Microsoft announced today that it has signed a multi-year deal for the removal of up to 315,000 metric tons of CO2 with Direct Air Capture (DAC) technology company Heirloom, marking one of the largest carbon removal agreements to date.
DAC technology, listed by the IEA as a key carbon removal option in the transition to a net-zero energy system, extracts CO2 directly from the atmosphere for use as a raw material or permanently removed when combined with storage. According to the landmark Intergovernmental Panel on Climate Change (IPCC) climate change mitigation study released last year, scenarios that limit warming to 1.5°C include carbon dioxide removal methods scaling to billions of tons of removal annually over the coming decades, with DAC positioned to potentially account for a significant portion of the total.
Heirloom, alongside partners Battelle and Climeworks, is currently developing the Louisiana-based Project Cypress, a DAC hub expected to be capable of capturing more than 1 million metric tons of CO2 annually from the atmosphere for permanent deep underground storage, more than 250 times the capacity of the largest DAC facility currently operating.
The agreement with Microsoft follows the announcement last month that Project Cypress was selected by the U.S. Department of Energy (DOE) to receive grants of up to $600 million, one of only two projects selected.
Most solutions that capture and store CO2 are early stage and currently limited in scale, including DAC. The new deal signed with Microsoft will enable a new funding mechanism for Heirloom for its DAC development, as one of the first CO2 removal agreements to use a bankable mechanism that funds the project with future project cash flows, similar to structures used for large-scale infrastructure development agreements.
Heirloom CEO Shashank Samala said:
“Microsoft has been an incredible supporter of Heirloom, helping us scale one of the world’s most cost-effective Direct Air Capture solutions. Bankable agreements of this magnitude enable Heirloom to raise project finance for our rapid scale-up, fueling exponential growth like what we’ve seen in the renewable energy industry.”
The new agreement marks the latest in a series of recent carbon removal deals for Microsoft, forming part of the company’s initiative to become carbon negative by 2030, and to remove all of its historical emissions by 2050. Microsoft recently announced DAC-based agreements with climate tech company CarbonCapture and with startup Climeworks, and in March the company entered its first agreement for ocean-based carbon dioxide removal, with ocean health company Running Tide. Most recently, Microsoft announced an agreement for the purchase of 2.76 million tonnes of carbon removal with Danish energy provider Ørsted to capture and store biogenic carbon – emissions resulting from the combustion of biomass – generated at a wood chip-fired power station in Denmark over 11 years.
Microsoft announced an investment last year in Heirloom, as part of the DAC company’s $53 million Series A funding round.
Microsoft Senior Director of Energy and Carbon Brian Marrs said:
“Microsoft’s agreement with Heirloom is another important step in helping build the market for high-quality carbon removal and supports our path to become carbon negative by 2030. As an investor in and customer of Heirloom, we believe that Heirloom’s technical approach and plan are designed for rapid iteration to help drive down the cost of large-scale Direct Air Capture at the urgent pace needed to meet the goals of the Paris Agreement.”