Fit for 55 lays the groundwork for real progress toward a net zero carbon economy

| Lucas Joppa, Chief Environmental Officer, and Casper Klynge, Vice President of European Government Affairs

Ryan Doran works on a solar panel installation at Kinsale Community School, Cork, Ireland as part of a renewable energy project with Microsoft and SSE Airtricity. Naoise Culhane Photography

The release today of the European Commission’s Fit for 55 package signals the start of something important and exciting—not just for the European Union, but for the entire global effort to address climate change.

Fit for 55 is a promising framework for reducing greenhouse gas emissions across the EU by at least 55 percent by 2030. The package offers an interlocking set of policies and rules for creating a future that is green, sustainable, and inclusive. Proposals include investments in infrastructure and incentives to drive innovation, rules for carbon pricing and renewable energy markets, targets for energy efficiency, and approaches that focus on environmental equity and a just transition. With these proposals, Fit for 55 will put the EU on a path to achieve carbon neutrality by 2050. And the extraordinary thing is that it aims to do so in ways that will strengthen the competitiveness of European businesses, create jobs and generate economic opportunity for EU citizens, and establish Europe’s leadership in many of the key industries of the future.

At Microsoft we welcome Fit for 55 and the compelling vision it offers for accelerating progress toward a net zero carbon economy before the world runs out of time. We also recognize that the technology industry has a responsibility to take action and contribute to the initiatives and proposals that the Fit for 55 package sets forward.

That’s why we have made bold environmental commitments. These include a detailed plan to be carbon negative by 2030, to reduce emissions by half or more, and to remove from the environment by 2050 all the carbon we will emit in the future, as well as all of the carbon the company has emitted since its founding in 1975. Equally important, we will work hard to ensure that digital tools and solutions will play an essential role in driving sustainability efforts and delivering the new innovations that will be needed to enable all sectors in the EU to meet the carbon reduction targets.

We want to focus attention today on three areas that we find particularly important in creating a solid foundation for progress toward a 55 percent reduction in carbon by 2030 and a net zero carbon economy by 2050. The three areas are:

  1. Accelerating markets for the reduction and removal of carbon;
  2. Advancing standards for carbon measurement; and
  3. Delivering on climate equity and a just transition.

Efficient and transparent markets for carbon reduction and carbon removal

To achieve our collective 2030 and 2050 net zero goals, all of us need to do our part to reduce and remove emissions. To move faster and farther in the right direction, policies that create the enabling conditions for the acceleration of both reduction and removal, are essential. We applaud the Fit for 55 Package for aiming to do just that in Europe. We are encouraged by new rules that aim to advance and accelerate the markets that will support faster reduction and removal efforts.

Reducing carbon emissions across all sectors of the economy is a goal we share. To achieve this goal, accelerating the transition to 100 percent clean energy delivered on a carbon free energy grid, will be essential. This is one of the main objectives of the Fit for 55 Package. To support Europe’s ambitious goals and maximize everyone’s contribution to achieving them, will take open and transparent renewable energy markets combined with policies that promote clean energy deployment and innovation.

We want to play our part, not only in supporting the achievement of the increased EU renewable energy goal, but also in driving forward a carbon free energy grid for everyone. Microsoft welcomes revisions of the renewable energy rules (RED III) under Fit for 55. The revisions present the opportunity to turbocharge more inclusive, next-generation energy markets, capable of ramping-up corporate investment, while ramping-down subsidies over time.

Our commitments to protect the climate include powering all our operations with 100 percent renewable energy by 2025. But our biggest contribution is not what we do ourselves but the support we will provide to our suppliers and customers along their own journeys to reduce carbon emissions.

To facilitate the green transition, next-generation energy markets will require next-generation grid infrastructure. This will ensure timely interconnection for new clean energy resources and efficient, reliable operations. New and advanced infrastructure is a prerequisite for a carbon free energy system. With this in mind, we value the focus in Fit for 55 to bolster grid infrastructure in Europe.

