Microsoft Imposes a Carbon Price on Itself

SeattleClouds via Flickr/CC BY 2.0

Microsoft just announced that it will effectively be carbon neutral by the next fiscal year. But the way it plans to do so is much more interesting than your typical "buy a bunch of offsets" emissions-reduction scheme—instead, the company is creating a "carbon price and charge back model" that will levy fees on each of its various internal business groups for the emissions they generate. In other words, Microsoft is imposing a carbon price on itself.

The company blog outlines how it would work:

we have created an accountability model which will make every Microsoft business unit responsible for the carbon they generate – creating incentives for greater efficiency, increased purchases of renewable energy, better data collection and reporting, and an overall reduction of our environmental impact.

To put this into action, we’re creating a new, internal carbon fee within Microsoft, which will place a price on carbon. The price will be based on market pricing for renewable energy and carbon offsets, and will be applied to our operations in over 100 countries. The goal is to make our business divisions responsible for the cost of offsetting their own carbon emissions.

The fee applies to data centers, office buildings, etc—each arm of the many-tentacled business. Emissions will be tracked using an extensive software system designed by CarbonSystems, according to Greenbiz. The software will tally how much carbon each operation, or "business unit" is emitting, and how much it will therefore be docked. That group will then have to pony up the fee, which goes into a company-wide investment fund that will be used to purchase renewable energy, and, yes, offsets.

The business groups can opt to invest in energy efficiency or local renewable power—which will likely be cheaper than coughing up the fees. Microsoft will, essentially, be running its own mini-version of a cap and trade. The whole data-driven approach is very Gates-ian indeed, and is certainly interesting enough (and comes at a rather opportune moment—right when Apple is making headlines for its heavy carbon footprint).

But whether or not it actually works will depend entirely on how serious the company is about enforcing the system, how stringently it does so, and the price it actually ends up setting on carbon emissions. If properly calibrated, it should prove a worthy experiment in reducing CO2 with innovative corporate governance.

Tags: Carbon Dioxide | Carbon Emissions | Carbon Offsets