In the wake of surging demand from major technology firms seeking to offset emissions tied to expanding artificial‑intelligence operations, the market for high‑quality carbon‑removal credits is facing a significant supply shortfall. Companies such as Microsoft and Alphabet (via its subsidiary Google LLC) have spent billions on durable credits derived from processes such as biochar and direct‑air‑capture, making those credits nearly four times more expensive than conventional forestry‑based offsets in 2024.
The shift reflects growing recognition that traditional reforestation projects may not offer the permanence or scalability required for tech companies looking to neutralise the carbon footprints of energy‑intensive data centres. But while demand is mounting – around 25 million tonnes of durable removal purchases anticipated in 2025 up from 8 million in 2024 – cumulative issued supply remains under 1 million tonnes. The imbalance is prompting firms to enter long‑term offtake agreements and build dedicated removal infrastructure, such as the UK‑based biochar facility announced by Pure Data Centres Group.
For the financial industry and corporates alike, the dynamics present both challenge and opportunity. On one hand, supply constraints could drive up prices, raising costs for companies pursuing net‑zero ambitions. On the other hand, the shortage is serving as a catalyst for investment in nascent removal technologies, which may ultimately enhance the quality and credibility of offset markets. Analysts note that companies must weigh reputational risk alongside technical feasibility when engaging in carbon‑removal commitments.
In summary, as tech firms accelerate consumption of removal credits, the market is being stretched. Unless supply‑side capacity expands rapidly, companies may face escalating costs and further scrutiny of their climate claims. For the finance sector this underscores the need to track not only the volume of offset purchases but the underlying supply chain and technological robustness of removal projects.
