Microsoft
carbon removal
Lessons from an early
corporate purchase© 2021 Microsoft. All rights reserved.

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Contents
Foreword .............................................................................................................................................................................................3
Executive summary .........................................................................................................................................................................4
Introduction .......................................................................................................................................................................................5
The big picture: the world can’t get to 1.5°C without carbon removal ........................................................................ 5
Challenges of removal today ......................................................................................................................................................... 6

Growing corporate momentum.................................................................................................................................................... 7

Developing our carbon removal strategy .............................................................................................................................. 8
Setting our scope ............................................................................................................................................................................... 8
Moving from offsets to removal................................................................................................................................................... 9

Catalyzing a market .........................................................................................................................................................................10

Constructing our FY21 portfolio ............................................................................................................................................. 11

What we purchased .........................................................................................................................................................................12
Short-term natural solutions ...............................................................................................................................................14
Medium-term blended solutions .......................................................................................................................................19
Long-term engineered solutions .......................................................................................................................................20

Project selection considerations .................................................................................................................................................22

Portfolio risks and remedies ........................................................................................................................................................24

Looking ahead ............................................................................................................................................................................... 26

Top five learnings .............................................................................................................................................................................27
Our future outlook ...........................................................................................................................................................................28

Appendix A: Prerequisites and considerations.................................................................................................................. 29
Appendix B: Sample contract language............................................................................................................................... 31
Appendix C: Responding organizations .............................................................................................................................. 332

Foreword
Stabilizing the global climate system will require a heroic societal effort. The world must drastically reducecarbon dioxide and other greenhouse gas (GHG) emissions. But reductions won’t be enough. As a global
society we must also remove large amounts of carbon from the atmosphere, to avert the worst social,economic, and environmental impacts of a rapidly changing climate. And we must do so while recoveringfrom a pandemic.
The International Energy Agency estimated an 8% (2.8 gigaton) drop in GHG emissions in 2020, due to theeconomic downturn from the global pandemic. 1 Now comes the challenge of this era—rebuilding the
economy post-COVID while continuing to drop emissions 8% per year, every year, until 2030 while also
successfully scaling the deployment of carbon removal approaches. Failure to achieve carbon removal atscale places a fantastic burden on reduction efforts, nearly doubling the required global reductions to 15%
every year through 2040 if the world is to have a real chance of limiting warming to 1.5 degrees Celsius.
That stark reality is why Microsoft and other entities committed to climate action need to take what iscurrently an immature market for negative emissions technologies—or carbon removal—and expand it as
quickly as possible.
This priority is a crucial part of Microsoft’s carbon negative commitment that we announced in January 2020
and why we started to build our carbon removal program last year. While we believe that projects that help
avoid emissions are crucial, we are exclusively focused on those that remove carbon from the atmosphere.
The reason is simple: looking ahead 10 years shows we simply can’t meet our global climate goals withoutcarbon removal.
As we said in our carbon negative announcement, those of us who can afford to move faster and go further
should do so. The more transparent a company like Microsoft is about our experience—from our due
diligence and the early purchases we are making—the stronger collective intelligence everyone will have tocreate a healthy, high-integrity, and affordable market in the coming decade.

1

IEA (2020), Global Energy Review 2020, IEA, Paris https://www.iea.org/reports/global-energy-review-2020.

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Executive
summary
Achieving our carbon negative goal by 2030 will require more than carbon reduction—Microsoft must also
physically remove carbon from the atmosphere. Today, carbon removal is far from mainstream, however, andthe market for corporate procurement of carbon removal is relatively undeveloped.
Microsoft is one of the first corporations to conduct due diligence on carbon removal procurement. In July
2020, we issued a request for proposals (RFP) and received proposals representing 189 projects. We chose topurchase from 15 suppliers representing more than 1.3 million metric tons of carbon removal (mtCO2). We
based our choices on specific criteria including clarity of carbon accounting, additionality, durability, potential
leakage, and other environmental and social considerations.
More than 99% of the carbon removal volume we selected was from natural solutions with durability terms of
100 years or less, such as forest and soil projects. Looking ahead, we hope to increase the overall durability ofour portfolio by helping to expand the market for long-term engineered solutions such as direct air captureand storage.
By sharing our experiences, we want to catalyze
discussion and collaboration that will lead to thedevelopment of a more robust global market forcorporate procurement of carbon removal
solutions. Since our first RFP, we’ve alreadylearned several key lessons, most notably that themarket lacks clear carbon removal accounting
standards, particularly around the key criteria ofadditionality, durability, and leakage.
Looking ahead, we will be focused on getting
carbon out of the atmosphere quickly andkeeping it out for as long as possible. We will
advocate for clear accounting and high-quality
standards for carbon removal. And we want tobuy and invest together with other corporations
to drive scale.

Highlights
1. We can’t meet our carbon negative commitment
without carbon removal.
2. Clear accounting of carbon removal is vital.
3. Additionality, durability, and leakage are crucial
criteria but lack clear standards.
4. Corporations do not yet have an easy way tosource affordable, high-integrity carbon removal.
5. We can’t do it alone—we need other corporate
buyers to accelerate market development.

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Introduction
On January 16, 2020, Microsoft announced a new climate commitment: we will be carbon negative by 2030. 2
This builds on our commitment since 2012 to being operationally carbon neutral, extending it in both scale—to beyond net-zero emissions—and scope—to include the emissions not just from our operations but also
from our supply and value chains.
Carbon removal (also known as carbon dioxide removal [CDR]) is a major factor underpinning our strategy toachieve this commitment. Although deep carbon reduction is our top priority, physically removing carbon
from the atmosphere will also be essential to our ability to meet our net-negative target scale and timeframe.
This white paper explains our rationale for focusing on carbon removal, our approach to selecting carbon
removal projects, details of the projects we selected in 2021, and the lessons we have learned so far. By
sharing our experiences, we hope to both inspire action and uptake from others and accelerate thedevelopment of the carbon removal market.

The big picture: the world can’t get to
1.5°C without carbon removal
The Paris Agreement, a landmark agreement signed by all 197 member countries of the United Nations
Framework Convention on Climate Change (UNFCC), aims to combat climate change by keeping global
temperatures well below 2°C above pre-industrial times and, if possible, below 1.5°C.
Why does 1.5°C matter? According to climate scientists, a 1.5°C increase is the limit required to avoid theworst impacts of climate change. In October 2018, the Intergovernmental Panel on Climate Change (IPCC)
published a Special Report on Global Warming of 1.5°C. It found that “all analysed pathways limiting warming
to 1.5°C with no or limited overshoot use CDR to some extent to neutralize emissions from sources for which
no mitigation measures have been identified.” As the following graphic shows, avoiding emissions throughmore conventional means (such as transitioning to renewable energy) will be vital but insufficient. Carbon
removal—the process of extracting carbon dioxide from the air and storing it—will be crucial to
avoiding the most catastrophic impacts of climate change.
For those readers wishing to understand carbon removal more deeply, we recommend the National
Academies of Sciences, Engineering, and Medicine 2019 report and the 2021 Carbon Dioxide Removal Primer.

We set our commitments based on the Microsoft fiscal year, which runs from July 1 through to June 30 (forexample, our fiscal year 2030 is from July 1, 2029 to June 30, 2030).

