How AI just killed the carbon removal industry

Plus, New Mexico Innovation Hub comes to life near Los Alamos

In today’s edition:

— Microsoft may have just killed the fledgling carbon removal market with its AI ambitions

— New Mexico Innovation Hub comes to life near Los Alamos

— How climate change weighs on the Doomsday Clock

— Antarctic fur seal, Emperor penguin now on endangered list

— Ahead of fire season, Forest Service will close 57 of 77 research facilities

LONDON (Callaway Climate Insights) — The market for carbon credits was always suspect. Big companies would pay to buy voluntary contracts to offset the pollution they spewed into the atmosphere; instead of just cutting that pollution. And nobody really ever knew how well those offsets worked.

But the money raised by the credits was used to fund fledgling carbon removal technologies, such as direct air capture. It subsidized hundreds of schemes and startups trying to find ways to remove harmful carbon, including from fossil fuel plants as they are operating.

Which is why Microsoft’s MSFT 0.00%↑ plan to pause its purchase of carbon credits, first reported last week by Heatmap, is such a big deal. As Microsoft represented about 90% of the business last year, and an estimated 80% to 90% of all carbon credits in existence, it effectively kills whatever market there was. If you could even call it a market.

Microsoft denied it was reducing its climate ambitions and said it could start buying again at any time as part of an altered strategy. But given its exploding data center costs, there is no real reason. It can’t compete in the AI arms race and at the same time get to net zero on carbon by its 2030 goal; and the credits yield no revenue or anything other than cost and a good climate reputation. It’s a classic case of one business line — AI data centers — making another redundant. Any chief financial officer would argue the same.

To put this in context, the estimated value of existing credits is between $1 billion and $2 billion. It is supposed to balloon to $10 billion by 2030, but only if Microsoft and other tech companies such as Google GOOGL 0.00%↑ keep spending.

The amount of carbon removed from the atmosphere by carbon technologies last year was about $1.3 million tons, or less than 1% of the amount removed by planting trees. The amount of carbon emitted into the atmosphere was about 38 billion tons, according to the International Energy Agency.

For the carbon removal startups that were so hot only a few years ago, there is little hope without Big Tech. Government help has always fallen short, now more than ever with the energy crisis. If anything, the shiny new toys for governments are fusion companies and other nuclear technologies.

There will be some buyers of last resort. The fossil fuel companies themselves, which can capture their own carbon and find other ways to monetize it.

Not much of a market, is it? Chalk another industry victim up to the miracles of AI.

If you have ideas or suggestions for us, contact me directly at
dcallaway@callawayclimateinsights.com.

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Artist’s rendering of the New Mexico Innovation Hub.

New Mexico Innovation Hub comes to life near Los Alamos