Microsoft has temporarily halted all new carbon removal purchases as it reviews its broader climate strategy. The move affects direct air capture, biochar, and other engineered carbon removal solutions supported by its $1 billion Climate Innovation Fund, launched in 2020. It could delay hundreds of millions of dollars in planned investments across the carbon removal sector.
The pause was first reported by Heatmap News, in which a company spokesperson said that Microsoft is not indefinitely halting all of its purchases. Rather, she stated:
“We continually review and assess our carbon removal portfolio along with market conditions for the optimal balance on our path to carbon negative.”
Microsoft has been one of the largest corporate buyers of high-quality carbon removal credits. Its decision signals a shift in how major companies evaluate carbon offsets and removal technologies.
The review focuses on whether current solutions can deliver reliable, long-term emissions reductions at scale. It also reflects growing scrutiny of corporate net-zero claims from regulators, investors, and climate groups.
Impact on Carbon Removal Market Pricing
Microsoft’s pause is expected to have an immediate impact on the voluntary carbon market (VCM). The company has played a leading role in scaling demand for engineered carbon removal credits.
These credits are more expensive than traditional offsets. Microsoft has typically paid between $100 and $600 per metric ton of CO₂ removed, compared with $5 to $15 per ton for many nature-based or avoidance credits.
Industry estimates suggest that Microsoft’s pause could significantly reduce demand in the engineered carbon removal market. The tech giant has accounted for as much as 80% to 90% of global purchases of carbon removals, as data from CDR.fyi shows below.
Several suppliers are directly exposed. Companies such as Climeworks and Carbon Engineering have signed multi-year agreements with Microsoft worth a combined $200 million to $300 million. These deals helped fund the early deployment of direct air capture facilities.
The broader voluntary carbon market has already seen price pressure. According to the Ecosystem Marketplace, average prices for carbon credits vary widely depending on quality. Premium removal credits trade at a steep premium due to limited supply and higher verification standards.
Microsoft’s exit, even if temporary, may accelerate a correction in these high prices. It may also reduce near-term funding for early-stage carbon removal technologies.
Microsoft’s Net-Zero Targets Face a Reality Check
Microsoft has some of the most ambitious climate goals in the corporate sector. The company aims to become carbon negative by 2030 and remove all the carbon it has emitted since its founding by 2050.
To support this, the tech giant has committed significant capital to carbon removal. By 2025, it had invested more than $750 million in carbon removal projects and contracted roughly 45 million tonnes of removals.
The current review is examining whether these investments can scale fast enough to meet long-term targets. Key concerns include:
- The permanence of carbon storage, especially for geological projects
- The high cost of engineered removal compared to direct emissions cuts
- The limited capacity of current technologies to deliver millions of tons annually
Many removal methods are still in early stages. Direct air capture, for example, currently removes only a small fraction of global emissions. The International Energy Agency estimates that global carbon removal capacity remains well below what is needed to meet net-zero scenarios by mid-century.
Microsoft is also reviewing how carbon removal fits into its broader decarbonization strategy. This includes aligning removal purchases with renewable energy investments and operational emissions reductions
SEE MORE:
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- Microsoft Strikes 2 Record-Breaking Carbon Credit Deals
Broader Big Tech Climate Strategy Shifts
Microsoft’s move reflects a broader shift across the technology sector. Other major companies, including Amazon, Meta, and Google, have slowed their carbon removal purchases in recent quarters.
Instead, many are focusing more on reducing emissions directly. This includes expanding renewable energy use, improving energy efficiency, and redesigning supply chains.
This trend aligns with updated guidance from the Science Based Targets initiative (SBTi). The SBTi emphasizes that companies should prioritize emissions reductions across Scope 1, 2, and 3 before relying on carbon removal.
Under this framework, carbon removal is treated as a solution for residual emissions that cannot be eliminated. This approach reduces reliance on offsets and increases pressure on companies to decarbonize core operations.
