Microsoft signs 10-year deal with Canadian cleantech company that turns CO2 into rocks

Arca Climate Technologies co-founder and head of science Dr. Greg Dipple. The Canadian company just made a landmark deal with Microsoft. (Credit: Arca Climate Technologies)

Microsoft Corp. has tapped a Canadian carbon-removal startup in its quest to counter rising emissions from its expanding data-centre, artificial intelligence and supply-chain operations.

The tech giant signed a 10-year deal with Vancouver-based Arca Climate Technologies Inc. that will see it purchase nearly 300,000 tonnes of permanent carbon removal credits in a landmark commercial deal for the Canadian carbon tech sector.

Arca landed the contract with Microsoft, worth an undisclosed amount, after demonstrating its process in an 18-month pilot at BHP Group Ltd.’s nickel mine in Australia. The deal provides Microsoft with the credits and verified proof of carbon removal, offsetting the tech giant’s rising emissions from its operations.

Arca’s process, known as industrial mineralization, repurposes mine tailings and other industrial waste to remove carbon dioxide from the atmosphere by accelerating a natural reaction that converts CO2 into solid form.

“Geologists will tell you that rocks were capturing CO2 before trees ever got started on this planet,” Arca chief executive Paul Needham said, explaining that the company’s founders realized that mines producing metals like nickel, chromium and copper are often found in rocks rich in minerals that naturally absorb CO2.

“And (Arca’s founders) invented technologies to accelerate that by millions of times over what would happen naturally.”

The company — which originated in a University of British Columbia geology lab — plans to continue partnering with mining firms to transform tailings into massive carbon sinks, generating revenue from the sale of CO2 removal credits.

Needham called the agreement with Microsoft critical for securing investment for large-scale projects, adding that Arca is now evaluating a pipeline of opportunities with industrial partners, with further announcements expected in the coming months.

Microsoft is currently the biggest buyer in the carbon-removal market, and the size of Arca’s deal puts it squarely in the middle of the company’s range of investments in technologies, such as direct air capture — including Canada’s Deep Sky — and major biomass sequestering projects in the U.S. and Europe.

The carbon tech sector has been challenged by the fact the technologies involved are expensive and investment capital has been hard to come by for pilot projects and pre-revenue companies. Hostility to climate policies from the Trump administration in the U.S. has also bred uncertainty.

“It’s very hard to find early catalytic capital, particularly for pre-revenue companies,” Sarah Goodman, chief executive  of government-backed climate investment agency NorthX, said. The agency was an early backer of Arca and Wednesday announced new funding for four other early-stage Canadian carbon removal ventures.

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“A lot of companies stall out at the science because they don’t have the backing for the pilots (to) be able to have proof of what (they’re) doing, to verify the carbon removal and basically turn that science into commercial impact.”

Market watchers say the key impediment is the fact high-quality carbon removal credits are expensive, but demand is still small — largely driven by voluntary purchases from just a few large tech or financial companies, including Alphabet Inc., Meta Platforms Inc., Shopify Inc., JPMorgan Chase & Co. and Swiss Re Ltd.

But Arca aims to stand out with a dual business model not purely reliant on the sale of carbon credits for its revenues, Needham said.

The company hopes to make carbon removal cheaper by piggybacking on existing mining infrastructure and by selling environmental services for mines and even legacy asbestos sites.

“It’s partly a remediation of a site as well as carbon removal,” Needham said. “In the future, we’ll be able to demonstrate these really powerful remediation effects, and mining companies will pay us to come to the site to help stabilize the tailings and help remediate the site, and then the carbon removal benefit comes at a much lower marginal cost.”

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The deal was announced Wednesday at the International Energy Agency‘s Innovation Forum, an event being hosted in Toronto ahead of a meeting of G7 energy and environment ministers Thursday.

Federal Energy Minister Tim Hodgson hailed Microsoft’s investment in Arca during a speech at Wednesday’s forum, praising it as an example of cutting-edge technology being developed domestically in a sector Canada hopes to lead in.

“In many ways, this moment feels like a full-circle one: a demonstration of how early public investment leads to private leadership and drives real-world scale results,” Hodgson said.

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