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Challenges of removal today
Carbon removal is far from mainstream. For more than a decade, the corporate world has met its climate
commitments primarily by offsetting carbon dioxide and other greenhouse gas (GHG) emissions bypurchasing “credits” from projects that avoid or reduce emissions (for example, renewable energy and energy
efficiency projects, and avoided deforestation). 3 Engineered removal solutions are costly, and although themarket offers some natural climate projects that physically result in carbon removal (such as reforestation andafforestation), project accounting of the resulting carbon removal is often unclear.
Partly as a result, the market for corporate procurement of carbon removal is nascent and undeveloped.
This presents some fundamental challenges:•••

The global carbon credit economy as it exists today was not set up for carbon removal, and instead
has an undifferentiated focus on avoidance of emissions.
Assessing the quality and validity of carbon removal projects is very difficult in the absence of strong
protocols and verification infrastructure.
Without a way to get clear and valid credit for funding removals, such as alignment with theGreenhouse Gas Protocol and the Science Based Targets Initiative, corporations do not have a strong
business case to support removal projects.

Corporate actions to reduce and avoid emissions continue to be crucial to getting the global economy on apath to net-zero emissions.
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•

The limited supply of high-quality carbon removal projects today means that a commitment like
Microsoft’s—let alone others—will be difficult to meet.

Though much needed, a distinct carbon removal market simply doesn’t exist today. Our goal is to help
establish this market by sparking a paradigm shift as soon as possible.

Growing corporate momentum
Although carbon removal represents a small fraction of corporate climate procurements and investments
today, a handful of other organizations, including Amazon, Apple, BCG, Delta, Facebook, Google, Mars,
Shopify, Stripe, SwissRe, United, and Velux, are incorporating carbon removal into their climate strategies.
Shopify and Stripe, like Microsoft, are making carbon removal a core focus.
A crucial element of our approach is our commitment to deep transparency. We know that we are one of thefirst corporations to conduct research and due diligence on carbon removal. We believe it is incumbent upon
us to share what we have learned, to inspire other organizations to adopt carbon removal into their own
strategies, to set a high bar for quality, and to help develop the market. In addition to the information weshare in this paper, we are publishing all non-confidential project information submitted to our RFP, throughan online project portal at aka.ms/msftcarbonprojectsubmissions.

7Developing ourcarbon removal
strategy
To achieve our carbon negative commitment, we needed to form our strategy and then get tactical—quickly.
This section outlines how we approached our removal work plan.

Setting our scope
When we made our carbon negative commitment, one key tenet was that those of us who can afford to
move faster and go further should do so. This principle is grounded in our recognition of global climate
inequity, recognizing that those countries and communities who are most responsible for the emissions
causing climate change are not those who are likely to feel its greatest impacts.
Accordingly, by 2030, we will remove more carbon than we emit—including emissions we incur directly
through our operations and those from our value chain (such as those associated with the manufacturing,
distribution, and use of our products). In addition, by 2050, we will remove from the atmosphere theequivalent of all carbon emissions associated with our business operations and electricity procurement fromthe time our company first started, in 1975.
We assessed our options to achieve these commitments, grounding our strategy in science. We closely
studied the IPCC Special Report on Global Warming of 1.5°C. We consulted with external experts in climate
science, decarbonization, and carbon removal. And we came to some key conclusions:••

We can’t meet our carbon negative commitment without carbon removal. We arecommitted to reducing our value chain emissions by over half by 2030. However, to cover the
residual, hard-to-eliminate emissions, we estimate that we will need to remove 6 million tons ofcarbon in 2030 (and annually in subsequent years). And to compensate for our historicaloperational emissions dating back to 1975, we must remove an additional 24 million tons
between 2030 and 2050. In 2021—as we begin expanding our coverage of our value chain—wetargeted 1 million tons of removal.
We need to use clear carbon math. To achieve net zero, we must first make deep cuts in our
GHG emissions, and then for every ton of residual GHG emissions that we emit into theatmosphere, we need to remove a ton of carbon dioxide. To be carbon negative, we will need toremove more carbon from the atmosphere than we emit in any given year. Sound andstraightforward carbon removal accounting will be vital.

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Moving from offsets to removal
As we shifted our focus from carbon offsets to carbon removals, we entered a relatively new landscape. We
could no longer rely as heavily on carbon registries to validate project quality, because their standards were
designed almost exclusively to measure and verify the claims of projects that avoid or reduce emissions, andwe experienced a lack of consistency in how the standards address key criteria. We are eager for standards toaddress these issues in their crediting systems. For now, although we did look to existing standards for some
guidance, we largely needed to set our own course.
We assembled a team of third-party technical experts from the advisory firm Carbon Direct andnongovernmental organization (NGO) Winrock International to help inform our criteria and due diligenceprocess. This team gave us a much clearer idea of how to determine which types of purchases would be ofhigh integrity and lead to real, long-lasting removal of carbon from the atmosphere. We established ourselection criteria through this process (see Appendix A for a breakdown of these criteria).
As we built our strategy, three key points formed the foundation:••

Be realistic about the durability of carbon removal. Unfortunately, “permanence,” a conceptthat is central to traditional carbon offsetting, is no guarantee with most projects available today.
Instead of permanence, we consider the “durability” of a removal claim—the time that the
specified tons of carbon dioxide will remain removed and sequestered from the atmosphere. For
example, although natural climate solutions—such as tree planting and soil carbon sequestration
projects—are a vital part of carbon removal portfolios, they are also less durable. They represent
dynamic natural carbon cycles (as trees eventually die and decay, and soil is turned), andconsequently require additional monitoring to track how long they keep carbon dioxide out of
the atmosphere. See the Durability and risk section for more detail.
Take a thorough and transparent approach to vetting. The issue of durability is just one
example of risk with carbon removal projects. For example, we sought forestry projects in whichcarbon removal would not have happened without the existence of the project, also known as
additionality. Unfortunately, there is no consistent market standard for additionality today, anddifferent stakeholders rate project additionality differently. As project controversies inevitably
surface, we take an approach of openness, learning, and transparency to help improve our own

9•

portfolio and drive broader market learning. See the Portfolio risks and remedies section for an
overview of the risks that we see in our portfolio and the remedies we are using to mitigate
those risks.
Place bets for the greatest opportunities for scale. The importance of mitigating risk is
obvious (particularly given the unknowns and relative newness of this market), but at the sametime, we need to move quickly to achieve our goals. We can’t afford to simply play it safe. Our
aim is to build the market and drive wide-scale adoption of carbon removal, and for that to be
successful we need to purchase from projects with the greatest potential to scale. We accept thatto push the limits in this way, we can’t wait for perfection. We will fund the projects that we
believe are the best available today, and those most likely to reach maturity in the short andmedium term. As a result, this means purchasing some carbon removal units that are notcurrently verified and therefore not formally applicable to our GHG inventory. Some of our earlybets may fail. If they do, we will be transparent about our experience and share our learnings.

Catalyzing a market
We knew that choosing how to fund carbon removal would be difficult—the types of projects we want tosupport are fundamentally different from what’s widely available through today’s carbon markets. This is one
reason why, when we announced our carbon negative commitment, we also announced a $1 billion Climate
Innovation Fund, designed specifically to help support new, early-stage ventures in carbon removal andgenerate more supply. This investment will help expand a growing pool of suitable carbon removal projects
that we and other corporations can draw from in the coming decades.
We also wanted to make a clear statement about the types of projects that would fit our requirements andidentify the best candidates from around the world. This meant that we could not work with a single
supplier—we had to cast our net as wide as possible. In July 2020, we issued a request for proposals (RFP) tosource our first carbon removals. The RFP was open to a broad array of project types, including natural
climate solutions and engineered solutions. Although designed to help us meet our own carbon
commitments, the RFP was, in effect, a mini-blueprint for what we feel the global market requires (seeAppendix B).
The broad market response to our RFP indicated a need for standard definitions and thresholds of key
removal concepts (additionality, leakage, and durability), how to account for removal consistently acrossdiverse project types, and how corporations can credibly claim credit for funding removal outcomes.
Corporate buyers, NGOs, policymakers, and project developers should answer these questions together, andwe want to participate in shaping those conversations.