At the same time, regulatory scrutiny is increasing. In the United States, the U.S. Securities and Exchange Commission has proposed new climate disclosure rules. These rules would require companies to provide more detailed reporting on emissions and climate-related risks.
This is pushing companies to strengthen verification standards for carbon credits and avoid reputational risks linked to low-quality offsets.
A Turning Point for Carbon Removal Investment Models
Microsoft’s decision may signal a broader shift in how companies support carbon removal technologies. Instead of buying credits directly, some firms are exploring new funding models.
These include advance market commitments, where companies guarantee future demand, and direct investments in technology development. These approaches can provide more stable funding while reducing reliance on spot market purchases.
The technology sector has been a major driver of carbon removal demand. Since 2022, it has accounted for about 40% of high-quality removal credit purchases. Between 2020 and 2025, major tech companies committed billions of dollars to carbon removal initiatives.
If large buyers step back, developers may face funding gaps in the short term. However, this could also push the industry to improve cost efficiency and scalability.
Current removal costs remain high. Direct air capture can exceed $500 per ton, though companies aim to reduce this below $100 per ton over time. Achieving this will require technological advances, economies of scale, and supportive policy frameworks.
What It Means for Carbon Markets and Climate Goals
Microsoft’s pause marks a key moment for the VCM. It highlights the growing demand for higher standards, better verification, and clearer climate impact.
In the short term, the decision may slow growth in the premium carbon removal segment. Prices could soften, and some projects may face delays or funding challenges.
However, the long-term impact could be positive. Stronger scrutiny may lead to more reliable and transparent carbon removal solutions. This would help build trust in the market and attract new investment.
For companies, the message is clear. Net-zero strategies must focus first on reducing emissions. Carbon removal remains important, but it must be credible, scalable, and cost-effective.
For the carbon removal sector, the challenge is to prove that its technologies can deliver on these expectations. If successful, it will play a critical role in global climate efforts.
The International Energy Agency and other bodies have made it clear that carbon removal will be essential to achieving net-zero emissions by 2050. The question is not whether it is needed, but how fast it can scale.
As the sector evolves, companies that can deliver verified, permanent, and affordable carbon removal solutions are likely to lead the next phase of expansion.
The post Microsoft Hits Pause on All Carbon Removal Purchases: A Major Shift in Corporate Climate Strategy appeared first on Carbon Credits.
More and more small and medium-sized businesses are hearing the same question from their larger customers: What is your carbon footprint? That question now travels down entire supply chains, and it arrives next to tender requirements, certification criteria, and rising customer expectations.
The accounting differences that decide whether your nature investment shows up in inventory, in BVCM, or nowhere at all.
The question reaches a procurement team about three weeks before the next sustainability committee meeting. Someone has read about insetting. Someone else has just signed off on an offset purchase. The CSO wants to know if the two are interchangeable. The answer is no, and the GHG Protocol Land Sector and Removals Standard is the reason why.
This article walks through what each term means at audit-grade specificity, what the standards actually say about how each gets counted, and how to decide which tool fits which target. The insetting vs offsetting question is one of the most-searched in corporate climate strategy, and one of the most poorly answered. By the end of this piece, you should be able to brief a committee on the difference without notes.
The two definitions, in plain English
Offsetting means buying carbon credits generated outside your value chain and retiring them against your residual emissions. The reduction happens somewhere else, financed by you, and the credit is the receipt.
Insetting means investing in emission reductions or removals inside your own value chain, typically with suppliers, where the reduction is directly linked to the products and services you buy. The reduction happens inside the boundary of your Scope 3 inventory, and the accounting treatment is fundamentally different.
The shorthand from the University of Oxford’s Nature-based Insetting Initiative is useful: insetting is what you do with the supply chain you have; offsetting is what you do with the supply chain you do not have.
What the GHG Protocol Land Sector Standard actually says
The GHG Protocol Land Sector and Removals Standard, finalised in 2024 after a multi-year pilot, sets the rules for how land-based emission reductions and removals enter corporate inventories. The Standard distinguishes between inventory accounting (Scope 1, 2, and 3) and project or intervention accounting (a separate methodology for crediting).
