We believe that Microsoft and the broader private sector have an important role to play in advocating for effective and innovative sustainability policy. When we announced our commitment in 2020 to become carbon negative by 2030, we pledged to use our voice on public policy issues to help to advance global decarbonization efforts.
Today, we are publishing briefs on carbon and electricity policy to share the priorities and principles that guide Microsoft’s policy advocacy work around the world. The principles we set forth are grounded in our focus on achieving tangible results, enabling a flexible rather than one-size-fits-all approach, and recognizing the important role that digital technologies will play as we expand market opportunities for all. We are releasing these two policy briefs together to underscore the integral and complementary role that electricity policy plays in addressing climate change. We also recognize that there are critical energy issues that go beyond climate change such as the availability of electricity for all, affordability and environmental justice. Similarly, there are carbon issues that go beyond energy. As we tackle these issues in parallel, we are mindful that our policy work will need to expand in the future and consider these policy briefs as foundations for future work on issues like water and waste.
We understand that public policies will play a critical role, both in creating signals to spur the economic and social transition required to address climate change and in building the foundations of markets to develop and deliver innovative goods, services and skills to achieve that transition. However, there is a growing gap between the pace of desired policy outcomes and economic and scientific indicators that show accelerating climate impacts. To help close this gap and support communities and companies in their efforts to achieve their climate pledges, governments around the world need to accelerate policy action.
Over the past two years, we have advocated for climate and energy investments as part of the recent U.S. infrastructure and climate laws, a robust and consistent framework for climate disclosure requirements by the U.S. Securities and Exchange Commission (SEC), and a comprehensive European Union (EU) decarbonization plan, to name just a few. As we expand our advocacy efforts, we will use the following priorities and principles to guide our engagement on carbon and electricity policy worldwide
Over the past decade, an average of at least 170 new climate-related laws have come into effect around the world each year. Multiple overlapping factors are driving both the pace and direction of climate-related policies. Chief among them is pressure on policymakers from the public, NGOs and corporations, as well as increasingly visible indications of a changing climate (including wildfires, droughts, heat waves, and severe storms and flooding), driving an elevated sense of urgency for near-term action. Furthermore, there is growing interest from investors and customers in companies delivering more climate-friendly goods and services.
Policies to mitigate climate change by addressing greenhouse gas (GHG; often referred to in shorthand as carbon) emissions can be organized into three core areas: carbon reporting, carbon reduction and carbon removal.
Carbon reporting: While many different steps are required to reach global net-zero emissions, they all rely on a common foundation that ensures carbon emissions are measured in an accurate, consistent, interoperable and reliable manner globally. If governments, NGOs and corporations around the world don’t measure carbon emissions in the same way, they’re likely to talk past each other, create confusion and ultimately set unrealistic expectations about the pace of progress.
We support new corporate carbon disclosure and procurement reporting policies that: (1) drive consistent, robust and interoperable GHG reporting metrics; (2) promote comprehensive yet flexible corporate GHG disclosures; and (3) take advantage of new technologies to calculate and track emissions and climate impacts.
Carbon reduction: To achieve net-zero emissions by mid-century, governments need to put in place additional policies to reduce carbon emissions. These policies will vary across geographies. Some approaches will focus on economy-wide solutions such as an emissions trading scheme (ETS) – or “cap and trade” – in which the government issues or auctions licenses to emit a fixed amount of GHG emissions for specific industries, and recipients with spare capacity can trade licenses to those expecting to exceed their allowance. Other policies will target specific sectors like power generation, building, transportation, aviation and agriculture, with governments using different policy levers to lower each sector’s footprint. The path to net-zero emissions is heavily influenced by a country’s stage of economic development and natural resource mix. Innovations in financing mechanisms, technology design and deployment approaches, and participation models can help countries in the Global South, which may be at the beginning stages of climate mitigation and adaptation journeys, to advance immediately beyond traditional carbon-intensive infrastructure.
We support new carbon reduction policies that: (1) support a broad, outcome-based, multisector toolkit; (2) double down on grid decarbonization while incentivizing reduction in hard-to-abate sectors; and (3) design for empowered advancement.
Carbon removal: We are seeing growing urgency in scaling the carbon removal market. An August 2021 report from the Intergovernmental Panel on Climate Change (IPCC) calls for the world to remove in the region of 10 gigatons of carbon dioxide (or its equivalent) annually in the second half of this century – and to make rapid progress immediately. Crucially, this must be in tandem with, and not as a replacement for, unprecedented carbon emissions reductions. Government policy can play an important role in building markets for high-quality and durable carbon removal.
