ESG Net Zero 2025 – Ørsted / Microsoft CCS, Denmark

The landmark agreement carbon removal between Microsoft and Ørsted that – as one judge puts it – “stands as a great example of commercialising CCS” wins the IJGlobal ESG Net Zero Deal of the Year.

Signed in May 2024, this agreement will see Microsoft purchase 2.76 million tonnes of carbon removal over 11 years from Ørsted’s bioenergy carbon capture and storage (BECCS) project at the Asnæs Power Station in Kalundborg, Denmark.

The project will capture biogenic carbon from straw-fired power generation and permanently store it in a North Sea reservoir, making it one of the largest BECCS initiatives in Europe.

This $1 billion deal forms a critical part of Microsoft’s strategy to become carbon negative by 2030 and is among the most substantial BECCS-based carbon removal agreements signed to date.

The structure is based on a long-term offtake model whereby Microsoft secures verifiable carbon removal credits from a project with permanent storage and scientific integrity, aligning commercial operations with climate goals. The first carbon removal deliveries are expected next year (2026).

This transaction advances a new frontier in climate-aligned infrastructure contracting – legally enforceable, long-term carbon removal agreements tied to BECCS operations.

The innovation lies in making carbon removals a commercially reliable commodity, underpinned by contractual mechanisms that embed ESG principles at the heart of performance obligations.

Key legal innovations include creating a tailored offtake agreement for carbon removal credits, drawing on power purchase agreement (PPA) architecture but adapted to address the unique verification, permanence, and delivery risks of BECCS.

This also involves a robust definition of “removal” that integrates third-party validation standards, bioenergy lifecycle assessments, and storage permanence criteria.

Novel approaches were adopted to liability and non-delivery remedies to reflect the uncertain regulatory environment and nascent MRV (monitoring, reporting, verification) systems.

Further, transferability and recognition of credits has to be negotiated in registry systems that meet the Integrity Council for the Voluntary Carbon Market’s Core Carbon Principles.

According to the submission: “This was not a ‘copy and paste’ from voluntary carbon offset contracts.”

Instead, it involved developing a new legal lexicon for how carbon removals can be sold, purchased, verified, and accounted for at scale.

The Ørsted BECCS project is expected to capture and permanently store up to 430,000 tonnes of biogenic CO2 annually from 2026 onwards, translating to a cumulative 2.76 million tonnes of CO2 removed over the 11-year contract term.

The carbon captured originates from straw combustion – considered biogenic and part of the short-term carbon cycle – ensuring that removals are additional and contribute to net atmospheric reductions when stored permanently.

Microsoft’s agreement with Ørsted allows forward funding for infrastructure that enables genuine, high-integrity carbon removal, directly aligned with the Paris Agreement’s 1.5°C trajectory and Microsoft’s own net zero ambitions.

The permanence of storage in geological formations offshore Denmark enhances the credibility of these removals compared to less secure offset mechanisms.

The agreement also has significant industrial and regional ESG benefits. Ørsted’s investment in BECCS technology at its Asnæs Power Station in Kalundborg creates jobs in Denmark’s green transition, supports industrial decarbonisation, and positions the region as a hub for negative emissions technology.

Quantifiably, this deal contributes nearly 10% of the volume Microsoft has committed to contract in carbon removals through 2030 and accelerates Ørsted’s leadership in combining renewable energy and CCS to deliver real net zero solutions.