10Constructing
our FY21
portfolio
We received proposals from 79 applicants representing 189 projects from over 40 countries, far more thanwe expected. Of these proposals, more than 55 million unvetted mtCO2 were available this year, although
based on our review the current-year proposals meeting our basic prerequisites totaled approximately 2
million mtCO2. 4 From these proposals, we chose to purchase from 15 organizations in FY21 from projects
representing more than 1.3 million metric tons of carbon removal. (See Appendix C for a full list of the
respondents and aka.ms/msftcarbonprojectsubmissions for our online project portal.)
The projects we selected can be categorized based on the type and durability of solution they represent:

Short-term natural solutions with up to 100-year durability, such as forests and soils.
Medium-term blended solutions with 100- to 1,000-year durability, such as biochar and specifictypes of carbon dioxide utilization.
Long-term engineered solutions with more than 1,000-year durability, such as direct air capture andstorage, and bioenergy with carbon capture and storage.

For our initial year of procurement, more than 99% of the total volume we purchased was from short-term
natural solutions, with less than half a percent from medium-term blended or long-term engineered
solutions. This reflects how today’s available solutions align with our criteria.

Some proposals lacked technical grounding, and others conflated removal with avoided or reduced
emissions.
411What we purchased
The following table describes the carbon removal purchases we made in FY21, in order of contracted volume(in metric tons of carbon dioxide, abbreviated as mtCO2).

Contracted
durability

Contracted
volumeAmericanCarbonRegistry

100
years

240,000
mtCO2

Afforestation/reforestationof private land
traditionally used for
agriculture andreforestation of underutilized farmland that was
historically deforested

AmericanCarbonRegistry andPlan Vivo

40years (GT)and 30years (CCP)

209,800
mtCO2

Forestry

Improving forest
management across fourareas in Virginia
representing 22,000 acresand in Washington onnearly 22,855 acres

California Air
Resources
Board,
ClimateActionRegistry,
AmericanCarbonRegistry

100
years (VA)
and 40years (WA)202,369
mtCO2

US
Southeast

Forestry

Deferring timber harvests
annually, increasing the
average age (and carbon
removal capacity) of
forests

N/A (underdevelopment)

Underdiscussion 5200,000
mtCO2

Cumberland
Forest ProjectKentucky,Tennessee,
and Virginia

Forestry

Improving forest
management on 108,182
acres

AmericanCarbonRegistry,
California Air
Resources
Board,
ClimateActionRegistry

100
years

153,000
mtCO2

ClimateCare
Oxford and
PUR Projet

Jubilación
SeguraPeru

Forestry

Agroforestry andreforestation with smallscale farmers

Verified
CarbonStandard

49
years

100,000
mtCO2

Truterra/
Land O’Lakes

Soil Carbon
Best Practices

US

Soil

Science-based cropland
management

N/A (underdevelopment)

20
years

100,000
mtCO2

Supplier

Project(s)LocationType

Description

Certification

Green
DiamondKlamath Eastand West IFM

OregonForestry

Improving forest
management on 573,231
acres

NaturalCapitalPartners andArbor Day
Foundation

GreenTrees
ACRE andCommuniTree
CarbonProgramSouth
Central US
andNicaragua

Forestry

The Nature
Conservancy

Clinch Valley
Conservation
andWashington
Rainforest

Virginia andWashington

SilviaTerra

NaturalCapital
Exchange(NCAPX)

Cumberland
Forest, LP
managed by
The Nature
Conservancy

12Supplier

Project(s)LocationType

Description

Certification

Contracted
durability

Contracted
volumeRegen
NetworkDevelopment

Cavan,
Wangella,
Wilmot, andWoodburn

Australia

Soil

Increasing soil organiccarbon through holistic
cattle grazing
management practices onfour ranches totaling morethan 18,000 hectares ofgrasslands

Regen
Network

25
years

93,338mtCO2

Shell Energy
North
America

TIST India

India

Forestry

Restoration of historicdense forests byencouraging farmers to
replant on
degraded/unused land

Verified
CarbonStandard

13
years

9,000
mtCO2

Charm
Industrial

Bio-liquid
geologic
sequestration

Oklahoma

Bioenergy
withcarboncaptureandstorage(BECCS)

Storing carbon dioxide in
deep geologic storage ascarbon-containing fluid
produced from biomass

N/A (underdevelopment)

10,000
years

2,000
mtCO2

Climeworks

CarbonDioxideRemovalIcelandDirect air
captureRemoving CO2 from airand storing it
underground

N/A (underdevelopment)

10,000
years

1,400
mtCO2

Carbon Cycle
via
Puro.earth

Carbon Cycle

SE Germany

Biochar

Producing high-quality
biochar from sustainable
feedstock for use as soil
additive and animal feed

Puro.earth(pending
ICROA
approval)

800
years

1,000
mtCO2

Carbofex via
Puro.earth

Carbofex

Finland

BiocharBiochar from combined
heat-and-power system,with the biochar used ashorticultural substrates
and water filter

Puro.earth(pending
ICROA
approval)

800
years

500 mtCO2

Coöperatieve
Rabobank
U.A.

Acorn

Brazil,Colombia,
Peru

Forestry

Agroforestry with 50+
smallholder farmers

N/A (underdevelopment)

10
years

500 mtCO2

ECHO2
via
Puro.earth

ECHO2Australia

BiocharDiverting green wastefrom landfill andconverting to bio energy
and biochar

Puro.earth(pending
ICROA
approval)

600
years

400 mtCO2

SilviaTerra is developing a conversion factor from ton-years to tons in collaboration with carbon market
registries.

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Short-term natural solutions
Forestry projects
As trees grow, the photosynthesis process naturally converts carbon dioxide into wood and fruit. According
to the Arbor Day Foundation, one mature tree can absorb 48 pounds of carbon dioxide from the atmosphereeach year and supply enough oxygen for up to four people per day. Forestry projects can also provide
additional environmental benefits, such as cleaning our drinking water and helping to protect endangered
species through restored habitats.
While forests are essential to carbon removal, it is a scientific reality that these projects are inherently
dynamic and impermanent. We assume that carbon removed via these projects today will need to be
removed at some point again in the future, such as when trees are lost to wildfires or when harvested wood
products decay.
Forestry projects we considered were in four primary categories:
1.
2.
3.
4.

Reforestation restocks existing forests that have been depleted, often through deforestation or
logging.
Afforestation introduces trees to create a new forest in an area that has not been forested
previously (or in recent history) and where tree growth is beneficial.
Agroforestry intentionally integrates trees into agricultural areas.
Improved forest management (IFM) aims to increase the carbon stored in forests, including
increasing the average age of trees in timber harvesting areas by avoiding or delaying conversion totimber.

We also received proposals from avoided forest conversion and REDD+ (Reducing Emissions from
Deforestation and Forest Degradation) projects, with the recognition that intact forests play an important role
in removing carbon dioxide from the atmosphere. These represented a smaller percentage of our candidate
pool.

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We favorably viewed forestry projects that: 6
1.

2.
3.

4.

5.

What makes an ideal forestry project?

