In 2012, Microsoft voluntarily introduced an internal
carbon fee that holds its business units financially accountable for their carbon emissions.
It’s a financial model that puts an incremental fee on carbon emissions associated with the
company's global operations for data centers, offices, labs, manufacturing, and business air
travel. The carbon fee is set each year based on the estimated cost of internal efficiency,
renewable energy, carbon offset, e-waste recycling, and other innovative research projects to be
carbon neutral. The carbon fee is already changing behavior at Microsoft – because its
business units now include the cost of carbon into their annual budgets, they have a real incentive
to reduce their emissions.
With the funds collected, Microsoft has purchased more than 10 billion kilowatt-hours of green
power, reduced emissions by 7.5 million tonnes of carbon dioxide equivalent and saved more than USD
10 million per year
Microsoft’s community offset projects have reached more than three million people around
the globe since 2012
Microsoft expects to invest more than USD 50 million over the next three fiscal years from its
carbon fee fund
Large companies typically have a substantial carbon footprint from their global operations, production and
supply chain. Many private sector companies recognize they need to be part of the solution and in fact,
sustainability strategies was one of the top five global challenges in the 2015 CEO Challenge survey.
Some jurisdictions are already imposing carbon taxes, including countries such as Ireland and Chile, and
regions such as British Columbia.
In 2012, Microsoft made a companywide commitment to become carbon neutral. In order to meet that goal,
Microsoft chose to implement a carbon fee that allocates the cost of becoming carbon neutral across its
major business units. Each quarter, Microsoft tracks and analyzes its energy use from data centers,
offices, labs and manufacturing, as well as emissions associated with business air travel. Those
kilowatt-hours and miles and class of air travel are then converted into tonnes of carbon.
Microsoft offsets those emissions by investing in projects that reduce carbon emissions, recycle e-waste,
generate green power, make buildings more efficient, and offset emissions through community projects around
the world. Each business unit contributes a proportional amount to the carbon fund based on their emissions
and this year’s carbon price.
Each business unit reduces electricity-related emissions directly (such as through efficiency projects)
where practical. Carbon neutrality for actual electricity-related emission is achieved through green power
investments such as renewable power purchase agreements and renewable energy certificates. For emissions
from air travel, fuel consumption (such as from backup generators) and any electricity-based emissions that
can’t be mitigated through qualifying green power investments, Microsoft then turns to a portfolio of
community investments in carbon offset projects.
Helping the planet
Microsoft focuses on projects that will accelerate climate friendly innovation. From developing new ideas
internally—with the aim of piloting and proving their value before sharing them more broadly—to
investing funds in support of external projects and research, Microsoft is helping the world transition to
a low-carbon future while addressing its carbon footprint.
By using funds collected from the carbon fee, Microsoft sponsors energy efficiency projects, renewable
energy projects, sustainable e-waste recycling projects, and carbon offset sustainable community projects.
For example, Microsoft purchased more than 3 billion kWh of renewable energy (equivalent to 100% of its
global electricity use), and has a carbon offset project portfolio representing more than 600,000 metric
tonnes of carbon dioxide emissions.
Microsoft estimates that the field driven internal carbon reduction projects funded in the last two years
have not only driven broad awareness of the need to conserve, but will lead to lifetime carbon reductions
of 31,000 megatonnes of CO2e. This is equivalent of the emissions produced from driving an average
passenger vehicle over 70 million miles or from the average annual electricity consumption of approximately
Since the start of the program, Microsoft has funded more than 60 projects in 23 countries by investing
more than USD 4 million. One of the carbon offset projects it funds is the Mongolian Insulation and
Efficient Stoves project. In addition to reducing heating fuel costs by up to 60%, the project helps reduce
indoor smoke by at least 80% and has a significant impact on the health and well-being of 167,000
Another carbon offset project that Microsoft funds is the Guatemala Water Filtration & Cookstoves
project. The water filter removes 99% of pathogens, and the improved cookstoves reduce harmful indoor air
pollution. In addition to the health and environmental benefits of reducing deforestation for fuel use, the
project employs 800 people and empowers women by saving them time cooking and collecting wood.
The Microsoft carbon fee model is simple, repeatable, and scalable. It allows for environmental action to
be deeply and broadly embedded in the financial and executive decision making structure across the
organization. The model is based on consumption, is not hard to manage and does not require complicated
credits to track or trade. This simplicity makes the model transferable and it can easily be adapted to fit
other organizations. The basic formula is universal: carbon emissions multiplied by carbon price equals the
carbon fee. Microsoft has created a detailed guide for any organization to replicate its model at http://aka.ms/carbon.
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