Collector containers at "Orca", Climeworks' new direct air capture and storage plant in Iceland.
Collector containers at “Orca”, Climeworks’ new direct air capture and storage plant in Iceland.

In addition to reducing carbon emissions, carbon removal will also play a major role in supporting the 2030-targets. In fact, the world cannot get there without carbon removal. As we learned from our first ever carbon removal procurement project, the challenges are immense. Today, there is no real existing carbon removal ecosystem and the world must build a new market on an unprecedented scale and timeline, starting from almost scratch.

While nature-based climate solutions require better integrity and standards, the technology-based solutions for carbon removal are still in their infancy. One good example of a technology-based solution in action can be seen in a project run by a Swiss company called Climeworks. Using only renewable energy, Climeworks’ technology captures carbon dioxide from the air, at which point it can be used for products such as synthetic fuels, greenhouse agriculture, and carbonated beverages, or it can be permanently stored underground in volcanic rock using a mineralization process.

To reach the level of scale needed in the short time we have left, will be incredibly hard. It will require integrity, public-private coordination, and heavy investment across both nature-based and technology-based solutions.

The good news is that Europe is already showing tremendous leadership in this area, by setting standards and creating a certification system for carbon removals. We are encouraged by the developments in the Fit for 55 package, aimed at strengthening the contribution of nature-based solutions, such as those from the land use, land use change and forestry (LULUCF) sector, to the increased 2030 target, and setting specific carbon removal targets.

Our own experience has taught us that we need to raise the bar on carbon removal accounting across forestry projects and the market needs a strong foundation for newer soil sequestration offerings. Fit for 55 can bring the much-needed clarity and accountability, and we stand ready to support and share our learnings. More needs to follow to establish trust, broaden investment, advance research, and develop and deploy the digital tools and infrastructure that will be needed to support greater precision and efficiency in tracking outcomes.

Improving carbon measurement and strengthening accountability

All of the steps outlined above are essential. But, to have any hope of moving quickly along the path that Fit for 55 envisions, we’ll need a common foundation that ensures carbon emissions are measured accurately, consistently, and reliably. Unless we all measure carbon emissions the same way, we’ll never know for certain whether we are actually making progress. And we will have no way to create the transparency and accountability that progress requires, or to make sound policy decisions about what steps to take next.

The challenge centers on the need for common standards around carbon measurement, accounting, and reporting. On this, the EU is showing strong leadership in advancing the conversation around measuring carbon flows in the economy, from reduction, to removal and trade.

This must connect to similar efforts by other major governments, including the United States. The forthcoming global dialogue, including around the Carbon Border Adjustment Mechanism (CBAM) proposed for Europe under Fit for 55, has the potential to accelerate global progress toward the adoption of uniform standards. Data science, artificial intelligence and digital technologies will play a vital role in supporting and enabling this measurement and we are eager to continue the conversation and play our part.

Climate equity and a just transition

Because climate change has a disproportionately greater negative impact on some communities than others, it is critical that we use this moment to address the underlying issues of environmental justice and ensure a just transition. We support the measures outlined in the Fit for 55 package that are designed to ensure the EU makes real progress toward achieving this goal.

Completed solar panel installation at Kinsale Community School, Cork, Ireland, part of a renewable energy project with Microsoft and SSE Airtricity. Naoise Culhane Photography
Completed solar panel installation at Kinsale Community School, Cork, Ireland, part of a renewable energy project with Microsoft and SSE Airtricity. Naoise Culhane Photography

A lot needs to be done. We’ve found that there can be interesting ways to combine market rules, technological innovation and policies to further just transition outcomes. For example, let’s take a look at the applicability of Guarantees of Origin (GOs) in Europe.

Microsoft recently partnered with SSE Airtricity, Ireland’s largest provider of renewable energy, to install and manage internet-connected solar panels on the roofs of dozens of schools in Dublin. The solar panels gave the schools access to a renewable energy source that also enabled them to reduce their utility bills.