Have conservative baselines that clearly and credibly
Clear, conservative baselines anddelineate business as usual, showing how the projects
additionality
lead to additional carbon removal (that is, notoverestimating harvesting to generate more credits).
Distinction between carbon removal andWe saw a high level of inconsistency in this regard,
avoided emissions
especially in IFM projects.
Clearly distinguish between carbon removal andSufficient accounting for activity andavoided emissions. This was also a missing element ofmarket leakage
many proposals.
Sufficiently account for activity and market leakage
Strong risk management and recourse
within and beyond the jurisdictional boundary of theprovisions
project. We feel that any forestry project with a zeroUses technology for monitoring andleakage deduction is simply unrealistic given theverification
dynamic nature of resource markets. In the near term,
if a forestry project in our portfolio does not accountfor leakage, we will make our own internal deduction.
Incorporate strong risk management and recourse provisions, recognizing the dynamic nature of theforest carbon cycle and showing how a developer would adjust if a project did not meet its
anticipated volume.
Use technology for ongoing monitoring beyond existing standards, providing more confidence in
actual carbon removal and helping to set expectations higher for other projects in the future.

We selected the following projects this year (with supplier names in parentheses):•••

The Klamath East and West IFM projects (Green Diamond), located in Oregon, address impacts ofoverharvesting by previous owners. This legacy left the forest carbon stocks significantly below thecommon practice baseline set by the California Air Resources Board (CARB). Forest thinning andother silvicultural tools are being used to improve forest health, manage fire hazard, and maximize
long-term forest growth. Atmospheric carbon removal is achieved through incremental tree growth
as evidenced by increases in baseline carbon stocks for the project areas.
Natural Capital Exchange (NCAPX) (SilviaTerra) is a data-driven forest carbon marketplace in the
United States that bridges operational, acre-level forest management with holistic, landscape-level
carbon removal. The backbone of the project is a high-resolution, nationwide forest inventory called
SilviaTerra Basemap, developed in collaboration with the Microsoft AI for Earth program. This tool
uses remote sensing to measure baseline and performance on an acre-by-acre basis across the entire
project area, providing transparency and precision to the resulting credits while lowering
measurement and monitoring costs, making participation more accessible for landowners of all sizes,
including those with smaller plots of land.
Clinch Valley Conservation (The Nature Conservancy) is a project in southwestern Virginia. The
Clinch River is one of the last free-flowing tributaries of the Tennessee River system and harbors thenation’s highest concentrations of globally rare and imperiled fish and freshwater mussels. The
Nature Conservancy has protected its lands and waters since 1990. It launched the Conservation

The projects in our portfolio did not uniformly fulfill all these preferences, which is an indication of thechallenges of the market today.

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•

•

•

•

•

•

Forestry Program in 2002 and now manages some 22,000 acres to model sustainable forestry
practices. Its on-the-ground operations are designed to provide economic opportunity for forest
owners and enhance forest resources such as soil and water quality, high-value timber, sensitive
wildlife habitat, and carbon storage.
Cumberland Forest Project (The Nature Conservancy) is a 253,000-acre conservation impact
investment located in the Central Appalachian region of Kentucky, Tennessee, and Virginia, of which
Microsoft’s purchase supported 108,182 acres. It aims to improve the health of working forestland tobenefit local economies, wildlife habitat, clean water, and climate resilience in a globally significant
biodiversity hotspot. Managed through its NatureVest impact investing team, the project seeks toachieve financial returns for investors and environmental outcomes generated by sustainable timber
management, carbon sequestration, recreational access, and nature-based local economic
development.
GreenTrees ACRE (Advanced Carbon Restored Ecosystem) (Natural Capital Partners and ArborDay Foundation) aims to reforest one million acres in the Mississippi Alluvial Valley, one of the mostimportant wetland ecoregions in North America. The project focuses on restoring degradedagricultural lands back to a highly beneficial, native forest ecosystem by helping landowners establish
and grow trees on private lands that have been in continuous agricultural use for decades.
Reforestation supports this vital watershed across seven states in the South Central United States,
restore habitat for threatened and endangered wildlife, and support the economic livelihoods of over
550 small- to medium-sized landowners. All the carbon credits generated through the project reflect
carbon removal from the atmosphere.
Jubilación Segura (ClimateCare Oxford and PUR Projet), a grouped afforestation and reforestation
project within the Amazon Andean foothill forest in the San Martin region of Peru, addresses
widespread deforestation caused by the expansion of agriculture, typically driven by international
demand, degraded lands, and low farmer income. Small-scale farmers increase land productivity anddiversify incomes through agroforestry and reforestation on previously degraded land. The project iscertified under the Verified Carbon Standard, with timber harvesting certified under the Forestry
Stewardship Council Certification.
The CommuniTree Carbon Program (Arbor Day Foundation, Natural Capital Partners), managed by
Taking Root, is the largest reforestation initiative in Nicaragua. It helps farming families to grownative tree species and build forest-based enterprises on underused farmland that has been
historically deforested, creating sustainable livelihoods for the long term. The project team is madeup of cross-disciplinary local and international experts in forestry, business, smallholder economics,
computer science, and remote sensing, and the project has been used as a best practice reforestation
model by organizations including the United Nations and European Union.
The Washington Rainforest Project (The Nature Conservancy) is based in the lowland areas of the
Washington coast—areas heavily affected by more than a century of industrial forest managementthat has almost eliminated old-growth forests. By managing Conservancy-owned forests to restore
old-growth forest habitat and function, this project can sequester a significant amount of carbon andat the same time restore habitat for wild salmon and other wildlife. It aims to connect forests fromsummit to sea through a combination of philanthropic capital and proceeds from carbon sales,
supporting restoration efforts in the Olympic Rainforest and Willapa Bay.
International Small Group and Tree Planting Program (TIST) India (Shell Energy North America)
is a reforestation and sustainable development project enabled by subsistence farmers. It is one ofmany solutions in Shell’s global portfolio spanning five continents aimed at helping its customers intheir decarbonization journey. Managed locally, the program uses a community-led approach to tree
planting and reforestation, with small groups of farmers planting and maintaining trees on degraded16•or unused land, restoring what a century ago was dense forest. These groups receive 70% of the
profits generated from carbon credit sales.
The Acorn project (Coöperatieve Rabobank U.A.) provides long-term food security for developing
countries with indigenous agricultural practices by helping smallholder farmers in their transition toagroforestry with the help of local partners. The benefits of agroforestry for the farmer include amore diversified and higher yield, improved soil health, and better resilience against climate change
and weather events. The project uses scalable, transparent, and inexpensive remote sensing
technologies to accurately measure yearly biomass increase. Rabobank measures the carbon storage
yearly, sells ex-post carbon credits, and pays the farmers 90–95%, reducing the cost of entry to themarket for farmers.

Soil projects
Carbon sequestration in soil is the process by which carbon dioxide is removed from the atmosphere andstored as soil organic matter, often in cropland and grazing lands. Through photosynthesis, plants assimilate
carbon, which is then consumed by animals or added to the soil as residue when plants die and decompose.
According to the Ecological Society of America, although oceans store most of the earth’s carbon, soils
contain approximately 75% of the carbon pool on land—three times more than the amount stored in living
plants and animals.

17

The long-term conversion of grassland and forestland to
cropland and grazing lands has resulted in historic losses ofsoil carbon. However, there is significant potential forreversing this trend through restoration of degraded soils andwidespread adoption of regenerative soil conservation
practices, which can also help improve water quality andincrease crop yield. Conservation tillage, cover cropping, crop
rotation, and improved cattle management are a few practices
that can increase carbon storage in soil. As with forests, we
also recognize that soil projects are inherently impermanentand that sequestered carbon can be released to theatmosphere, such as through erosion, tillage, or land usechanges.

