The Private Sector Built the Market, Time for Us to Scale it

Microsoft has allegedly begun telling its suppliers and partners that it is pausing future purchases of carbon dioxide removal. Microsoft has denied that they are indefinitely pausing future CDR purchases. In a quote from the Heatmap News story above, a spokesperson for the company said, “We continually review and assess our carbon removal portfolio along with market conditions for the optimal balance on our path to carbon negative.”

The news has understandably hit the CDR community pretty hard. Microsoft has been one of the single most important actors in the history of carbon removal. It has made somewhere between 80 and 90 percent of all durable CDR purchases ever recorded. It helped create quality standards for the industry. It publishes its criteria, its lessons learned, and its red flags, creating a shared knowledge base that every subsequent buyer can draw from. For the past five years, Microsoft has been instrumental in the CDR market.

What happened last week is not really a story about Microsoft potentially pausing future purchases. Microsoft is still working on CDR projects across all stages of development. They aren’t leaving CDR. It is, however, a story about the shocking lack of government support for a critical technology to stabilize the climate.

We owe all the early purchasers of CDR a great deal of gratitude. They created and scaled the market out of sheer will. But the voluntary market was never going to be the pathway to gigatons of CDR. The fact that we are in a downturn for carbon removal has almost nothing to do with the decision of a private company. That downturn can be uniquely laid at the feet of governments unwilling to adequately incentivize CDR deployments, of any scale, despite clear scientific consensus that it is needed at scale

The Way Up

The modern CDR market did not exist before 2019 in the way it does today. There were researchers, there were startups, and there were a handful of pilot facilities. Klaus Lackner had been writing about direct air capture since the late 1990s. Climeworks opened Capricorn in Switzerland in 2017. Carbon Engineering had a demonstration plant in Squamish. But there was no functioning market for purchasing carbon removal at any meaningful scale.

That changed with two organizations.

In 2019, Stripe committed $1 million, annually to purchase carbon removal from early-stage companies. Although small, this commitment created an enormous momentum in the tech world.

In 2020, Microsoft announced it would become carbon negative by 2030 and remove all its historical emissions since its 1975 founding by 2050. Unlike most corporate climate pledges, this one came with a procurement budget, a technical team, and a willingness to pay above-market prices for high-quality removal. The company published a white paper in January 2021 detailing its approach to selecting projects, its criteria for quality, and the lessons it had already learned from its first procurement cycle. That document became the closest thing the CDR industry had to a shared standard.

In 2022, Stripe, Alphabet, Shopify, Meta, and McKinsey launched Frontier, an advanced market commitment to purchase more than $1 billion in permanent carbon removal by 2030. The team borrowed the advance market commitment model from the pharmaceutical industry, where guaranteed future demand had been used to accelerate pneumococcal vaccine development for low-income countries. Frontier’s team of technical and commercial experts began evaluating suppliers, facilitating purchases, and publishing procurement criteria and pathway-specific rubrics. As of early 2025, Frontier had signed approximately $455 million in transactions across 45 projects, with the remainder committed through 2030.

These were voluntary efforts. No regulation required them. No tax credit incentivized them. A handful of companies, led by Frontier and Microsoft, knew that CDR needed a market to grow, and they needed to build one, because they understood that is in investment in a stable, prosperous future

It’s amazing what Microsoft and Frontier did and continue to do. This was a moment in time where a relatively unheard of climate technology caught the upwinds of the tech industry. The right people were in the right organizations and created billions in market demand. I actually cannot imagine this today. Really, try to think about speaking to some of the largest companies in the world and saying, “We’re going to spend billions of free cash flow on carbon removal, completely voluntary.” In fact, alongside many others in carbon removal, I have these conversations with potential buyers of CDR, and whether the dollar amount is billions or thousands, the answer is almost always no.

The House Microsoft Built

The scale of Microsoft’s contribution is difficult to overstate. In 2025 alone, the company signed agreements covering 45 million metric tons of carbon dioxide removal, more than double its 2024 volume and nine times its 2023 volume. It contracted with 21 companies across both nature-based and engineered solutions, spanning geographies from Brazil to Bolivia to Denmark to India. By early 2026, Microsoft had signed another 5 million tons in deals in just the first weeks of the year.

According to CDR.fyi, the industry’s most comprehensive tracker, Microsoft’s cumulative contracted volume reached roughly 80 percent of the entire durable CDR market since the company’s first order in December 2020. The next largest buyer, Frontier, accounts for about 1.8 million tons. Microsoft alone more than doubled the entire durable CDR market in Q2 2025.

The company buys tons but also publishes its criteria for high-quality carbon dioxide removal, specifying requirements for net-negativity on a lifecycle basis, independent scientific verification, storage durability exceeding 1,000 years for engineered pathways, and avoidance of environmental and social harm. These published criteria are an influential reference point for other buyers entering the market. Microsoft also publishes annual briefing papers documenting what it has learned, including a taxonomy of red flags for questionable projects and an honest accounting of how difficult it is to find credible supply.

This transparency has a catalytic effect, although not as much as Microsoft would have hoped. Other corporations have entered the CDR market with greater confidence because Microsoft had already done the due diligence and shared the results. Google, JPMorgan, Airbus, Boeing, Schneider Electric, SAP, and Barclays all made CDR purchases.

The Demand Gap

The more productive question is not why Microsoft may have paused, but why Microsoft was alone.

