Microsoft sharply reduced its purchases of carbon removal credits in the first half of 2026 even as its greenhouse-gas emissions rose 25% in the previous fiscal year. The company purchased 8.55 million metric tons of carbon removal credits through mid-July, about 80% less than during the same period in 2025, according to BloombergNEF calculations. The pullback comes as Microsoft continues to spend heavily on artificial intelligence infrastructure, with the rapid expansion of data centers increasing electricity demand and putting pressure on its climate targets.
The development highlights a growing tension across the technology industry. Microsoft, Google, Amazon and other hyperscalers are investing billions of dollars in AI data centers, GPUs and power infrastructure to meet rising demand for artificial intelligence. At the same time, those investments are making it more difficult for the companies to reduce their environmental footprints. Microsoft’s latest sustainability report showed that its total emissions reached about 20.29 million metric tons of carbon dioxide equivalent in fiscal 2025, up 25% year over year. Microsoft says the increase was primarily driven by data-center expansion and changes in its electricity procurement strategy.
Microsoft Cuts Carbon Removal Purchases by 80%
Microsoft bought 8.55 million metric tons of carbon removal credits through mid-July 2026, according to BloombergNEF calculations.
That represents an approximately 80% decline from the amount purchased during the comparable period in 2025.
The reduction puts Microsoft on track for its first annual decline in carbon removal purchases since it entered the market in 2020.
| Microsoft Carbon Removal Data | Figure |
|---|---|
| Carbon removal credits purchased through mid-July 2026 | 8.55 million tonnes |
| Year-on-year change | ~80% decline |
| Microsoft’s market entry | 2020 |
| First potential annual decline since | 2023 |
| Share of 2026 voluntary market transactions | Nearly 50% |
| Global carbon removal sales through mid-July | 18 million tonnes |
| Global market change | ~66% below 2025 levels |
Despite the sharp reduction, Microsoft remains the largest buyer in the voluntary carbon removal market.
Why Did Microsoft’s Carbon Removal Purchases Fall?
The decline comes as Microsoft reassesses how it allocates capital toward carbon removal.
Reports earlier in 2026 indicated that the company had paused some purchases because of financial considerations. Microsoft maintained that it had not abandoned its carbon removal programme.
The company has described carbon removal purchases as only one part of its broader decarbonization strategy.
Microsoft’s Climate Strategy
Carbon removal
+
Renewable energy
+
Carbon-free electricity
+
Energy efficiency
+
Sustainable fuels
+
Data-center efficiency
↓
Overall decarbonization strategy
The company says adjustments to its purchasing strategy do not represent a change in its long-term climate ambition.
Microsoft’s Emissions Rose 25%
While carbon removal purchases declined, Microsoft’s reported emissions moved sharply in the opposite direction.
The company’s total Scope 1, 2 and 3 emissions increased 25% during fiscal 2025.
Microsoft reported total emissions of approximately 20.29 million metric tons of CO2 equivalent, compared with about 16.2 million metric tons the previous year.
| Microsoft Emissions | FY2024 | FY2025 | Change |
|---|---|---|---|
| Total emissions | ~16.2M tonnes | ~20.29M tonnes | +25% |
| Scope 1 | Lower | Higher | Increased |
| Scope 2 | Lower share | 13% of footprint | Increased |
| Main driver | — | Data-center expansion | Significant |
Microsoft’s own sustainability report identifies data-center infrastructure expansion as the primary driver of the increase.
AI Data Centers Are Driving More Electricity Demand
The rapid expansion of artificial intelligence is one of the biggest forces behind Microsoft’s infrastructure spending.
AI models require significantly more computing power than many traditional software workloads.
That means companies need more servers, GPUs and data centers.
AI Infrastructure
AI models
↓
GPU servers
↓
Data centers
↓
Electricity
↓
Cooling
↓
Networking
↓
Higher infrastructure footprint
Microsoft is building data centers to support cloud services, AI products and enterprise workloads.