We support new carbon removal policies that focus on: (1) driving clear accounting and high-quality standards; (2) prioritizing highly durable solutions: and (3) engaging local and impacted communities.
Electricity is an enabler of economic development, social welfare, improved health and other positive societal outcomes. In an increasingly interconnected, technology-driven global economy, the demand for reliable electricity will continue to grow.
There are three dimensions of this need for electricity that are important to consider.
First, despite the indispensable role of electricity, we still live in a world where more than 770 million people live without access to electricity (mostly in Africa and Asia). Economic growth in these regions requires the development of a reliable electric grid. Second, the diversification of renewable and carbon free energy sources and the modernization of the electrical goal are critical to meeting the world’s decarbonization goals. Today, fossil fuels produce 61% of electricity in the US, nearly 70% in the Asia Pacific region and significant portions on other grids around the world. Third, access to renewable energy on a global basis has become important to Microsoft’s own business. The datacenters that power our global cloud services depend on having a reliable, consistent, flexible and resilient supply of electricity in every country where we operate. At the same time, Microsoft has some of the world’s most ambitious climate and clean energy commitments, including our commitment to be carbon negative by 2030 and procure enough renewable energy to cover 100% of our electricity use by 2025.
According to McKinsey & Company, global electricity demand will triple by 2050, an increase driven by both electrification and improvements in living standards. Recent research shows that, in the United States alone, the supply of electricity will need to expand by 60% by 2030 and triple in size by 2050. Disruptions associated with Russia’s invasion of Ukraine have highlighted the importance of affordable energy security and the advantage of electricity generation that does not depend on fuel to ensure the reliability of the European grid. Ice storms, fires and heat waves have put grids around the world under massive stress. These grids are coming under pressure right at the time that they are becoming a necessary foundation of transformation to electrify the economy and increase access to carbon-free energy – underscoring the need for urgent action.
Our public policy advocacy relating to the electrical grid is focused on three pillars. These seek to support an expanded, robust, reliable and carbon-free grid by: (1) accelerating the transition to clean electricity generation; (2) modernizing and improving grid infrastructure; and (3) encouraging an equitable energy future.
Accelerating the transition to clean electricity generation: To expand carbon-free supply to power our growing operations and to power local grids around the world, we are supporting policies that promote a diverse zero-carbon energy mix for a reliable, resilient and flexible grid. This includes the use of wind, solar, hydro, nuclear and green hydrogen power. We are also supporting policies that will enable the grid to respond flexibly to changes in supply and demand – for example, using storage technology to dispatch zero-carbon electricity on demand on grids with a high level of variable renewable energy. We believe the most suitable policy design – regulatory caps, clean energy standards, tax incentives, subsidies and/or public procurement – may vary greatly between countries.
We support policies that: (1) promote a diverse zero-carbon energy mix for a reliable, resilient and flexible grid; (2) update electricity market design and price signals to expand participation; and (3) advance R&D investments to deliver the clean energy technologies of the future.
Modernizing and improving grid infrastructure: In addition to adding clean energy capacity, grid management must become more dynamic as larger volumes of renewable energy and distributed resources are deployed and carbon-emitting energy sources are retired. As zero-carbon resources are added to the grid at an accelerated pace, the network of wires that will deliver that electricity to homes and businesses must also significantly expand.
We support policies that: (1) prioritize and resource transmission planning and siting to expand energy delivery; (2) simplify the permitting process to expedite clean energy grid interconnections; and (3) advance the use of digital technology, including AI, to manage, optimize, stabilize and protect the grid.
Encouraging an equitable energy future: Finally, the clean energy transition needs a new strategy for community and stakeholder engagement that ensures participation for those that have been historically impacted by carbon-intensive energy development and those that stand to benefit the most from the expansion of the electrical grid. There is an opportunity to apply new zero-carbon energy best practices in countries that are building out their grids for the first time.
We support policies that: (1) support and amplify the voice of impacted communities; (2) design energy for an equitable start in the Global South; and (3) implement measures to keep electricity costs affordable and equitable.
Conclusion
Public policy will play a critical role in the global net-zero transition. Microsoft has a longstanding history of environmental sustainability action and advocacy, and we view it as both our responsibility and an opportunity to use our voice to support the policies that we believe will have the greatest impact.
To read the policy briefs, please visit:
aka.ms/carbonpolicybrief
aka.ms/electricitypolicybrief
Tags: carbon neutral, climate change, net zero, sustainability, Sustainable Development Goals