Private sector CDR purchase commitments since 2021 total an estimated $10.5 billion, with Microsoft accounting for roughly 80 to 90 percent of the total. Frontier has committed over $1 billion, of which approximately $455 million has been deployed to date. Google, JPMorgan, Airbus, and several hundred smaller buyers make up the remainder. At the end of the day, other private actors did not step up at the same level as Microsoft. The reasons are varied, but they all come back to the fundamental nature of the voluntary market. Why spend money on CDR rather than anything else?

Government CDR procurement, globally, totals $45 million committed.

Zero dollars have been spent. Zero dollars from the federal governments on a technology that they all acknowledge (or previously acknowledged in the case of the US) will be necessary to reach any climate aspirations.

Canada announced a C$10 million federal CDR procurement program, the only active government CDR purchase program in the world. The U.S. DOE announced a $35 million CDR purchase pilot prize. Neither program has bought a single ton.

On a linear scale, the government bar is invisible. At $10 billion against $45 million, the private sector outspent governments on CDR purchasing by a ratio of more than 200 to 1.

The Investment Gap

The supply side tells a similar story.

Since 2021, private and philanthropic actors have invested approximately $6.5 billion in CDR companies and projects. That includes $3.61 billion in venture capital and equity (CDR.fyi data, with DACCS accounting for 61 percent of the total).

Governments have authorized approximately $4.3 billion in CDR-specific funding. Of that, roughly $725 million has actually been disbursed. The $3.5B DAC Hubs program, authorized under the Bipartisan Infrastructure Law, plus the $35 million purchase pilot, sit in varying states of suspension. The Trump administration has declined to spend, and in some cases, is looking to reassign previously authorized CDR funds.

For context, McKinsey estimated in 2023 that $100 to $400 billion in CDR investment is needed by 2030 to put the industry on a trajectory consistent with net zero by 2050. The combined public and private investment to date, roughly $11 billion, represents 3 to 11 percent of that range. For every dollar of public money that actually reached CDR, the private sector committed approximately $9.

The Way Down

The next 12 to 24 months will be difficult for the CDR industry. Microsoft’s existing agreements appear intact, and companies with signed offtake contracts will continue to receive revenue. But the pipeline of new deals may have frozen. For the roughly two-thirds of CDR suppliers on CDR.fyi that have never recorded a sale, the window to secure customers before running out of capital just narrowed.

Many of Microsoft’s purchased tons still need to be delivered, and that in and of itself will continue to help the industry mature. Those suppliers will continue to work on delivering those tons on time and cost. So even if they have decided to pause new purchases, we will continue to learn from their work for years to come. Those purchases, whether delivered or not, will inform future projects for decades.

Frontier’s remaining ~$545 million in uncommitted AMC funds will matter more than ever as a source of continued demand. Google, JPMorgan, and the smaller cohort of repeat buyers will continue purchasing, but at volumes that cannot replace Microsoft’s contribution. CDR.fyi’s market survey found that 64 percent of suppliers plan to raise financing in 2025, and 85 percent by the end of 2026. Many of those fundraising efforts will fail without purchase agreements to show prospective investors.

The 45Q tax credit at $180 per ton for DAC with geologic storage remains intact, providing a floor for projects that qualify. But 45Q does not cover enhanced rock weathering, biochar, marine CDR, or most biomass pathways, leaving the most promising cost-reduction pathways without deployment-stage support.

Consolidation and bankruptcies are coming. They are a natural feature of any maturing industry. But the pace and depth of the shakeout will be determined by whether any new source of demand materializes in the next two years. If it does, the industry contracts but survives. If it does not, a generation of CDR startups and the knowledge they represent will be lost.

Crawling Back to the Next Upturn

If you understand that climate change is an issue that affects us all and most of all the stability of our value chains and economies, then regardless of your timescale for net zero, we will need cumulative 10s of gigatons of carbon removal. Then the question is not whether CDR will be needed. It is how we get from roughly 1 million tons of deliveries today to billions of tons per year over the next few decades.

Voluntary corporate purchasing cannot close that gap. Microsoft’s extraordinary five-year effort demonstrated both the power and the limits of voluntary demand. One company, spending aggressively, built a market from nothing to $10 billion in commitments. But one company cannot sustain a global industry indefinitely, and the concentration of 80 to 90 percent of all purchases in a single buyer was always a structural vulnerability.

The pathway out is through policy.

The single most important thing that happens now in carbon removal is that we pass durable, adequate policy to incentivize carbon removal across all jurisdictions. To pass that policy, we need philanthropic funding to flow to the policy professionals. We also need large, politically powerful companies like Microsoft, Google, JP Morgan to spend real resources supporting policy on CDR. In many ways, the value of these companies advocating for policy could lead to even better outcomes than the private purchases themselves.

The policy exists. CDR tax credits and R&D money have been previously introduced into the US legislature. Europe is integrating removals into its emissions trading system (the biggest carbon market in the world). Japan is doing something similar with its domestic ETS. Canada will carry out the world’s first procurement. Billions in frozen funds are waiting to be deployed from the infrastructure law. CDR could be a compliance pathway for low-carbon fuel standards (as it is in New Mexico). The same could be true for trade policy that embeds carbon. We have the tools, we need the votes.

The lesson is not that CDR does not work, or that Microsoft is walking back its climate commitments. The lesson is that climate technologies do not scale on voluntary demand alone. Solar did not scale because environmentally conscious homeowners volunteered to pay above-market prices for panels. Solar scaled because governments created policies that made deployment profitable and drove down the cost of the technology. Wind followed the same path. Every energy technology that has reached scale in the modern era did so because policy created the market conditions for private investment to flow. Even fracking was enabled by key research dollars through the Department of Energy, and then derisked in the private sector.

CDR needs the same treatment. Microsoft showed it can work. Governments need to show they are willing to make it last.