Microsoft has paused all of its carbon removal purchases, in a major blow to the industry. Microsoft is by far the largest corporate buyer of carbon removal credits, having signed numerous deals in recent years, totaling millions of credits.

The news, first reported by Heat Map, revealed that the hyperscaler has begun informing suppliers and partners that it is suspending all future purchases of credits, with it unclear whether the company will resume such purchases.

The news is a major shock to the sector, which has effectively been anchored by Microsoft over recent years. The company had made carbon removal a central tenet of its sustainability strategy, backing companies with ranging approaches to removal, including biochar, enhanced rock weathering, carbon capture and storage, and reforestation, to name a few. In total, the company has purchased more than 45 million tons of carbon removal, with its next-closest challenger, Frontier, a carbon credit-buying consortium that includes the likes of Meta and Google, purchasing 1.8 million tons.

In response to the news, Microsoft denied that it was indefinitely pausing all purchasing. “Our carbon removal program has not ended, we continue to both build on and support our existing portfolio of both nature-based and technology-based solutions. Our decarbonization approach combines reduction, removal, and efficiency, and carbon removal is one piece of that equation. At times we may adjust the pace or volume of our carbon removal procurement as we continue to refine our approach toward sustainability goals. Any adjustments we make are part of our disciplined approach- not a change in ambition." said Melanie Nakagawa, chief sustainability officer, Microsoft.

The pause comes as hyperscalers such as Microsoft struggle to match their lofty carbon-reduction goals with the growing energy requirements tied to AI growth. The company has seen its carbon emissions grow by around 30 percent from its 2020 baseline, due to the high energy demand driven by the AI boom. Despite the growth, Microsoft has been seen as a leader in sustainability in the space, much of which is due to its aggressive carbon removal policy. While credit purchases have been paused, the company will retain a huge portfolio of deals, the latest of which was signed mere days prior to the announcement, with a bioenergy with carbon capture and storage (BECCS) project in Saskatchewan, Canada.

The news of Microsoft’s pause is another blow to the carbon removal market, which has drawn the ire of the Trump administration. Earlier this year, it was reported that the US Department of Energy was looking to redirect more than $500 million in funding for carbon removal projects to prop up aging coal-fired power plants. The blow was softened by support in Congress for the sector, with a 2026 federal spending law including more than $116m for carbon removal projects and research.

Whether any other major data center firm will pick up Microsoft’s mantle remains up in the air, with the other major hyperscalers much more selective in their purchasing strategies.