Microsoft has entered a new agreement to procure 650,000 metric tons of carbon credits from the climate startup BioCirc, signaling that the corporation is not abandoning its carbon removal initiatives. While not a colossal deal by industry standards, its significance far outweighs its volume: the contract was inked mere weeks after reports surfaced suggesting Microsoft had purportedly halted new commitments in the active carbon removal market.
For the climate tech industry, such indications carry considerable weight. Market participants estimate that Microsoft currently accounts for over 90% of the global demand for carbon removal credits. In essence, the decisions of this single corporation determine the viability of numerous nascent companies building businesses around next-generation climate technologies.
Microsoft itself denies any freeze on its program. Melanie Nakagawa, the company’s Chief Sustainability Officer, stated that the “carbon removal program is not winding down, and the corporation is merely adjusting the pace and volume of its purchases periodically as it revises its climate strategy.”
The new transaction is based on BioCirc’s five biogas projects. The startup’s technology utilizes agricultural and organic waste, which is processed in industrial bioreactors to produce methane and carbon dioxide. The resulting CO2 is then captured and injected into underground storage beneath the seabed, while the methane is used for electricity generation.
However, the crucial context of this deal relates less to environmental concerns and more to artificial intelligence. The rapid expansion of Microsoft’s AI infrastructure has already begun to disrupt the company’s previous climate calculations. Last month, the corporation announced a partnership with Chevron and the investment firm Engine No. 1 to construct a gas-fired power plant in Texas intended to fuel its data centers. This facility could eventually generate up to 5 gigawatts of power – the output of a substantial energy system.
The potential emissions from such a project far exceed the volume covered by the current deal with BioCirc. This is precisely why the question is being debated more intensely within Microsoft: can the company genuinely uphold its climate commitments in an era of aggressive AI scaling?
Further controversy surrounds the accounting system for “green energy.” Currently, Microsoft offsets its electricity consumption with renewable sources on an annual, rather than hourly, basis. This approach offers the corporation greater flexibility, allowing it, for instance, to more actively utilize gas generation at night to support data centers. However, it simultaneously renders the actual environmental performance significantly less transparent and more challenging to verify.
This issue is particularly sensitive given Microsoft’s ambitious goal of becoming a carbon-negative company by 2030. If the corporation continues to build infrastructure reliant on fossil fuels for AI, it will need to exponentially increase its procurement of carbon credits.
In 2025, Microsoft signed several large agreements for millions of tons of carbon removal, effectively becoming the primary financial driver for the entire sector. Therefore, reports of a potential pause triggered a near-panic reaction among climate startups.
The current deal suggests that Microsoft is likely not abandoning its climate program entirely but rather attempting to adapt it to a new reality – one where artificial intelligence demands ever more energy, and environmental promises become increasingly costly. The only question is whether the corporation can continue to scale its AI infrastructure while simultaneously maintaining its status as one of Silicon Valley’s leading climate advocates.
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