Microsoft will purchase 8 million tons of carbon offsets to convert Brazilian farmland into forests. Billed as “the world’s largest carbon removal credit transition to date,” it will see 50% of the offsets dedicated to native species and the rest to eucalyptus for future timber production.
In September, Wood Central reported that the software giant is now investing in carbon capture agreements as part of a pledge to achieve carbon neutrality by 2030. By 2050, it has pledged to remove all carbon emitted since its founding in 1975.
Reuters reports that the deal, signed with Brazilian investment bank BTG Pactual’s forestry arm, the BTG Pactual Timberland Investment Group, will use Verra’s Verified Carbon Standard. Wood Central understands that the credits will start being generated within the next two years, with the deal running until 2043.
“To have a large, long-term agreement with a counterparty like Microsoft executed is a very strong signal to the market broadly as to the strength and value of the voluntary carbon markets,” said Mark Wishnie, BTG’s Chief Sustainability Officer and Head of Impact Investment Management.
BTG’s massive investment in forest and timberland assets
As reported in April, BTG manages over US $6.9 billion in forest assets across 3 million acres of timberland, including a new $1 billion restoration fund connected to Microsoft’s carbon capture agreement, now targeting degraded lands in Brazil, Uruguay, and Chile.
The push comes as deforestation rates in the region—especially Brazil—are now in decline. BTG’s restoration strategy is focused on building positive momentum across Latin America. The strategy aims to restore 135,000 hectares of natural forests and develop sustainable commercial tree farms on an additional 135,000 hectares.
“Institutional investors have a critical role to play in delivering nature-based solutions at a scale that matters for climate and biodiversity,” said Gerrity Lansing, BTG’s Managing Director and Head of International Markets. “The scale of the native forest restoration and sustainable timber production that TIG seeks to deliver with our reforestation strategy enables a carbon removal credit transaction of this size.”
According to Mr Wishnie, “Brazil is home to probably the world’s most sophisticated forestry industry. It is also the world’s low-cost producer of a variety of forest products,” he told agriinvestor. “The other part is forest management for climate, which is sequestering and storing climate out on landscapes, but also producing products that store carbon for an extended period of time.”
Carbon removal instrumental to Microsoft’s path to net-zero
The transaction aligns with the tech giant’s aims to eliminate its Scope 1 and 2 emissions through various means, including:
- Increasing energy efficiency,
- Decarbonising its operations and
- Achieving 100% renewable energy by 2025.
The company achieved a 6% reduction in Scope 1 and 2 emissions from the 2020 baseline year.
However, Scope 3 (value chain emissions) accounts for more than 96% of total emissions. Most of these emissions come from purchased goods and services, capital goods, downstream, and sold products. While large-scale, high-quality carbon removal projects are a crucial pillar of the strategy, they cannot be at the expense of land rights and nursery production.
Amid concerns over carbon colonialism, in June 2023, Microsoft published a whitepaper highlighting the risks that global demand for reforestation and afforestation at scale could stretch worldwide nursery capacity and cause shortfalls in seed stock for regionally acclimatised tropical species. The paper also called for thoughtful consideration of project location based on other potential land uses and clear legal titles, among other issues.
“While we don’t think that Microsoft’s scale of demand will exhaust the supply of prime afforestation lands, that constraint may be felt sooner than expected due to overall growing demand,” the authors said.
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