The resulting increase in electricity consumption can translate into higher emissions depending on the source of the electricity.
Microsoft’s Scope 2 Emissions Have Increased
Scope 2 emissions are associated with purchased electricity.
Microsoft’s Scope 2 emissions increased substantially after the company stopped counting certain non-additional, unbundled renewable energy certificates.
These certificates did not necessarily correspond to new clean-energy generation being added to the grids where Microsoft operates.
Electricity Accounting Change
Earlier approach
↓
Purchase renewable energy certificates
↓
Account for electricity consumption
New approach
↓
Prioritize additional clean-energy projects
↓
More direct impact on grid decarbonization
↓
Higher reported emissions
Microsoft says the change is part of a broader strategy to invest in clean power that adds new generation capacity rather than relying on certificates that do not necessarily create additional renewable electricity.
The Emissions Increase Is Not Entirely an AI Effect
It would be inaccurate to attribute Microsoft’s entire 25% emissions increase directly to AI.
The company says the increase was primarily caused by the expansion of its data-center infrastructure, while changes in its renewable-energy accounting also affected reported emissions.
AI is an important driver of data-center expansion, but the company’s total footprint also reflects broader cloud and infrastructure growth.
Emissions Drivers
Data-center expansion
+
AI computing demand
+
Cloud growth
+
Electricity consumption
+
Changes in renewable-energy accounting
↓
25% increase in reported emissions
This distinction is important when evaluating Microsoft’s sustainability performance.
Microsoft Still Remains the Largest Carbon Removal Buyer
Despite cutting purchases sharply, Microsoft remains by far the biggest buyer in the voluntary carbon removal market.
The company accounted for nearly half of all carbon removal transactions so far in 2026, according to BloombergNEF data.
That gives Microsoft enormous influence over the emerging carbon removal industry.
Microsoft’s Market Influence
Microsoft
↓
Large carbon removal purchases
↓
Carbon removal developers
↓
New projects
↓
Technology development
↓
Market expansion
A reduction in Microsoft’s purchases can therefore affect the economics of the entire industry.
The Global Carbon Removal Market Is Also Slowing
Microsoft’s pullback is happening during a broader slowdown in carbon removal transactions.
Global carbon removal credit sales reached about 18 million metric tons through mid-July 2026.
That is approximately 66% below the level recorded during the comparable period in 2025, according to BloombergNEF data.
| Carbon Removal Market | 2026 Through Mid-July |
|---|---|
| Global sales | ~18 million tonnes |
| Change from 2025 | ~66% decline |
| Microsoft’s share of transactions | Nearly 50% |
| Microsoft’s purchases | 8.55 million tonnes |
The market is therefore facing pressure from both reduced corporate demand and the financial challenges associated with scaling carbon removal technologies.
Why Carbon Removal Matters
Carbon removal is different from simply reducing emissions.
Emission reduction means preventing greenhouse gases from being released.
Carbon removal involves taking carbon dioxide that has already entered the atmosphere and storing it for an extended period.
Emissions Reduction vs Carbon Removal
Reduce emissions
↓
Less CO2 enters atmosphere
Carbon removal
↓
CO2 removed from atmosphere
↓
Long-term storage
↓
Lower atmospheric concentration
Both approaches can be part of a broader climate strategy.
Carbon Removal Technologies Are Expensive
Many carbon removal technologies remain expensive to deploy at large scale.
Examples include:
- Direct air capture
- Enhanced rock weathering
- Biochar
- Biomass carbon removal
- Reforestation
- Soil carbon projects
Some technologies are relatively mature, while others are still developing.
Carbon Removal Cost Challenge
Technology development
↓
High capital cost
+
Energy requirements
+
Verification
+
Long project timelines
↓
High cost per tonne
↓
Need for corporate buyers
Large technology companies have therefore become important sources of demand for the sector.
Microsoft’s Purchases Have Helped Build the Market
Microsoft has been one of the most aggressive corporate buyers of carbon removal credits.
