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Oxy Strikes Carbon Credit Deal With Microsoft

Occidental Petroleum has signed a deal with Microsoft for the sale of 500,000 tons in carbon removal credits from a carbon capture facility that Oxy is building in Texas.

The Stratos direct air capture facility will have the capacity to suck up to 500,000 tons of carbon dioxide annually, meaning Microsoft will be its single client buying the entire “output”.

Microsoft urgently needs to lower its carbon footprint because its AI push is bringing emissions to new records. The company reported a 30% increase in emissions since 2020—and it is not the only one. Google recently reported a 50% surge in its own emissions since 2019 because of the rise if artificial intelligence.

Occidental, for its part, is the first U.S. oil firm to pledge net-zero emissions, including the emissions from the use of its products, dubbed Scope 3. Oxy is betting big on direct air capture (DAC) technology to directly remove the greenhouse gas from the air and sell carbon removal credits to corporate polluters.

Critics of direct air capture argue it is way too expensive to make any commercial sense. Yet the oil company, in which Warren Buffett has been building his shareholding consistently over the past couple of years, seems well positioned to profit from Big Tech’s race to the bottom of emissions. All the majors have net-zero targets even if they had to tweak them recently in light of their emissions records.

Carbon credits are the only way Big Tech’s decarbonization could happen in any conceivable way because going 100% wind and solar would be impossible: data centers and other IT infrastructure need reliable electricity supply round the clock and at the moment this sort of supply can only be provided by hydrocarbons or nuclear.

There is a near-term shortage of clean energy to run AI data centers on, the boss of Oxy’s carbon capture subsidiary, 1PointFive, told the FT, so “a basket of solutions” would be necessary.

“We don’t see DAC as trying to solve any company’s entire portfolio of emissions,” Michael Avery also said.

By Irina Slav for Oilprice.com

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