Microsoft has entered into a significant carbon dioxide removal (CDR) deal with Direct Air Capture (DAC) startup Heirloom, marking one of the largest agreements in the field to date. The deal involves the removal of 315,000 metric tons of carbon, estimated to be worth $200 million. Heirloom specializes in DAC technology that accelerates the process of limestone absorbing CO2 from the air, reducing the carbon capture time from years to just days. This has attracted the attention of major buyers of CDR credits, including Stripe, Klarna, Shopify, and Microsoft. The tech giant has previously invested in Heirloom through its $1 billion Climate Innovation Fund, but this new CDR deal provides the startup with the necessary project financing to rapidly scale up its DAC technology.
Microsoft’s Senior Director of Energy and Carbon, Brian Marrs, explained the rationale behind the investment in Heirloom, stating that they believe the company’s technical approach and plan are designed to drive down the cost of large-scale Direct Air Capture at the pace required to meet the goals of the Paris Agreement.
Large companies have been demonstrating strong support for the CDR sector by investing in startups with innovative CDR technologies like DAC. Microsoft has been at the forefront of carbon removal efforts, aiming to become carbon negative by 2050. The financial support provided to Heirloom represents one of the first “bankable” CDR agreements, unlocking critical funding for the DAC company to finance future carbon removal facilities. This funding mechanism is similar to how other large-scale infrastructure projects have been financed for scaling up. CEO of Heirloom, Shashank Samala, expressed that this deal allows them to raise project finance to fuel the company’s rapid growth, similar to what has happened in the renewable energy industry.
The agreement between Microsoft and Heirloom follows the U.S. Department of Energy’s selection of Heirloom as one of the winners of the DAC Hub award. This award includes a subsidy of up to $600 million for Heirloom’s Project Cypress in Louisiana, in collaboration with Climeworks. The project is one of two hubs to receive the highest level of public funding, with the other being the Oxy DAC plant in Texas, which will employ Carbon Engineering’s DAC technology.
Heirloom’s DAC solution involves speeding up a natural process. The company uses a powder made from crushed limestone, a rock that forms using CO2. In nature, this carbon mineralization process takes millions of years, but Heirloom achieves it in just three days. By mixing the powder with water, it acts as a sponge that rapidly absorbs CO2. The captured CO2 can then be safely and permanently stored, providing a low-cost and durable carbon removal solution using limestone.
Microsoft believes that funding Heirloom will help build an early market for high-quality carbon removal and contribute to the company’s carbon neutrality goal. The CDR deal will provide the guaranteed cash flow needed to construct Heirloom’s next two commercial DAC facilities.
In addition to scaling up CDR and DAC, the agreement between Microsoft and Heirloom will also advance the United States’ leadership in climate action. At the 2021 COP26, the U.S. launched the First Movers Coalition, a program that brings together large private companies to commercialize innovative clean technologies through advanced purchase agreements. This program sends a strong demand signal for clean tech, crucial in achieving net-zero emissions targets. Since its launch, the coalition has received significant commitments from the public and private sectors for carbon removal initiatives. Last year, Microsoft, along with Alphabet and Salesforce, committed $500 million to a CDR program as members of the First Movers Coalition. Other large companies are also investing millions of dollars in advanced CDR credit purchase deals. For example, JP Morgan announced earlier this year its intent to buy $200 million worth of carbon removal credits, while Apple invested the same amount in nature-based CDR credits through its Restore Fund.
According to CDR.fyi, Microsoft is currently the largest buyer of carbon removal credits. The platform also reported a 437% increase in CDR purchases in the first half of 2023 compared to the full year of 2022. Microsoft made its first long-term purchase last year in an agreement with Climeworks to remove 10,000 tons of CO2. Climeworks operates the world’s first commercial DAC facility in Iceland, which captures CO2 using giant fans and stores it underground. Earlier this year, Microsoft also agreed to buy carbon removal credits from California-based DAC startup CarbonCapture, although the details of the agreement were not disclosed.
The partnership between Microsoft and Heirloom not only accelerates DAC innovation but also demonstrates how major players like Microsoft are driving the urgent pace needed to meet climate goals. As corporate support for CDR technologies continues to grow, the world moves closer to achieving climate targets.