Its long-term contracts have provided developers with greater revenue certainty.
That can make it easier for carbon removal companies to secure financing and build projects.
Corporate Offtake Model
Microsoft
↓
Long-term carbon removal agreement
↓
Developer receives future revenue visibility
↓
Project financing
↓
Construction
↓
Carbon removal
↓
Credits delivered to Microsoft
This model has helped some emerging carbon removal companies move toward commercial scale.
Why a Microsoft Pullback Matters
Because Microsoft is such a large buyer, its reduced purchases could have a disproportionate effect on the industry.
If other technology companies do not increase purchases, carbon removal developers could face difficulty securing financing.
Market Impact
Microsoft reduces purchases
↓
Lower demand
↓
Pressure on credit prices
↓
Less revenue certainty
↓
More difficult project financing
↓
Slower deployment
The effect could be particularly significant for early-stage companies developing expensive engineered carbon removal technologies.
Microsoft Says Its Climate Ambition Has Not Changed
Microsoft has rejected the idea that reduced carbon removal purchases represent an abandonment of its climate goals.
The company says it is taking a disciplined approach to procurement.
Its stated environmental ambitions include becoming carbon negative, water positive and zero waste.
Microsoft’s Climate Ambitions
Carbon negative
+
Water positive
+
Zero waste
+
More carbon-free electricity
↓
Long-term sustainability strategy
The company argues that the mix of tools used to achieve these objectives can change over time.
Microsoft’s 2030 Carbon-Negative Goal Faces Greater Pressure
Microsoft previously committed to becoming carbon negative by 2030.
That means removing more carbon from the atmosphere than the company emits.
The 25% increase in emissions makes that goal more challenging.
Carbon-Negative Path
Reduce emissions
↓
Increase clean electricity
↓
Improve data-center efficiency
↓
Remove carbon
↓
Offset unavoidable emissions
↓
Net-negative emissions
The faster Microsoft’s infrastructure expands, the more difficult it becomes to achieve the target.
AI Creates a Climate Dilemma for Big Tech
Microsoft is not alone.
Google, Amazon and other technology companies are experiencing growing electricity demand as they expand AI infrastructure.
The industry is therefore facing a fundamental contradiction.
AI Growth vs Climate Goals
AI demand
↑
Data centers
↑
Electricity demand
↑
Infrastructure investment
↑
Emissions pressure
↓
Climate targets become harder to achieve
At the same time, AI could potentially help improve energy efficiency, optimize power grids and accelerate climate research.
The challenge is balancing those potential benefits against the environmental cost of AI infrastructure.
Microsoft’s Renewable Energy Strategy Is Changing
Microsoft says it matched 100% of its annual global electricity consumption with renewable energy in fiscal 2025.
However, the company is increasingly focused on adding new carbon-free electricity to the grids where it operates.
This means simply purchasing certificates is becoming less central to its strategy.
Renewable Energy Strategy
Renewable certificates
↓
Previously used extensively
↓
Shift toward additional clean power
↓
New renewable projects
+
Carbon-free electricity
↓
Long-term grid impact
The transition can increase reported emissions in the short term even if the company believes it creates stronger environmental benefits over time.
AI Data Centers Require More Than Renewable Energy
Even when electricity is matched with renewable generation on an annual basis, data centers still need power at specific locations and times.
This creates challenges around:
- Grid capacity
- Transmission
- Storage
- Nuclear power
- Solar
- Wind
- Hydropower
- Natural gas backup
AI Power Challenge
Data center
↓
24/7 electricity demand
↓
Local grid capacity
↓
Need for reliable power
↓
Clean generation
+
Storage
+
Transmission
↓
Lower-carbon AI infrastructure
The electricity challenge is becoming one of the biggest constraints on AI expansion.
Carbon Removal Could Become More Important as AI Scales
If AI infrastructure continues expanding rapidly, companies may need both emission reductions and carbon removal.
Efficiency alone may not be enough to eliminate all emissions.
