Microsoft and Occidental Petroleum have entered a carbon credits deal as the tech giant seeks to offset the increased greenhouse gas emissions spurred by AI demand. The deal is reportedly worth hundreds of millions of dollars.
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The development comes as the tech industry is grappling to keep its climate promises at a time when energy consumption to support their data centers continues to skyrocket on increased demand for AI services.
Occidental prioritizes tech firms like Microsoft
The Financial Times reported that the deal mandates Occidental, one of the US’ largest oil producers, will sell 500,000 carbon credits to Microsoft for over six years. Both companies have said the deal, which was announced on Tuesday, is the largest of its kind in which Occidental will suck carbon from the atmosphere “and store underground.”
Under this deal, Occidental will sell credits generated by a process known as direct air capture (DAC), which involves sucking carbon dioxide from the atmosphere. This is also expected to be much cheaper than the usual market rate of $1,000.
But, critics have argued that the process remains pricey, using a lot of energy relative to the amount of carbon dioxide it captures in projects to date.
According to Micheal Avery, president and general manager of 1PointFive – Occidental’s carbon management subsidiary, the tech industry has been a “priority sector.”
“We don’t see DAC as trying to solve an entire company’s entire portfolio of emissions.”
Avery.
Avery said carbon credits would be one of the “basket of solutions” needed for clean energy required to run AI systems.
Occidental has developed its carbon dioxide management business, and in September signed a deal with Amazon for 250,000 credits for 10 years. Currently, 1PointFive is developing its first industrial-scale DAC plant in Texas named Stratos.
1PointFive, a carbon capture, utilization and sequestration (CCUS) company announced it has entered into an agreement with Microsoft to sell 500,000 Mton carbon dioxide removal (CDR) credits over 6 yr via STRATOS, 1PointFive’s planned DAC facility in Texas https://t.co/zK3jmeDK1u pic.twitter.com/3aOeNJIV4j
— Jos Cozijnsen (@timbales) July 9, 2024
Tech firms grapple with emissions
The International Energy Agency has highlighted the important role of this technology adding it has not been fully explored. It has added this only removes a “small fraction” of the 37 billion tons of annual energy-related emissions. The deal with Microsoft is a boost that helps anchor its business in DAC at a time when tech firms are looking at clean energy to limit their greenhouse gas emissions.
Tech firms are struggling to contain the spike in energy demand spurred by AI expansion. Reports have shown that there has been an increase in energy usage and carbon emissions at data centers due to the increase in AI services.
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Data centers are also consuming vast amounts of water to cool off generative AI servers. Recently, Google revealed carbon emissions have increased by about 50% since 2019, driven by data centers. The company has pledged to achieve net zero by 2030, a feat that might be hard to fulfill because of growing AI expansion.
Microsoft also revealed in May that emissions had increased by almost a third since 2020, driven mostly by the construction of data centers. The tech giant has also promised to be “carbon negative” by 2030.
Carbon credits could help these tech firms achieve this, although the method has been criticized on concerns about how much carbon can be “removed by new projects.” This method suggests each credit represents a ton of greenhouse gas removed from the atmosphere.
Cryptopolitan reporting by Enacy Mapakame