Hero Background
Header Image

Since the Paris Agreement to limit global carbon emissions was ratified, countries must now figure out how to fulfill their individual climate pledges and meet their Nationally Determined Contributions (NDCs).

NDCs are national climate action plans under the Paris Agreement that cover both reducing greenhouse gas emissions and building resilience to the inevitable impacts of climate change.

Carbon pricing has emerged as one of the most popular and effective ways to make progress on the NDCs. Already, about 40 national governments have a price on carbon, covering 12 percent of global emissions. And nearly half of the pledged NDCs include a reference to carbon pricing.

The private sector has a wealth of experience to offer countries that are considering putting a price on carbon. One of the corporate pioneers in this space is Microsoft. Microsoft received a Momentum for Change Lighthouse Activity Award at COP21 for its innovative carbon program, and spoke at COP22 about how others can adopt this effective model.

“The fee has helped establish a culture of sustainability in our company,” said TJ DiCaprio, Senior Director of Environmental Sustainability at Microsoft and the chief architect behind the company’s carbon fee. “Sustainability is now an expectation of our leadership for how we operate our datacenters and facilities.”

Since implementing its carbon fee in July 2012, Microsoft has reduced its emissions by more than 9 million metric tons of carbon dioxide equivalent (mtCO2e), invested in more than 14 million megawatt-hours (MWh) of green power, and has had a positive impact on more than 7 million people through carbon offset community project investments.

The impact of the Microsoft carbon fee since it was implemented in 2012

Microsoft first introduced its carbon fee when it made a company-wide commitment to operate net carbon neutral in 2012. The fee holds Microsoft internal business groups financially accountable for the carbon emissions associated with their operations. Through the fee, Microsoft generates the funds to pay for the cost of carbon neutrality and works to advance the following goals:

  1. Internalize the external cost of emissions, by making the company’s carbon impact understandable in business language;
  2. Transform the culture of the company, by establishing an expectation for environmental and climate responsibility;
  3. Catalyze and accelerate climate-neutral innovation, by investing carbon fee funds into internal and external climate-neutral projects;
  4. Support the transition to a low-carbon economy, by prioritizing investments that empower communities globally in the response to climate change.

To help achieve this, Microsoft invests its carbon fee fund in four areas: First, the company dedicates a significant portion to renewable energy, helping to increase its reliance on clean power and expanding the renewable energy market worldwide. Second, it invests in carbon offset community projects—particularly in the areas where it operates datacenters—to offset its emissions while supporting sustainable development. Third, it uses the fund to drive internal and external climate-related energy and technology innovation. And finally, the company sets aside a portion for “track-and-report” projects, helping to ensure transparency and accountability through its carbon program. 

 Microsoft green power purchases (learn more through an interactive Bing map)

Microsoft carbon offset community investments (learn more through an interactive Bing map)

Microsoft designed its carbon fee model to be easy to replicate. The company has published several white papers describing its goals and providing detailed guidance for other organizations interested in using the model. 

TJ DiCaprio (left), participating in the Momentum for Change: Climate Friendly Investments session at COP22, during which she also highlighted the launch of the latest Microsoft carbon program white paper, “Beyond carbon neutral: Expanding beyond our carbon neutral operations to accelerate global and local good.

“At Microsoft, we are committed to taking significant action to tackle climate change,” said Ms. DiCaprio. “We do this in part by carefully investing our carbon fee fund into carbon-neutral projects that will accelerate energy and technology innovation. We do it in part by operating carbon neutral and running our business as efficiently as possible. And we do it by sharing the lessons we have learned over the years to help others benefit from our experience.”

This article is a collaborative effort between Microsoft and the UNFCCC's Momentum for Change initiative.

Subscribe to our newsletter