Big tech companies are in a buying frenzy for carbon credits to offset all the pollution their AI operations pump out. The rush has created a shortage, but industry stakeholders say that’s actually what needs to happen to get this market moving.
Microsoft and Google have gone on a serious buying spree over the last couple of years. Their purchases pushed prices for the good carbon credits up to almost four times what the cheaper forest protection ones cost.
Tech firms have dropped hundreds of millions since 2019 on permanent carbon removal, mostly in recent years. CDR.fyi tracks this data and says total spending between spot market buys and longer-term deals hit $10 billion.
Scientists say we need these carbon removal projects to slow down global warming. They balance out emissions from industries that still burn fossil fuels, like power plants.
Tech companies keep throwing up more data centers for AI, and a lot of them run on fossil fuels. So profits climb, but emissions do too. That’s what’s really pushing demand.
AI boom drives carbon spending
Brennan Spellacy runs a climate tech company called Patch. He says lots of businesses are using AI to grow, then taking some of that money to buy credits.
“The companies that are performing well are investing heavily, and the reason why these companies are performing well is AI. So AI’s driving profit and profit’s driving investment”, Spellacy said at the COP30 climate conference in Brazil, as mentioned in a Reuters report.
The big tech names all claim they’re shooting for net-zero emissions down the road. Meanwhile, the US bailed on the 2015 Paris climate deal under President Donald Trump.
A Microsoft spokesperson explained their approach: “We send strong demand signals through long-term offtakes to unlock a virtuous cycle of innovation, financing, and deployment. By anchoring large-scale projects, we both drive new supply while leaving headroom for other corporate buyers to enter.”
Buyers are having a rough time getting what they want.
Check out Patch’s numbers. One-third of people wanted biochar credits. But those only made up less than 20% of what actually got sold because there just weren’t enough. Forest restoration credits had the same issue. Requested 25% of the time, sold 12% of the time.
Lukas May handles commercial stuff at Isometric, a carbon registry. His numbers paint a clear picture.
“The desire for high quality is very real, and you can see it in the numbers. In 2024, there were 8 million tons of durable carbon removal purchased, and so far this year, it’s 25 million.”
Big tech’s behind most of that jump, May says.
CDR.fyi’s data shows less than 1 million tons of permanent carbon removal credits have been issued in total. Biochar projects account for most of them.
Supply’s so tight now that more companies are going for offtake agreements. May thinks that’ll help boost supply by giving developers guaranteed buyers.
“At the end of the day, extra demand will drive extra supply,” he said.
Some companies go DIY
Pure Data Centres Group decided they’d just make their own credits. They work with big tech clients and are about to spend 24 million pounds ($31.6 million) building the UK’s biggest biochar facility in Wiltshire.
CEO Dawn Childs said they didn’t have much choice. “When we started to evaluate suppliers, we quickly realised it was very difficult to find a reliable, high-quality product. We decided the best way to guarantee quality was to develop our own expertise and production.”
Alastair Collier runs R&D at A Healthier Earth, the company that’ll operate the new facility. Operations start in December. They’ll scale up over 18 months to pull 9,000 tons of carbon out annually. Three more UK sites are planned.
Collier’s been betting on this for years. “My underlying investment thesis has been for the last three years … that demand will, and already does, significantly outstrip supply.”
This shortage is hitting while concerns about data center emissions keep growing. Some lawmakers want to slap emissions fees on facilities that go over federal limits.
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Source: https://www.cryptopolitan.com/big-tech-carbon-credits-market-squeeze/
