Microsoft Is Supercharging the Carbon-Removals Market. Amazon Thinks We Should Take it Slow.

One tech giant has been on a buying spree this year, while the other believes a more measured approach is better for fighting climate change

When it comes to buying carbon removals, the market has an undisputed heavyweight champion: Microsoft. But one of its main rivals thinks there is a better way to do it—by slowing down.

"It’s strange to say we can be strategically patient in the midst of a climate crisis, but we really have a responsibility to make sure we get things right," said Jamey Mulligan, head of carbon neutralization science and strategy at Amazon.

For Mulligan, building a marketplace where many buyers can buy carbon-removal credits is more important than having one that is accessible to only a handful of deep-pocketed buyers. He also wants to see more efforts to ensure the quality of the credits that fund projects aimed at reducing carbon in the atmosphere to fight global warming.

The Amazon carbon-credit czar likened building the carbon-removal market to running an ultra marathon with your family and pet dog, saying that it was no use to finish the race on your own if your teammates are still on mile one.

"If we’re really good at decarbonizing just our own operations and buying a lot of carbon credits for the residual [emissions] of just our own operations, and we have a value chain that’s bloated from a carbon standpoint, that’s going to slow us down in that low-carbon future," Mulligan said. "What we want to avoid is standing at the finish line by ourselves."

Technologies like carbon capture, biochar and enhanced rock weathering have emerged as ways to mitigate climate change. At the moment, demand for credits that fund these projects mostly comes from technology firms, especially Microsoft.

Of the 37 million tons of durable carbon credits purchased since 2019, 30 million of those have gone to Microsoft, according to CDR.fyi, a carbon removal database which doesn’t include nature-based solutions. Amazon meanwhile has snapped up 250,000 tons. Other major buyers include Google, Stripe and Meta under an umbrella buying group called Frontier.

According to the U.N.’s Intergovernmental Panel on Climate Change, those millions of tons of carbon credits need to turn into billions of tons to have any chance of limiting global warming to 1.5 degrees Celsius as targeted in the Paris Agreement in 2016.

The market may have a long way to go, but Lukas May, chief commercial officer at carbon-removal registry Isometric, said the approach of buying as much as you can and hoping others will follow has worked. "What Microsoft has done is just made that industry much bigger," he said.

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Microsoft says it has two main aims in the market: be a leader in building the marketplace for these credits by creating demand, while at the same time using top-quality removals to meet its own high sustainability goals. The company is aiming to be carbon negative by 2030, and is seeking by 2050 to remove from the environment more greenhouse gases than the company has emitted since its founding in 1975. Amazon’s goal is to have net-zero emissions by 2040.

"Carbon removal is a time machine of sorts," said Brian Marrs, Microsoft’s senior director of energy and carbon removal. "However, Microsoft solving its goals alone doesn’t solve climate change. So while we’re building out the portfolio we need to meet our targets, we are very cognizant that there needs to be a market building moment beyond Microsoft."

Amazon and Microsoft aren’t completely at odds in how they view the removal market. Both want to buy what are known as high-integrity credits—those that have been verified as taking carbon out of the atmosphere and have a high chance of delivering the credits as promised. Both want to limit social harm when looking at projects, especially trying to avoid agricultural displacement and detriment to indigenous communities. And both require a lot of monitoring to make sure projects are delivering as expected.

But there are differences. Microsoft is often the anchor buyer in projects, sometimes purchasing up to half of a developer’s total credits. It says that buying in volume encourages others to snap up the rest of the credits knowing the project has been backed and verified by Microsoft. It also is keen on advance market commitments, buying credits years ahead of when they are due to be delivered so project developers have cash upfront and proof to lenders that demand exists for what they are doing. Amazon does this too, but on a smaller scale.

Also, Microsoft seeks many different types of high-quality projects in its portfolio, while Amazon is taking a more targeted approach.

"We want to build a diversified portfolio," Microsoft’s Marrs said. "We don’t pick winners, we take a very wide stance as to the number of CDR pathways that we contract from." Microsoft is spending in dozens of areas, including on companies that burn trash to create carbon credits and store farm and industrial waste underground.

Amazon, meanwhile, is more narrowly focused on restoring degraded land, reducing tropical forest loss and a handful of technologies such as direct air capture, enhanced rock weathering and some ocean carbon removal projects.

"We’re very discerning about the kinds of projects that we’re focused on," Amazon’s Mulligan said. "We’re not taking a scattershot approach, we’re not really diversifying. We’re not doing the ‘let a 1,000 flowers bloom’ kind of thing.’”

Amazon worked with Verra, one of the leading verifiers of carbon credits, to create the Abacus label designed to signify which ecosystem-restoration projects adhere to stringent quality standards.

Amazon is also keen on building the buying system for others to come in to buy credits. It provides a credit service to some of the companies within its supply chain that want to purchase carbon credits, but don’t have the means to do so in bulk, which project developers typically want. Using this service, smaller companies can buy credits from Amazon after the tech giant buys them in bulk.

"This [market] will grow over time, but you’ve got to be a relatively big company and have some internal capacity to consider these kinds of deals and build mechanisms," Mulligan said.

Isometric’s May said the market will likely expand further once governments develop compliance markets like those being pushed through in Europe and the U.K. through emissions trading programs that require companies to purchase credits.

"The other companies who maybe today don’t feel that motivated to buy carbon removal, will have a direct financial incentive to do so and ultimately will have to do so," he said. "What [Microsoft and Amazon are] doing is they’re paving the way for that industry to, A, exist and, B, scale and, C, come sufficiently down the cost curve such that at the point at which governments are integrating these into emissions trading systems, it actually makes sense."

But for now, Microsoft sits atop of the mountain.

"I’m not worried that we’re going to build a market that no one else needs to use because this is going to be a critical tool, not just for Microsoft, but for the world to hit its [climate] targets," Marrs said. "Building missing markets isn’t necessarily easy, but it is essential, and I think that’s a piece of being a leader."