What makes an ideal soil project?
Baseline and verification in-soil sample
measurements to supplement modeling,aiming for 30–50cm depth in the longterm
Distinct and measured tallies of removal
and avoided emissions
Net-negativity claims account for all
program inputs/outputs (such as
fertilizer)

The soil carbon market is relatively immature, and thecertainty of soil carbon removal estimates is dependent on
Ecologically sustainable farming practices
rigorous and appropriately designed measurement
approaches. As with forest projects, baseline sample
Democratization and equity for farmers
measurements are essential, and projects must clearlydelineate removals from avoided emissions. We realize thatthe process of extracting and processing soil samples is expensive today and will need to become more
affordable in the future for more widespread adoption.
On land where fertilizers are used, we expect net-negativity claims to take nitrogen use into account ascarbon sequestration benefits can be offset by nitrous oxide (N2O) emissions. 7 We also expect soil projects topromote ecologically healthy farming practices and that project sponsors provide full transparency of all
agricultural supplements, including fertilizer and pesticide use. Lastly, we believe that farmers should not be
unduly burdened with program requirements that increase risk for their livelihoods, crops, animals, or local
ecological health.
We selected the following two soil projects this year:••

The Truterra/Land O’Lakes Soil Carbon Best Practices project, based in various regions of theUnited States, focuses on building an innovative and best-in-class soil carbon program into the Gold
Standard Soil Organic Carbon Framework, which currently only covers “improved tillage.” Covering abroader range of soil carbon best practices accessible to US production will create an economy ofscale, generate greater awareness of benefits, and incentivize growers to adopt best practices forcarbon removal.
With Regen Network, four soil organic carbon sequestration sub-projects in Australia focus on
increasing soil organic carbon through better cattle management practices across more than 18,000
hectares of grasslands. The projects, located at the Cavan, Wangella, Wilmot, and Woodburn sites,
use practices such as time-controlled rotational grazing, increased stock density, and decreased
paddock size. These practices are leading to outcomes including increased ground cover, increased
biomass production, and increased water-carrying capacity.

Nitrous oxide is a greenhouse gas that is approximately 300 times more potent than carbon dioxide. It
comes primarily from fertilized soil and animal waste in agriculture.
718

Medium-term blended solutions
Biochar is the only medium-term, blended solution type we chose to purchase from this year. Biochar is acharcoal-like substance that is produced by pyrolysis, which is the heating of organic agricultural and forestry
waste (biomass) in the absence of oxygen. Without oxygen, the material doesn’t combust but the chemicalcompounds (that is, cellulose, hemicellulose, and lignin) that make up the biomass thermally decompose into
charcoal and combustible gases, some of which may be further condensed into a bio-oil. The proportions ofthese byproducts vary based on biomass feedstock and pyrolysis process parameters.

Biochar is a highly porous stable solid that is rich in carbon.
It is commonly used as a soil additive and helps reduce theneed for fertilizers. It can endure in soil for hundreds ofyears, helping to bind and retain water and nutrients.
Although biochar is considered a more recent approach tocarbon sequestration, adding charred biomass to improvesoil quality dates back 2,500 years to the Amazonian basin,
where indigenous people created areas of rich, fertile soils
called terra preta (meaning “dark earth”). 8

What makes an ideal biochar project?
Net negativity claims include full life-cycle
assessment
Reliable availability of sustainable
feedstock with 10–20% moisture and highlignin content

Safe and appropriate disposal of biochar to
We found relatively few biochar projects available to
avoid any human health hazard
purchase, and their pricing was substantially higher thanshorter-term natural solutions. We required a full life-cycle
analysis for each project to assess the net negativity of the process. We also learned that the best projects
use clean biogenic feedstock with low moisture and high lignin content (a polymer that is an essential
structural element in plant cell walls), including crop field residues and woody biomass. Finally, we requiredthat all projects attested to safely and appropriately disposing of biochar to avoid any human health hazard.
We selected three biochar projects this year:•

8

Carbon Cycle, a sustainable agriculture company based in southeast Germany, produces highquality biochar from untreated wood chips sourced locally from Programme for the Endorsement ofForest Certification (PEFC)–certified forests, both for animal feed and as a soil additive. The producthelps reduce the loss of nutrients and nitrate leaching from the soil, reduces the need for fertilizers,
helps protect groundwater, and improves soil fertility, all while binding carbon dioxide for centuries.
One metric ton of biochar removes 3.091 mtCO2. As Carbon Cycle is a small operation, income fromUS Biochar Initiative, https://biochar-us.org/biochar-then-now

19

•

•

carbon removal helps expand its production. The project receives CO2 Removal Certificates (CORCs)
through the Puro.earth marketplace.
Carbofex produces high-stability biochar manufactured with spruce thinnings from sustainably
managed Finnish forests, which would otherwise decompose. Examples of use include city
plantations in Stockholm, Sweden and landfill leachate water filtration in Tampere, Finland. The
additional income from CORCs will allow Carbofex to grow its production and develop new biocharbased products such as phosphorus filtration for lakes and water ecosystems. The biochar removes
3.11 mtCO2 from the atmosphere per one metric ton of product. The project receives CORCs throughthe Puro.earth marketplace.
ECHO2, based in Australia, focuses on developing and supplying modular systems to transformbiomass residues to energy and biochar. It tackles the issue of green waste from food, agriculture,
and wood processing that is burned or landfilled each year, converting it into high-carbon biochar
and clean syngas. Each metric ton of biochar removes 2.88 mtCO2 for centuries. The additional
revenue from CORCs allows the next ECHO2 modules to be commissioned and new biochar
commercial products to be developed, increasing the volume of carbon dioxide that is removed andstored in biochar. The project receives CORCs through the Puro.earth marketplace.

Long-term engineered solutions
While we are hopeful that innovation will spawn many more long-term solution options, we funded only one
direct air capture project and one bioenergy with carbon capture and storage (BECCS, in the form of biooil) project this year. At more than 50 times the cost per metric ton of most natural climate solutions, longterm solutions today are both limited in availability and practically cost prohibitive.


Direct air capture with storage is a process of filtering air through large scrubbers, chemically
capturing carbon dioxide from the air, and storing the carbon dioxide underground permanently. As
today’s direct air capture solutions are very energy intensive, plentiful zero-carbon energy is essential
to achieving net negativity (removing more carbon from the atmosphere than is emitted).
Bio-oil is a liquid byproduct of the same pyrolysis process that produces biochar. When not used forother commercial purposes, it can be sequestered by injecting it into underground salt caverns.

20Knowing the end use of the carbon dioxide captured isessential to verify that it is truly net negative. Is it stored
responsibly with ongoing monitoring? Is a risk mitigation
covenant recorded in relevant jurisdictions? Is the carbon
dioxide used for durable products (when used commerciallyrather than being stored underground)? What is the full lifecycle impact of the project?
We selected the following two engineered projects this year:••

What makes an ideal direct air capture
project?
Net negativity
Affordability
Use of zero-carbon energy

US-based Charm Industrial has created a novel
Responsible storage of CO2, including
process for preparing and injecting bio-oil and otherongoing monitoring for geologic storage
carbon-containing liquids into geologic storage. The
process takes atmospheric carbon dioxide captured in
Existence of a risk mitigation covenantbiomass, converts the biomass to a carbonrecorded in relevant jurisdictions
containing liquid, and injects it into deep geologic
storage. The company has reported that it hascompleted its first demonstration injection of 80 mtCO2 and is rapidly scaling up to meet demand.
Climeworks developed a direct air capture technology solution that captures carbon dioxide fromthe air and stores it underground using a mineralization process developed by Icelandic company
Carbfix. Climeworks has direct air capture plants in Europe, with plans to scale up rapidly andincrease capacity to a scale of removing billions of tons of carbon dioxide.