AI Sustainability Model
Efficient chips
+
Efficient data centers
+
Clean electricity
+
Low-carbon construction
+
Carbon removal
↓
Lower overall AI footprint
The question is how much of each tool companies should use and at what cost.
Microsoft’s Earlier Carbon Removal Deals Were Large
Microsoft has previously signed some of the world’s largest corporate carbon removal agreements.
In 2025, the company made multibillion-dollar commitments covering engineered and nature-based carbon removal projects.
Those deals helped make Microsoft one of the most important buyers in the industry.
Microsoft’s Carbon Removal Strategy
Nature-based removals
+
Engineered removals
+
Long-term contracts
+
New technologies
↓
Large carbon removal portfolio
The 2026 reduction therefore represents a notable change in purchasing pace rather than an exit from the market.
Microsoft Is Still Making New Carbon Removal Deals
Despite reports of a purchasing pause, Microsoft has continued to sign selected carbon removal agreements.
In May 2026, the company agreed to purchase 650,000 metric tons of carbon removal from BioCirc.
It also signed a three-year agreement with India’s Alt Carbon for nearly 37,000 metric tons of carbon removal from enhanced rock weathering.
These deals indicate that Microsoft is continuing to participate while becoming more selective about purchases.
India’s Carbon Removal Sector Is Also Benefiting
Microsoft’s agreement with Alt Carbon represents its first enhanced rock weathering deal in Asia.
Under the agreement, Alt Carbon is expected to deliver 36,920 metric tons of carbon dioxide removal credits by 2029 from its Darjeeling Revival Project.
Alt Carbon Deal
Microsoft
↓
3-year agreement
↓
36,920 tonnes
↓
Enhanced rock weathering
↓
Darjeeling Revival Project
↓
Delivery through 2029
The deal highlights the growing role of Indian companies in the global carbon removal market.
What Is Enhanced Rock Weathering?
Enhanced rock weathering involves accelerating the natural process through which rocks absorb carbon dioxide.
Rock materials are processed and spread across suitable land.
Chemical reactions then allow minerals to capture and store carbon.
Enhanced Rock Weathering
Rock material
↓
Crushed and distributed
↓
Reacts with CO2
↓
Carbon converted into stable forms
↓
Long-term storage
The technology is attracting investment because it could potentially operate at large scale.
Microsoft Is Becoming More Selective
The latest data suggests Microsoft is not abandoning carbon removal but is becoming more selective about how it spends on the market.
That could mean greater emphasis on:
- High-quality projects
- Durable carbon storage
- Additional climate impact
- Strong verification
- Lower costs
- Long-term scalability
New Procurement Strategy
Large-volume purchases
↓
More selective purchasing
↓
High-quality projects
+
Lower-cost opportunities
+
Scalable technologies
↓
More disciplined carbon removal portfolio
This could reshape the market even if Microsoft’s total purchases remain significant.
The Carbon Removal Market Needs More Buyers
One of the industry’s biggest structural problems is concentration.
If one company accounts for a huge share of purchases, the market becomes vulnerable to changes in that company’s strategy.
Concentrated Market
Microsoft
↓
Large share of demand
↓
Carbon removal developers
↓
High dependence
↓
Microsoft reduces purchases
↓
Market disruption
A broader group of buyers would make the market more resilient.
Other Hyperscalers Could Play a Larger Role
Google, Amazon and Meta have their own climate commitments.
If these companies increase purchases of carbon removal credits, they could partially offset Microsoft’s reduced demand.
Potential Buyer Base
Microsoft
+
+
Amazon
+
Meta
+
Other technology companies
+
Airlines
+
Financial institutions
↓
Larger carbon removal market
Diversification would reduce the sector’s dependence on any one buyer.
Investors Will Watch Microsoft’s Sustainability Spending
Microsoft’s sustainability strategy is becoming increasingly relevant to investors.