For insetting, the practical implication is that supplier-level interventions, when properly measured and attributed, can reduce your Scope 3 category 1 (purchased goods and services) emissions in your inventory. The reduction is not a credit retired against the inventory; it is a lower inventory number, period.
For offsetting, the credit is retired separately. It can be reported as a contribution toward a net-zero claim under the SBTi Beyond Value Chain Mitigation framework or as part of a VCMI Carbon Integrity claim, but it does not lower the inventory number.
A practical consequence: if your Science Based Target requires a 50% absolute reduction in Scope 3 emissions by 2030, insetting moves you toward the target. Offsetting does not. This single point of difference reshapes the procurement decision.
When insetting counts toward Scope 3 (and when it does not)
Insetting counts toward Scope 3 only when several conditions are met:
- The intervention must occur with an entity in your value chain.
- The emissions reduction or removal must be measured against a defensible baseline.
- The reduction must be attributed to your share of that supplier’s output, not double-counted with other buyers.
- It must follow the inventory accounting rules in the GHG Protocol Land Sector Standard, not the project accounting rules used to generate credits.
The most common failure mode is double counting. If your supplier sells the same reduction as a credit on the voluntary market and also reports it to you as a Scope 3 reduction, the math breaks. The Standard requires you to address this risk, typically by purchasing and retiring the supplier-issued credit as part of your inventory or by contractual provisions that prevent the supplier from selling the reduction twice.
When insetting does not count toward Scope 3: when the intervention sits with a supplier you do not buy from, when the baseline is not defensible, when the attribution is unclear, or when the documentation does not survive audit. Those cases default to Beyond Value Chain Mitigation, which is still useful but operates on a different ledger.
The procurement and supplier engagement question
Insetting is harder than offsetting. That is the unfashionable truth most buyers eventually confront. Offsetting is a transaction; insetting is a relationship.
To run an insetting program, you need supplier mapping precise enough to know which farms or facilities sit at which Scope 3 boundary. You need an engagement model that gets suppliers to participate, which usually requires multi-year commitments and shared economics. You need an MRV architecture that measures the right things and produces audit-ready documentation. And you need a contractual structure that prevents double counting and protects both sides.
The trade-off you receive in return is significant. Reductions count against your inventory rather than your residual. Supplier relationships deepen, which protects sourcing continuity. Yield and quality improvements often follow regenerative interventions, which reduces your input cost over time. And the regulatory file, under CSRD, CSDDD, EUDR, and the SBTi FLAG Guidance, is materially stronger.
Choosing the right tool for the right target
A practical decision rule. If your target is a science-based Scope 3 reduction and you operate in a FLAG sector or source FLAG commodities, insetting is the structurally correct tool. If your target is a net-zero claim that includes neutralising hard-to-abate residual emissions outside your value chain, BVCM via high-integrity offsets is the structurally correct tool. Most companies with material Scope 3 exposure need both, in different proportions, sequenced over time.
The sequencing matters. Insetting takes longer to stand up but produces a permanent reduction in the inventory. Offsetting can be transacted faster but does not change the inventory and now sits under tighter claim restrictions. Treat them as complementary tools with different jobs, not as substitutes. The Accountability Framework Initiative and the IUCN Global Standard for Nature-based Solutions both provide useful guardrails for the insetting side, with biodiversity, human rights, and benefit-sharing requirements that go beyond carbon math.
If you are mapping a Scope 3 reduction roadmap and need to scope which interventions count toward your inventory versus which sit in Beyond Value Chain Mitigation, the carbon and sustainability experts at Carbon Credit Capital can help you structure a nature-based supply chain investment program that fits your FLAG exposure, your target architecture, and your audit horizon. Schedule a consultation.
Net zero is often described as a balancing act: cut what you can, account for the rest, and reach zero on the ledger. That framing is useful, but it leaves something out. It treats every tonne of carbon as interchangeable and every route to zero as equally sound, while the science tells a more specific story.
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