Under construction: Climeworks’ new large-scale direct air capture and storage plant “Orca”(Credit: Climeworks)

21

Project selection considerations
In our review process, we considered the prerequisites and criteria listed in Appendix A. In parallel, we
modeled portfolio scenarios based on project costs and our overall budget.
We reviewed every proposed project for carbon accounting integrity, additionality, durability, and leakage to
identify whether it was offering carbon removal. The findings of this review were not as clear as we had
anticipated. We also identified a list of red flags that caused us to ask more critical questions about someprojects.

Additionality: How much removal would have happened without the project?
One of our criteria for carbon removal is whether it would have happened without the existence of the
project, also known as additionality. For natural climate solutions, this is a complicated and controversial
topic—relying on logic that can be difficult to prove in either direction. At least two significant issues make itchallenging to assess the carbon additionality of natural climate solutions today:
1.

2.

There is not a single, clear market agreement for how to calculate the baseline against which a
project’s impact gets measured. Project developers can misuse baselines, resulting in inflated credit
values. Baselines against which removals are estimated must be set conservatively to minimize risk ofover-crediting.
No common authoritative standard exists on how carbon finance and corporate procurement ofcredits contribute to additionality. Some projects have received criticism because payments forcarbon credits are only a percentage of the entire project funding stack or because landowners don’tknow that the project is generating carbon credits. In the view of some market players, carbon
finance is the “last mile” source of funding to help a project achieve viability and is very often pairedwith other sources of funding to make the project happen, like financing of renewable energy andaffordable housing.

Going forward, we believe that an open debate leading to clearer market agreement about what counts as“carbon additionality,” why, and who gets paid for what will be crucial to build trust and integrity in thesystem overall.

Durability and risk: How long will the carbon dioxide be kept from the atmosphere?
We assess carbon removal projects in part based on their durability, categorized as short term (up to 100
years), medium term (100 to 1,000 years), and long term (more than 1,000 years).
Forests and soil—the basis for most carbon project volume on today’s market—are part of Earth’s naturalcarbon cycle, in which carbon storage is short term (measured in the span of decades). Their carbon removal
is inherently impermanent, in contrast to engineered solutions, which can store carbon for the long term(measured in the span of millennia).
Today’s carbon markets often use “buffer pools” from which a project developer can replace tons that revert
to the atmosphere (for example, through forest fire or illegal logging), but we think that a full, healthy market
will require stronger protections for such scenarios, to ensure that tons stay out of the atmosphere for theduration for which they are contracted. We required transparency about the projected durability of removals,
timely reporting on reversals, and a recourse provision in our contracts to provide this type of protection, but
durability is still difficult to project and substantiate for natural climate solutions.

22

Going forward, we will increasingly seek low risk of carbon loss for the stated term (including from the effects
of climate change), strong measures that minimize that risk, and conservative carbon estimates that accountfor the reversal risk. As the market scales, we feel that there is much more that can and should be done todevelop collective solutions to mitigate the risk of reversal (for example, insurance products, more robust
buffer pools that differentiate between removal and avoided emissions, and technology-enabled projectmonitoring). See the Contractual provisions section in Appendix B for examples of the durability and recourse
provisions we used in our contracts.
To date, however, we have found that the current carbon market language of “permanence” masks the true
durability of a solution—especially natural climate solutions, which could range from 1 year to 100 years.
Another way to think about this is that natural carbon removal has a hidden cost of replacement when theassociated tons revert to the atmosphere—almost certainly sooner than the engineered removal tons.
This disparity makes it hard to compare natural and engineered solutions. We want to help change thismindset by developing a more comparable metric that incorporates the immediate availability of somesolutions relative to their durability.

Leakage: Will the same emissions just occur elsewhere?
Some projects inadvertently shift emissions from one geographic area to another area (includinginternationally) that is not counted in the project claim. Activity leakage occurs when an activity is displaced
from one geographic area to a nearby area. Market leakage occurs when a project reduces supply of a
specific product but market demand encourages others to provide that product instead. An IFM project, forexample, might lead to carbon removal in one area by letting trees grow longer but may indirectly result intrees being cut elsewhere to satisfy timber market demands, thereby negating removal.
Our approach to mitigate leakage is twofold: (1) make an internal deduction of credits we purchase fromprojects that have a material risk of leakage not already accounted for, and (2) encourage carbon market
registries to develop stronger science-based benchmarks for leakage that are informed by peer-reviewed
research. We strongly prefer the latter, as it is not efficient to commission our own independent analyses ofleakage outside of what standards already require.

Red flags and other observations
As the carbon removal market evolves to meet increased corporate demand, important questions are
surfacing about market design and integrity. Corporate buyers need to make decisions on what credits tobuy without ideal standards or full information. Based on our survey of this nascent market, we haveassembled a non-exhaustive list of red flags and observations that, if present, would make us hesitant topurchase from a project or, at least, ask more critical questions. These include projects that:•••

Are not measurable and verifiable. Do not have a pathway to third-party scientific verification or
accreditation. Do not have substantiation of their net-negativity claims (for example, through lifecycle assessments or clear project documentation).
Mix avoided or reduced emissions with removal. Describe activities that avoid and reduce
emissions without clear accounting of removal.
Inflate credit volumes. Take advantage of project accreditation rules for baselining and projectgeographic boundaries to inflate credit volumes beyond what is truly happening (a difficult issue tospot without third-party scientific advisors). (Note that over-crediting may not be intentional but may
result naturally from the current system in which baselines are not prescribed conservatively andconsistently by crediting protocols.)

23

•
•
•

•

Have conflicts of interest. Gain accreditation that was funded entirely or largely by entities with adirect financial interest in the project.
Do not mitigate risk of reversal. Have no mitigation plan for risk of reversals (for example, wildfire,illegal logging, risk covenant for engineered carbon sequestration).
Have hidden environmental or social harms. Inadvertently drive deforestation or land use
competition. Involve widespread planting of non-native species without regard for water
stewardship. Contribute negatively to water consumption, fossil fuel consumption, or toxic waste. Do
not have substantiation of balanced community involvement, especially in cases of climate equity orsocial equity claims.
Play up market hype. Make references to cutting-edge technology topics or topics “du jour”
without basic substantiation.

There are many well-intentioned project teams who may need feedback on how to avoid these concerns.
These red flag observations may not immediately disqualify a project from further consideration but strongly
reinforce the need for well-balanced due diligence with qualified scientific advisors.

Portfolio risks and remedies
Despite our best efforts, we recognize that our portfolio has vulnerabilities due to the difficulty of sourcing
affordable, high-integrity carbon removal in today’s market. We will work to address known risks in our
portfolio to continually increase the quality of projects and our confidence in carbon removal.

Risk

RemedyLack of clarity on
additionality•••

Get involved in the project at early stages of origination and/or review
market purchases deeply.
Avoid IFM projects with baselines below initial carbon stocks.
Advocate for clearer standards guided by public policy.

Short durability terms•

Purchase from long-term solutions to extend overall portfolio durability.

Reversal risk•

Understand project-level risks from forest fire, insects, drought, and illegal
logging through technology innovation.
Develop stronger recourse provisions and buffer pool requirements toensure compensation for failed tons.

•

Lack of clarity abouttrue market leakage••

Internally, deduct credits applied to footprint relative to what waspurchased if we conclude that a project undercounted leakage.
Advocate for better leakage models and peer review process foralignment.

