The lack of carbon regulations represents a “fundamental market failure,” according to Microsoft’s Chief Environmental Officer Lucas Joppa. 

Joppa, who participated in an MWC Barcelona climate panel this week, said that if corporations don’t pay for the waste and greenhouse gas (GHG) emissions they produce, then market uncertainty around how to handle these issues will continue. 

Organizations and lawmakers must take more aggressive measures to eliminate carbon emissions and avoid critical warming of the planet, he added. “We obviously need some sort of regulation on carbon,” Joppa said. “I think it's time for governments to start thinking about how they bring their traditional approach to these new areas.”

Regardless of the steps governments take toward regulating GHG emissions, individual companies can introduce internal carbon taxes to promote self-regulation. Some, like Microsoft, already do.

In January, Microsoft expanded its internal carbon tax to include scope 3 emissions, such as GHG emissions from its suppliers and customers using its products. This initiative builds on its scope 1 and scope 2 internal carbon taxes, originally introduced in 2012. 

Companies measure their GHG emissions in three buckets, or scopes. Scope 1 includes direct emissions from any sources owned or controlled by the company, such as emissions from company vehicles and facilities. These emissions are usually easiest to reduce because the organization often has complete control of operations that result in these emissions. Scope 2 covers indirect emissions from services the company purchases, including electricity generation, heating, and cooling. 

Scope 3 emissions include all other indirect emissions from a company’s value chain, such as emissions from distribution, waste disposal, and suppliers. Scope 3 emissions are often the most difficult to regulate, but Microsoft remains committed to reductions across all three scopes to achieve its environmental targets. 

Microsoft taxes itself $15 per metric ton for its scope 1 and scope 2 emissions and sets a $5 fee per metric ton on its scope 3 emissions, although the company plans to gradually increase this tax overtime. Microsoft uses its internal carbon taxes to fund projects such as "procuring carbon removal," Joppa said. Additionally, the company claims that these taxes motivate its employees to be aware of the company’s carbon footprint and reduce it. 

Microsoft previously committed to be a carbon-negative company by 2030, meaning it will remove more carbon from the atmosphere than it emits. 

Microsoft also set a goal to remove all of its historical emissions dating back to 1975 by 2050. To round out its environmental strategy, the software giant plans to reach zero-waste and water-positive targets by 2030. 

“Microsoft achieving its commitments moves the world further down its maturity curve, and every other organization's ability to meet their commitments as well,” Joppa said. 

Technological developments will be a key factor in mitigating the climate crisis, but Joppa noted that technology isn’t the only answer. “We're not here to say that technology is the silver bullet to all of our environmental challenges,” he explained. “But we do think that technology, and particularly some technology breakthroughs, are going to be fundamentally important for Microsoft to achieve its goals, and for the world to achieve its goals.”