Yet, distributed solar power doesn’t qualify for GOs under current guidance in most of the EU. Advancing the renewable energy rules to ensure that distributed solar projects, like the one above, can generate GOs, or some other form of environmental credit, will provide the distributed solar power sector with new revenue streams and addressable markets. It will also improve access to clean energy in communities where affordable sources of renewable electricity, such as solar power, have historically been unavailable. Reconsidering the applicability of GOs in Europe, under the revision of renewable energy rules, is one important way to achieve a more equitable access to clean energy, particularly distributed solar energy.

We welcome the advancement of the framework for GOs under the new rules, and look forward to continuing the dialogue on the market and policy architecture needed to support just transition outcomes. With these type of innovations becoming increasingly possible, Microsoft and other companies that purchase clean energy, can do more to help address climate equity and environmental justice, while working to achieve our own carbon commitments.

Transforming commitments into action, and action into progress

Reducing carbon emissions by at least 55 percent by 2030 is a massive undertaking. While it will require full participation by organizations in every sector of the economy, the technology sector’s role will be key.

We are taking steps, both within Microsoft, and in partnership with others, to make progress and support Europe’s journey toward achieving the goals of the Fit for 55 package and toward reaching the net-zero target by 2050.

Here are just some of the areas in which we have started to take steps in support of Europe’s journey to net-zero:

1. Deploying digital solutions

Progress in carbon reduction and removal will require a wide range of innovative digital solutions to create smart renewable-centric energy grids that are capable of handling and sustaining affordable, reliable, zero-carbon power services. Organizations of every size in every industry will have to implement digital systems to monitor, manage, and report on their carbon emissions. Breakthroughs in AI and other advanced technologies are required to drive greater energy efficiencies in manufacturing, transportation, building operations, and much more. New technologies for carbon removal are essential. At Microsoft, one of our most important contributions will be to support our customers’ efforts to develop and deploy digital solutions that meet their needs across all of these areas.

2. Advancing the sustainability of our operations

We have a responsibility to look at our own operations and lead the way forward in moving toward net zero carbon by 2050. Over a year ago, Microsoft announced its own bold ambitions to become carbon negative by 2030, water positive by 2030, zero waste by 2030 and to protect ecosystems by developing a Planetary Computer. Today, we are sharing an update on our journey to achieve these sustainability commitments.

Our ongoing investments in energy efficiency in our datacenters mean that today, the Microsoft cloud is up to 98 percent more carbon efficient than on-premises datacenters and we are on track to power all of our datacenters with 100 percent renewable energy by 2025. With Fit for 55, we look forward to supporting the conversation around advancing common metrics for measuring energy efficiency, as well as the new data center sustainability indicator, as part of the revision of Energy efficiency rules, and as a contribution to the achievement of climate neutral data centers by 2030.

3. Working with others

To accelerate the contribution of digital technology to our collective 2030 goals, we also need to work together to better understand the net sustainability gains of digital solutions. That’s why we have joined the European Commission and other companies in forming the European Green Digital Coalition, with the goal of developing standardised, credible and comparable methodologies for calculating the net impact of green digital solutions in different sectors.

A once in a lifetime opportunity

Building a green future is a global challenge, requiring contributions from all of us. This is why today’s launch of the EU’s Fit for 55 is so important—and so promising. The package that the European Commission has presented offers a once in a lifetime opportunity for all of us to transform our ambitions and commitments into clear, measurable actions across all sectors of the economy.

While there is still a lot of work to do to understand all the details, we believe the Fit for 55 package provides a galvanizing framework for moving more quickly and more profoundly to create a net zero carbon economy in Europe. In the process, it can serve as a model for the rest of the world. Because it is designed to encourage innovation, foster the competitiveness of European businesses in the green industries of the present and the future, and ensure the progress is inclusive and just, we also believe it has a good chance of succeeding. At Microsoft, we are excited to be part of the process to ensure that it does.

Tags: ,