24

Risk

RemedyNon-traditional removal
accounting (forexample, ton-year
accounting)•Ex-ante accounting••

In the short term, count non-traditionally accounted tons ascompensation for our scope 3 footprint (if the project is otherwise highquality).
In the long term, work with market stakeholders to adjust for relative
radiative forcing values of different project types.
Do not apply ex-ante credits to verified net-zero footprint—only apply
when converted to ex-post.

25

Looking
ahead
The world is at a critical inflection point in deciding what counts as
credible corporate climate mitigation, and increased scrutiny of carbon
markets is a healthy dynamic that we welcome in service of the planet.
Our actions should help shape a broad conversation toward greater
market integrity, transparency, and accessibility as preconditions for thelarge-scale removal that the planet needs. Along those lines, our firstyear carbon removal procurement is simply a benchmark of what isavailable today that we must all improve upon.

Even after the deep due diligence we conducted, including reviewing project certifications, we still faced
uncertainty in how to compare proposals on an apples-to-apples basis. The challenges in answering
fundamental questions about carbon removal dominated our review process, resulting in less time andattention on important topics such as climate equity and other areas of sustainability, such as water andbiodiversity co-benefits.
From our perspective, deeper investigation of natural climate solutions is warranted, to raise the bar on
carbon removal accounting across forestry projects. And the market needs to set a strong foundation for the
newer soil carbon offerings while that type of project is still relatively young.
But this need for accountability does not mean that corporations should divest from forestry and soil projects
altogether. More corporate investment is required in both natural climate solutions and engineered
solutions—it just needs to be transparently verifiable and should mitigate inherent risks of reversal. Thishigher bar requires common standards that are consistent, accessible, and understandable to all market
players and technology innovations that support greater precision and efficiency in tracking outcomes.

26Top five learnings
As we move ahead, we have learned lessons that we will use to shape our program going forward:
1. Emphasize straightforward accounting of carbon removal. Our definition of a net-negativeemissions project is one that is additional (would not have happened without carbon finance) andavoids leakage (does not simply shift emissions to another geography). We are still in process ofdetermining a preferred durability threshold in our project assessments. What we have found is thatsound durability projections and clear removal accounting have not yet taken hold in the market,
while additionality, accurate baselining, and leakage in forestry and soil projects continue to besources of debate among market actors and experts. As a result, we constructed our portfolio with alack of perfect confidence about these dimensions. The market needs clearer definitions andstandards to protect the integrity of resulting credits.
2. Place bigger bets. To source the volume that we need by 2025, we will need a portfolio of at least
several medium-sized or large projects (more than 100,000 mtCO2 each). We are still interested insupporting small pioneering projects, but we will likely need to look to project models that offer aminimum level of aggregated supply from small sources (such as small landowners).
3. Do the homework—and refine the process. Due diligence requires deep focus and a heavy draw
on team capacity, even for a large corporation. We developed a “go/no go” approach for triaging
and prioritizing the review of proposals most likely to advance to serious consideration, but ourinaugural process still took longer than we had anticipated. In the future, we could make the reviews
more efficient through pre-screening of projects, educating candidates more deeply about what weare seeking, and scheduling more time for candidates to respond to an RFP.
4. Advocate for stronger carbon removal standards. Our first-year portfolio represents a mix ofcertified and uncertified tons for several reasons: first, there were not enough certified tons available
today that met our other prerequisites; second, we wanted to support promising new approaches
that have not yet been ex-post certified; and finally, we concluded that we could not rely solely on
the standards in place today for full vetting of net negativity (specifically additionality, leakage,
durability, and sound carbon removal accounting). For Microsoft and other companies to do thiswork efficiently in the future, we will need the market to adopt scientifically sound, common, andtransparent standards for carbon removal.
5. Source projects outside the existing carbon market infrastructure. The current voluntary carbon
market was not designed explicitly to measure, validate, and source carbon removal projects.
Traditional carbon project types that were designed to avoid emissions (for example, IFM and
REDD+) can result in real removals, but more work is needed to quantify, account for, and monetize
these removals.

27

Our future outlook
As we contribute to growing and shaping the carbon removal market, we are prioritizing three focus areas.
•••

Getting carbon out of the atmosphere quickly and keeping it out for as long as possible. The
urgency of the climate crisis demands that we not wait for a perfect solution at large scale andaffordable cost but rather that we act now to lower the atmospheric concentration of GHG emissions
today. This means continuing to support natural climate solutions, such as forestry and soil carbon
projects, which are impermanent but immediately available. Meanwhile, we must also invest in
scaling the supply and reducing the costs of engineered solutions, which will get carbon dioxide backin the ground and keep it there.
Establishing clear accounting and high-quality standards for carbon removal. Scaling the carbon
removal market quickly does not mean sacrificing integrity. On the contrary, trust and support in aremoval market among NGOs, corporate buyers, investors, and policymakers requires credibility andwill be crucially dependent on greater clarity, consistency, and transparency of carbon removal
accounting principles and standards. This area is an opportunity for public policy oversight andgovernmental support, not only in the regulatory context but also in support of voluntary markets.
Buying and investing together to drive scale. As we said in announcing our carbon negative
commitment, those of us who can afford to move faster and go further should do so. Microsoft’scommitment, let alone the global need, requires solutions that do not exist at large scale andaffordable cost today. We know that our procurement of carbon removal is a fraction of the financeneeded to develop this market, and we will take proactive steps with other companies andgovernments to drive the collective procurement, investment, and policies needed to support thismarket.

Please visit aka.ms/carbonremoval for more information.

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Appendix A:
Prerequisites andconsiderations

In our RFP, we specified that we would only purchase tonnage from projects that meet the following
prerequisites:1.

Net negativity. Remove net atmospheric carbon dioxide on a life-cycle basis, including thefollowing considerations, with conservative assumptions regarding uncertainty:
i. Additionality.
ii. Durability.
iii. Avoidance of leakage.
iv. Clear removals attributes, as opposed to emissions avoided and/or reduced (that is, areeither clearly 100% removals or are ex-post verified as removal volumes according to acredible, science-based measurement, reporting, and verification [MRV] methodology).

2.

Scientific verification.
i. Projects with carbon removal tonnage that has already been certified and independently
verified ex-post under an existing methodology by a standard approved by theInternational Carbon Reduction and Offset Alliance (ICROA).
ii. Projects that have not yet been certified but have a plan for ICROA-approved
certification, whether because the project has not yet completed the certification process
or because the relevant methodology is still under development.
iii. Projects that do not have a plan for ICROA-approved certification but sufficiently
document prerequisites through comprehensive independent review. Note that we may
request that such projects pursue certification before agreement to purchase.
All projects, regardless of certification status, go through comprehensive independent review ofproject documents and underlying scientific studies to assess the extent to which they fulfill
Microsoft criteria.

3.

Avoidance of harm. Avoid or minimize environmental and social harm (for example, continued
reliance on fossil fuel energy, deforestation, environmental impact due to mining of raw
materials, water consumption, impacts to indigenous/local rights, and violation of nationalsovereignty).

If projects did not meet the preceding prerequisites, they were not qualified for further consideration. Of the
projects that met the preceding prerequisites, we considered the following criteria to help inform our final
project selection:•

Global carbon removal potential. Projected to contribute meaningfully to a global CDR portfolio
based on peer-reviewed science.

