Large firms are buying more high-quality carbon removal credits as they expand their use of AI, according to industry experts. As a result, supply is tight and prices are rising. The trend is moving fast because firms want clear paths to reduce the impact of new data hubs that consume large amounts of power.
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Strong Demand and Limited Supply
Two of the major buyers of carbon removal credits are Microsoft (MSFT) and Alphabet (GOOGL). Since 2019, the group of large firms has spent over $10 billion on projects that capture and store carbon for long periods. Prices for these credits are now close to 4 times higher than those for credits tied to forest plans. Each firm is using these credits to help meet long-term climate aims as AI use grows.
In 2024, buyers took in 8 million tons of durable carbon removal. This year, the total is near 25 million tons. Yet fewer than one million tons of credits have been issued so far. Most issued credits have come from biochar plans that turn plant waste into a solid form that locks in carbon.
Firms that want these high-grade credits must wait or shift plans. One climate tech firm said that one-third of requests on its site in the past year were for biochar credits. Yet the site could only sell less than one-fifth of that share due to a lack of supply. The same trend held for land plants that aim to renew soil and plant life.
New Projects Aim to Lift Future Supply
The tight supply is now shaping new plans in the market. Some firms are moving to make their own credits rather than compete for a small share. Pure Data Centres Group plans to spend £24 million to build a large biochar site in the UK. The site will begin operations by the end of the year and will grow to remove more than 18,000 tons of carbon each year.
Long-term deals are also key. These deals give project teams clear sales paths and help them get funds to grow. Microsoft said these deals help start new sites and provide space for more buyers to join as supply grows.
The rise in demand is tied to the rapid build of AI data hubs. Many of these hubs still rely on fossil power. As a result, firms are buying more credits to match their goals on climate.
Looking ahead, the tight supply is likely to draw more funds toward this part of the market. More sites and more long-term deals may help close the gap between demand and supply in the years to come.
We used TipRanks’ Comparison Tool to align and compare four notable companies that are expanding their use of carbon removal credits. It’s a great tool for investors to examine each company’s performance.
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