Occidental Petroleum (OXY), has just signed its largest ever carbon credits deal with tech giant Microsoft (MSFT). As per the deal, the American oil producer will sell half a million carbon credits to Microsoft over the next 6 years. The exact dollar amount of the deal has not been disclosed yet.
Big Tech’s need for carbon credits
Big Tech has received a boost from the developments in AI in recent years. But this surge in business has come at a cost: increased carbon emissions.
Microsoft’s emissions have risen by 33% in the last 4 years. Google’s emissions have increased by 50% in the last 5 years. Both companies have ambitious carbon emission plans till 2030, which means they need to look for solutions to offset their emissions quickly.
Carbon removal technology is still relatively new and for some, not yet efficient enough to be taken seriously. Direct Air Capture (DAC) is the technology in question, which uses too much energy in the process, and is therefore quite expensive.
For now, that’s more of a problem for OXY and less so for tech companies busy milking the AI trend.
OXY’s expansion into carbon dioxide management
OXY realized a few years ago that carbon removal can be a lucrative business opportunity. That was the reason for its acquisition of 1PointFive, a carbon management company.
Its a growing business that is currently a beneficiary of the AI boom, albeit in an unexpected way. Last year in September, the company signed a similar deal with Amazon for 250,000 carbon credits over a period of 10 years.
The company’s management is confident that despite all the criticism, its carbon removal technology will help companies reach their climate goals.
Energy demand across the technology industry is increasing and we believe direct air capture is uniquely suited to remove residual emissions and further climate goals.
Michael Avery, President and GM 1PointFive1PointFive expects to reduce the price per tonne of carbon removal by 50% from its current price of $800 to $1200 per tonne. If the company is able to achieve that, it will silence a lot of critics and help companies across the globe control their carbon footprint.
The credits being sold in the Microsoft deal will come from OXY’s first DAC project in West Texas. It goes by the name ‘Stratos’ and will be the world’s biggest Direct Air Capture facility when it becomes operational some time next year.
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