29

•

•

•

•

Affordability. Have a path to being affordable at scale (for example, $100/mt in 5–10 years). Ourcurrent target average price per ton is $15/mtCO2, but we will review proposals at any unit cost thatprovide a future projected cost curve.
Climate equity. Engage and empower diverse stakeholders who have otherwise faced systemic
barriers to accessing carbon finance (for example, small landholders, diverse suppliers, new voicesfrom the Global South). Support projects that address the disproportionate impacts of climatechange on low-income communities; vulnerable communities in developing countries; andcommunities that bear the brunt of industrial pollution or are transitioning to low-carbon economies.
Work to ensure that under-represented and under-resourced communities are included in thetransition to an environmentally just future.
Technology innovation. Use technology innovation to improve carbon market outcomes (forexample, reduce certification cost per metric ton of carbon dioxide, democratize selling/buying
opportunities, and overcome other barriers to scale).
Other sustainability dimensions. Proactively promote other measurable sustainability objectives(for example, water stewardship, waste reduction, biodiversity protection), especially in areas ofMicrosoft campuses and other operations.

30

Appendix B:
Sample contract
languageIn the contracting process for 2021, Microsoft and our project partners agreed to include several new
contracting sections, including new definitions and provisions on durability and reversal risk. Following issample language from those sections.

Definitions
Carbon Removal Unit or CRU: means a unit representing one metric ton of CO2 removed from theatmosphere, net of any life-cycle process emissions, and intended to be permanently stored or otherwise
sequestered.
Durability Period: means the period during which (i) the CO2 represented by the Project CRUs Delivered
under this SOW is required to remain removed and sequestered from the atmosphere and (ii) the Reversal
Obligations under this Scope of Work (SOW) will remain in full force and effect.
Recourse Pool: means a pool of Replacement CRUs, in a quantity equal to such percentage of the Contract
Quantity as Microsoft determines to be reasonable in light of the Reversal risks associated with the Project,that is required to be maintained by Supplier under this SOW in order to provide Microsoft with Replacement
CRUs in place of Delivered Project CRUs in the event of a Reversal.
Reversal: means an escape or release into the atmosphere during the Durability Period, as a result of a
Reversal Event, of any stored or otherwise sequestered CO2 represented by Project CRUs Delivered to
Microsoft.
Reversal Event: means any event or circumstance occurring after Delivery of any Project CRU and during the
Durability Period, whether intentional or unintentional, that results, or that is reasonably likely to result, in a
Reversal. Under no circumstances will a Reversal Event constitute a force majeure event, even if such Reversal
Event is caused by or results from an event or circumstance that otherwise would constitute a force majeure
event. [Note that the separate treatment of Reversal Event and Force Majeure was meant to ensure that a
supplier could not eliminate its duty to provide replacement CRUs by invoking Force Majeure.]
Reversal Obligations: means the obligations of Supplier following any Reversal Event.

31

Contractual provisions
Durability Period: The Durability Period will be XX years from the date of creation of the Delivered Project
CRUs.

Supplier Reversal Obligations; Microsoft’s Remedies in Event of Reversal•••

Supplier will provide the following performance assurance in favor of Microsoft: In anticipation of any
type of Reversal during the Durability Period, Supplier will maintain a Recourse Pool of Replacement
CRUs in an amount of XX% of total Project CRUs created under the Draft Protocol.
Supplier will notify Microsoft in writing of such Reversal Event promptly (and in any event no later
than in Supplier’s quarterly report with respect to the calendar quarter in which the Reversal Eventoccurred) after becoming aware of the occurrence of such Reversal Event.
Any Reversal Event notice provided by Supplier will include a written report assessing and evaluating
the impact of the Reversal Event on Supplier’s obligations under this SOW, including any potential
Reversals resulting from such Reversal Event and any potential further Reversal Events.

Reporting, Monitoring, and Auditing
Before payment, Supplier will deliver a written report to Microsoft that details the following:• Actual Project CRUs Delivered compared to the Contract Quantity;• Proof of the Retirement of the Project CRUs by evidence reasonably acceptable to Microsoft which
will include:• quantity of Project CRUs Retired;• Project location(s) (State);• Project type/methodology providing Project under;• statement that Retirement is voluntary; and• statement listing Microsoft as the owner or beneficiary of the Retirement.

32

Appendix C:
Respondingorganizations

Following are the respondents to the Microsoft FY21 Carbon Dioxide Removal RFP. We greatly appreciate thetime that all respondents took to submit applications. They are leaders of a new approach to mitigating
corporate carbon emissions, and their contributions enabled us to learn about the market today. This isa transformative time for the world, and we’re excited to see how these organizations evolve in the
coming years.
12Tree Finance GmbH
3Degrees Group, Inc
ACT Commodities
African Parks Foundation of America
Are TreindustrierArk 2030 C.I.C
Bamboo Ecologic, Corp dba RIZOME
Battelle Memorial Institute
Bayer Crop Science
BioChar Now LLC
Biorecro AB
Blue Source LLC
BP Products North America Inc
BTG Pactual Timberland Investment
Group (“TIG”)
Cambium Carbon LLC
Carbo Culture Inc
Carbofex Oy
Carbon Cycle GmbH
Carbon Engineering Ltd
Carbon Sequestration Inc
CarbonCure Technologies Inc
Cargill Incorporated
C-Combinator, Public Benefit
Corporation
CCS Development Partners LLC
Charm Industrial, Inc
Clean Air Action Corporation
Climate Trust Capital Fund I LP (CTC)
ClimateCare Oxford Ltd
ClimeCo Corporation
Climeworks AG
Compensate Compensate Foundation(Kompensäätiö sr.)
Coöperatieve Rabobank U.A.

Corteva Inc
Drax Power Limited
DroneSeed Co
Ducks Unlimited Inc
EBS one Pty Ltd
Ecoera Ab
EcoTree International
Ecotrust Forest Management
EDF Trading Limited
Ekovilla Oy
Fondo Nacionalde Financiamiento Forestal(FONAFIFO)
Green Diamond Resource Company
greenSand Stock NV
GreenTrees LLC
Hardwick Climate Business Limited
Hirsitaloteollisuus ry (Finnish Log
House Industry Association)
Iberdrola SA
Indigo Carbon PBC
Intuit Earth Pty Ltd (carbonsync)
Investancia Paraguay SA
Land Life Company BVLand O’Lakes Inc
Livelihoods Carbon Fund 3 (LCF3)
Moelven Limtre AS
NativeEnergy, A Public Benefit
Corporation
Natural Capital Partners Americas LLC
NatureBank Asset Management Inc(on behalf of Coastal First Nations
Great Bear Initiative)
Nori Inc
Ocean-based Climate Solutions, Inc

Operation Wallacea Ltd
Pachama Inc
Pan-African Environmental
Conservation and Development
Company (PECDC)
Project Vesta
PT Global Alam Lestari
RAINBOW BEE EATER PTY LTD
Regen Network Development Inc
Running Tide Technologies, Inc
Saving Nature Inc
Shell Energy North America (US) LP(“Shell Energy”)
SilviaTerra LLC
Soil Value Exchange Public Benefit LLC
South Pole Carbon Asset Management
Ltd
Spatial Informatics Group
Sterling Planet Inc
Stockholm Exergi AB
Termowood AS
Terra Global Capital Inc
Terraformation Inc
The Conservation Fund
The Nature Conservancy
Tree Global Inc
United States Endowment for Forestry
and Communities Inc
World Wildlife Fund, Inc
XCHG (Xpansiv CBL Holding Group– Xpansiv, CBL Markets, H2OXand Carbon Finance Services)
Yara International ASA

33

Acknowledgments
The Microsoft carbon removal white paper would not have been possible without the contributions of:
Rafael Broze, Microsoft
Amy Luers, Microsoft
Bernardo Medeiros, Microsoft
Carson Wright, Bridge Partners
Sarah Carson, Machtley Group
Dallas Drotz, Machtley Group
Philip LaRose, Machtley GroupKen Machtley, Machtley Group
Claudia Richey, Machtley Group
Bridget Venne, WSP

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