Microsoft’s $200M Carbon Removal Deal Advances Heirloom’s DAC Solution
Microsoft has inked one of the largest carbon dioxide removal (CDR) deals to date with Direct Air Capture (DAC) startup Heirloom, which involves 315,000 metric tons of carbon removal estimated to be worth $200 million.
Heirloom focuses on building a DAC technology that speeds up the natural process of limestone absorbing CO2 from the air. The company enhances this carbon capture process from years to merely days, attracting large buyers of CDR credits. These include Stripe, Klarna, Shopify, and Microsoft.
The tech giant had previously invested in Heirloom through its $1 billion Climate Innovation Fund. But this recent CDR deal is at magnitude the startup needed in project financing to rapidly scale-up its DAC technology.
Microsoft Senior Director of Energy and Carbon Brian Marrs noted why they’re investing such amount in 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.”
Advancing Early Markets for CDR and DAC
Large companies have been showing strong support for the sector, pumping funds to startups with innovative CDR technologies like DAC. Microsoft has been at the forefront of carbon removal aiming to be carbon negative, removing more than it emits, by 2050.
Its recent financial support for Heirloom is one of the first “bankable” CDR agreements. It unlocks a critical funding mechanism for the DAC company to finance future carbon removal facilities. It works similar to how other large-scale infrastructure projects have been financed to scale up.
Speaking for Heirloom, CEO Shashank Samala remarked that this deal allows them to raise project finance that can help fuel the company’s rapid growth like what happened in the renewable energy industry.
Their agreement follows the U.S. Department of Energy’s DAC Hub award selection which included Heirloom as one of the winners. The subsidy is worth up to $600 million for the startup’s Project Cypress in Louisiana in collaboration with Climeworks.
It’s one of the 2 hubs to win the highest level of public funding. The other is the Oxy DAC plant in Texas which will employ Carbon Engineering’s (CE) DAC technology.
Heirloom’s DAC Technology Explained
Heirloom provides a DAC solution that’s basically speeding up a process that happens naturally. The climate tech 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 does it in only 3 days. How? By mixing the powder with water, which then acts like a sponge that absorbs CO2 very quickly.
The captured CO2 can then be safely and permanently stored for good, providing a low-cost, durable carbon removal with limestone.
Microsoft believes that funding Heirloom will result in building an early market for high-quality carbon removal, on top of helping the tech giant achieve its carbon neutrality goal.
Their CDR deal will provide guaranteed cash flow needed to construct Heirloom’s next 2 commercial DAC facilities.
Advancing America’s Climate Leadership Globally
The agreement between Microsoft and Heirloom won’t only scale up CDR and DAC, but it will also advance the country’s leadership in climate actions.
At the 2021 COP26, the US launched the First Movers Coalition – a program for carbon removal and reduction initiatives. It aims to bring together large private companies to commercialize innovative clean technologies through advanced purchase agreements. The program sends the strongest demand signal in history for clean tech crucial in achieving net zero emissions targets.
Since its launch, the coalition forwarded massive public and private sector commitments in carbon removals.
Last year, three tech giants which included Microsoft, along with Alphabet and Salesforce, together committed $500 million to a CDR program as members of the First Movers Coalition.
Other large companies are also pouring millions of dollars into advanced CDR credits purchase deals.
For example, JP Morgan announced earlier this year intent to buy carbon removal credits that are worth the same – $200M. Apple also invested the same amount on CDR credits as an expansion of its Restore Fund, but it focuses on nature-based CDR, not technological.
Microsoft, by far, is the largest buyer of carbon removal credits, according to CDR.fyi. The platform also reported that CDR purchases went up 437% in the first half of 2023 vs. full-year 2022.
Microsoft made its first long-term purchase last year in an agreement with Climeworks to remove 10,000 tons of CO2. Climeworks launched the world’s first commercial DAC facility in Iceland, which uses giant fans to capture CO2 and bury it underground.
Earlier this year, Microsoft also agreed to buy carbon removal credits from another California-based DAC startup CarbonCapture. The amount of the agreement wasn’t disclosed though.
Its current deal with Heirloom reinforces the leading role of the US in its massive efforts to fight climate change. One focus area of such efforts is scaling up carbon removal and other clean technologies for net zero.
This partnership not only accelerates Heirloom’s DAC innovation but also showcases how big players like Microsoft are driving the urgent pace needed to meet climate goals. As corporate support for CDR technologies grows, the world inches closer to achieving climate targets.
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