Microsoft, RBC Bet on New Approach to Carbon Cleanup

The duo are buying carbon removal from Deep Sky, a company convening multiple technologies in a bid to bring down costs

Microsoft Corp. and Royal Bank of Canada have agreed to buy carbon dioxide removal credits from Canada’s first commercial facility to remove carbon from the atmosphere.

Pulling carbon from the air is crucial in limiting global warming to safer levels. The world may need to remove billions of tons of CO2 from the air each year by mid-century, yet current capacity is only a fraction of that. A wave of startups aims to address this through various techniques, including direct air capture (DAC) machines.

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“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 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 unique approach to carbon removal: the company consolidates multiple technologies on a single site, powered by one energy source and funneling CO2 to the same storage well. Deep Sky’s Alberta facility, upon completion, is set to house eight DAC units, each designed by a different startup.

Co-founder Fred Lalonde, also the CEO of Canadian travel company and unicorn startup Hopper Inc., said he wasn’t going to “sit here and watch the world burn.”

Centralizing various startups’ DAC units in one location will help reduce overhead and accelerate innovation, said Lalonde. It’s also expected to relieve these startups from the challenges of CO2 storage permitting and clean energy sourcing for their machines — a task made harder by 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 described Deep Sky as a “playground for direct air capture.”

Corporations with ambitious net-zero goals and the resources to back them have poured millions into helping these startups grow, with Microsoft leading the charge. The tech giant aims to be carbon-negative by 2030, though its emissions have risen over 40% since 2020, partly due to AI initiatives that have complicated its climate targets.

Deep Sky expects its Alberta facility to be operational by the end of March and ready to deliver credits to customers by June. Although its capacity of 3,000 tons per year is modest, it will demonstrate to buyers and investors that the technology is viable, said Charlie Renzoni, Deep Sky’s vice president of carbon markets. Deep Sky is also developing three larger commercial sites across Canada, each with initial renewable power allocations from local utilities.

Carbon removal has become a critical part of corporate decarbonization strategies, especially for companies pursuing higher-quality carbon credits in a complex market. While the Deep Sky deal is a small fraction of Microsoft’s carbon removal portfolio, it complements millions of tons purchased from projects such as bioenergy and carbon capture from Stockholm Exergi, Orsted A/S, and direct air capture from 1PointFive and Heirloom Carbon Technologies. This agreement marks RBC’s first DAC purchase.

Steel believes that within 15 years, corporate and governmental pressure to cut emissions will be undeniable. “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.”

About Deep Sky

Deep Sky is a Canadian project developer pioneering a multi-technology approach to carbon dioxide removal. With the mission to enable scalable direct air capture facilities across Canada, Deep Sky is developing multiple sites to support diverse technology innovators in a single location.