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How Microsoft is using an internal carbon fee to reach its carbon negative goal

From wildfires to floods, the catastrophic impacts of climate change threaten to outpace our global ability to adapt, as the most recent Intergovernmental Panel on Climate Change report has told us. This reinforces the importance of companies and people doing all they can to reduce their carbon emissions.

Microsoft has committed to becoming carbon negative—meaning, we will reduce our carbon emissions deeply and remove more carbon than we emit—by the year 2030. By 2050, our goal is to remove from the environment all the carbon the company has emitted since it was founded in 1975.

Evolution of our carbon fee

We’ve been working to reduce our carbon emissions since 2009, through energy efficiency, renewable electricity, and low-carbon transportation. Our efforts address all scopes of the Greenhouse Gas Protocol: Our direct emissions (scope 1), such as from company vehicles; our purchases of electricity (scope 2); and our indirect emissions from supply chain and product use (scope 3).

One of our key tools for reduction is an internal carbon fee—a way to accelerate decarbonization internally and generate funding for carbon reduction and removal efforts. Starting in 2012, our initial carbon fee focused on scope 1, scope 2, and business air travel. The proceeds from the fee provided funding for our carbon-neutral commitment at the time. In 2020 we began charging our internal business groups for all scope 3 emissions and, in parallel, worked with our suppliers to help them understand their carbon contributions and how to reduce them.

We track all our emissions across scopes: direct operations, electricity, procurement, supply chain, product energy use, plus categories such as business travel and employee commuting. We aggregate that information, and each year charge our business groups a certain amount in carbon fees. Determining how much is a balancing act, enough to encourage meaningful change.

None of this could be called easy. Our progress in reducing carbon output has not been a straight line. Plus, like any company, we seek to grow. We have seen revenue growth of as much as 22 percent, year over year, since 2018. While we are very proud of that, we’re cognizant of the fact that growth almost inevitability demands more energy usage.

Attend a webinar on our carbon fee

Now in 2022, we have redesigned and increased our carbon fee to accelerate scope 3 emissions reduction and match the underlying costs of carbon abatement. For example, the scope 3 business travel fee will increase to $100 per metric ton of carbon dioxide equivalent in our next fiscal year to better support the purchase of sustainable aviation fuel. And we will continue to increase the annual fee at an accelerated rate through FY30. Learn more by watching the on-demand webinar “Accelerated Sustainability with an Internal Carbon Fee.”  

In the webinar, you’ll learn more about the history of our carbon fee, how it works, how we measure scope 3 emissions, and more.

Partnering for climate progress

As a leading technology provider of sustainability solutions, Microsoft is supporting our customers and partners as they move toward a net-zero, environmentally sustainable future. In addition to sharing our experience implementing carbon-reduction projects, our carbon fee model serves as one example of how a large enterprise can reduce carbon output.

Read more about our progress and learnings on the journey to meeting our 2030 company commitments and find out how we are helping customers take their own path through our Microsoft Cloud for Sustainability solution.