They will watch:
- Total emissions
- Data-center emissions
- Electricity consumption
- Carbon removal purchases
- Renewable-energy contracts
- Clean-energy investments
- Water usage
- Climate target progress
The company’s AI expansion means environmental performance is becoming increasingly tied to its infrastructure strategy.
The AI Boom Is Reshaping Corporate Sustainability
The Microsoft case illustrates a broader trend.
Companies once expected technology to become increasingly digital and less resource-intensive.
AI is changing that assumption.
Digital Economy 2.0
Software
↓
Cloud computing
↓
AI
↓
Massive data centers
↓
Large electricity demand
↓
Physical infrastructure
The AI economy is therefore increasingly dependent on physical resources.
AI Could Also Help Reduce Emissions
There is another side to the equation.
AI can potentially help optimize:
- Electricity grids
- Renewable generation
- Industrial processes
- Logistics
- Buildings
- Agriculture
- Weather forecasting
These applications could reduce emissions elsewhere in the economy.
The challenge is ensuring that the environmental benefits of AI eventually outweigh the additional infrastructure footprint.
Key Numbers at a Glance
8.55 million tonnes
Carbon removal credits Microsoft purchased through mid-July 2026
~80%
Decline from the comparable 2025 period
25%
Increase in Microsoft’s total emissions in fiscal 2025
20.29 million tonnes
Microsoft’s reported FY2025 Scope 1, 2 and 3 emissions
~16.2 million tonnes
Reported emissions in the previous year
18 million tonnes
Global carbon removal credit sales through mid-July 2026
~66%
Decline in global carbon removal sales from the comparable 2025 period
~50%
Microsoft’s approximate share of voluntary carbon removal transactions in 2026 so far
2030
Microsoft’s target year for becoming carbon negative
650,000 tonnes
Carbon removal credits in Microsoft’s May 2026 BioCirc agreement
36,920 tonnes
Carbon removal credits covered by Microsoft’s Alt Carbon agreement
What Investors and Climate Analysts Will Watch
The next few quarters will show whether Microsoft’s reduced carbon removal purchases represent a temporary adjustment or the beginning of a longer-term decline.
Important indicators include:
- Carbon removal procurement
- AI data-center expansion
- Electricity demand
- Emissions intensity
- Renewable-energy additions
- Carbon-free electricity purchases
- Carbon removal costs
- Progress toward 2030 targets
The relationship between AI growth and emissions will remain particularly important.
The Bigger Issue Is AI’s Environmental Cost
Microsoft’s situation reflects a fundamental challenge facing the technology industry.
The same AI boom driving massive revenue growth is also driving demand for physical infrastructure and electricity.
Companies therefore have to solve two problems simultaneously:
AI Growth
More computing
↓
More data centers
↓
More revenue
Climate Challenge
More computing
↓
More electricity
↓
Potentially more emissions
↓
Need for clean power and carbon removal
The industry’s long-term credibility will depend on whether it can manage both sides of this equation.
Looking Ahead
Microsoft’s 80% reduction in carbon removal purchases through mid-July 2026 is a significant development because the company has historically been the largest buyer in the voluntary carbon removal market. At the same time, its reported emissions increased 25% in fiscal 2025 to about 20.29 million metric tons of CO2 equivalent, with data-center expansion and changes in electricity procurement identified as major contributors. The figures illustrate the growing difficulty of maintaining aggressive climate targets while rapidly expanding AI infrastructure, which requires enormous amounts of computing capacity and electricity.
Microsoft says its carbon removal programme remains part of its broader decarbonization strategy and that changes in purchasing reflect a more disciplined approach rather than a retreat from its climate ambitions. The company is still signing selective deals, including agreements with BioCirc and India’s Alt Carbon. The bigger question is whether Microsoft and its technology peers can build enough additional clean electricity, improve data-center efficiency and scale credible carbon removal technologies quickly enough to offset the environmental impact of the AI boom. If carbon removal demand remains concentrated among a small number of buyers, Microsoft’s purchasing decisions could also have an outsized effect on the development and financing of the global carbon removal industry.
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