from Hafslund Celsio’s Oslo plant, part of the Longship programme (DataCenterDynamics, Jul 2025).

• Underground organics (US): On 17 July 2025, Vaulted Deep announced a 12-year, up to 4.9Mt offtake with Microsoft to inject CO₂-bearing organic waste deep underground (company release, Jul 2025).

• Microsoft emissions trend: Microsoft’s total GHG emissions are up ~23.4% vs 2020, attributed to AI/cloud expansion (Microsoft 2025 ESG report; DCD summary, Jun 2025). The company also discloses ~22Mt of removals contracted as of FY24 (Microsoft 2025 report).

My take (PE lens)

I like the strategic logic: lock in scarce, durable tonnes early, help projects reach FID, and hedge AI-driven Scope 3. The offtake mix (BECCS, CCS at EfW, underground organics) diversifies technical and regulatory risk, and Microsoft’s balance sheet effectively substitutes for project finance—bringing forward supply while others wait on standards and policy.

But concentration cuts both ways. One buyer setting the clearing price risks shallow liquidity and “philanthropic optics” rather than hard-nosed abatement economics. Unit costs remain high ($180+/t on engineered vs ~$35/t nature-based per FT). Without broader corporate demand or policy pulls (e.g., 45Q in the US, EU/UK removal support, CfDs for CDR), projects may anchor to Microsoft’s cheque book. From a returns perspective, I’d prioritise picks-and-shovels (MRV platforms, storage/transport infra, solvent/sorbent suppliers) and projects with multi-offtake optionality (not single-counterparty exposure). Watch for standardisation (Puro, CORC, Verra removals methodologies) and insurance adoption to deepen the market.

Risks & watch-list

• Policy dependency: US 45Q or EU/UK support schemes drive BECCS/DAC bankability; any retrenchment impairs project finance

• Delivery risk: Long lead times (many start 2028–2030), scale-up risk on capture/transport/storage, and permanence/MRV scrutiny

• Buyer concentration: Over-reliance on Microsoft for price discovery and volume; need more Fortune 500/sovereign demand

• Social licence: Public acceptance (waste injection, CCS near urban areas) and NGO scrutiny could delay permitting