Microsoft Corp. and Royal Bank of Canada have agreed to buy carbon dioxide removal credits from Canada’s first commercial facility to suck carbon from the air.
Pulling carbon from the atmosphere is increasingly important in limiting global warming to relatively safe levels. The world will likely need to take billions of tons of CO2 from the air per year by mid-century, yet current capacity is just a fraction of that. A wave of startups is attempting to address that using a range of techniques, including deploying machines that perform what’s known as direct air capture (DAC).
“We need to prove that this stuff works. We need to prove that we can actually build the projects we say we’re going to build, and we actually have to deliver credits to the customers who have, over the last couple of years, been making commitments to future supply,” said Damien Steel, chief executive officer of Deep Sky. “If that supply doesn’t start showing up soon, we as a market are in big trouble.”
Microsoft and RBC agreed to purchase 10,000 tons of CO2 removal services over a 10-year period from Deep Sky, a Canadian project developer with a distinct approach to carbon removal: the company is convening multiple technologies at the same site, powered by a single energy source and funnelling CO2 to the same storage well. Deep Sky is building a facility in Alberta that, upon completion, is expected to house eight DAC units, each designed and built by a different startup.
Co-founder Fred Lalonde, who is also the co-founder and chief executive officer of Canadian travel company and unicorn startup Hopper Inc., said he wasn’t going to “sit here and watch the world burn.”
Centralizing different startups’ DAC units in a single location will help reduce overhead and increase the pace of innovation, said Lalonde. It’s also expected to help free them from the headache of permitting for CO2 storage and purchasing clean energy to power the machines pulling carbon from the air — a task becoming increasingly hard amid the AI data center boom.
“They can go through innovation cycles on a rapid basis across a very large, diverse technology set to push down costs, timeline to deployment and overall scale potential,” said Brian Marrs, Microsoft’s senior director of energy and carbon removal, who called Deep Sky a “playground for direct air capture.”
Dedicated corporate buyers with hard-to-reach net zero goals and deep pockets have poured millions into helping these startups grow, with Microsoft a particular leader. The tech giant has targeted being carbon-negative by 2030 yet its emissions have risen more than 40 per cent since 2020, driven in part by an AI push that has put its climate targets at risk.
Deep Sky expects its Alberta facility to be operational by the end of March and to be delivering credits to customers by June. With a 3,000-ton-per-year capacity, it’s small but will prove to buyers and investors that the technology works, according to vice president of carbon markets Charlie Renzoni. Deep Sky is also working on building three much larger commercial sites throughout Canada, all of which have initial allocations of renewable power from their local utilities.
Carbon removal is a growing part of corporate decarbonization strategies, particularly for companies seeking higher-quality carbon credits amid a flawed market. Yet the Deep Sky deal is a tiny fraction of Microsoft’s overall carbon removal portfolio, which includes millions of tons purchased from projects including bioenergy and carbon capture from Stockholm Exergi and Orsted A/S and direct air capture from 1PointFive and Heirloom Carbon Technologies. This marks RBC’s first DAC purchase.
Steel thinks that within the next 15 years, pressure for corporations and governments to cut emissions will become impossible to ignore.
“What we’re trying to do at Deep Sky is invest and get ourselves as far along the innovation curve as possible so that when we inevitably reach a point where we don’t have a choice,” he said. “We actually have a solution that can scale.”
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