The AI boom may have side effects. It’s a surge in big tech companies buying carbon credits to offset the emissions produced by their energy-intensive construction.
Amazon, google, metaand microsoft Carbon credit management platform Ceezer has increased its purchases of permanent carbon credits since the launch of ChatGPT ignited the AI race in 2022, according to data compiled for CNBC.
Companies are all working towards achieving net-zero emissions, but the rapid development of energy- and water-intensive AI is raising questions about whether that goal is achievable. The credits can offset emissions by funding other projects that reduce emissions, such as technologies that remove carbon from the atmosphere.
Each carbon credit represents a metric ton of carbon dioxide reduced or removed from the atmosphere.
Amazon, Google parent Alphabet, Microsoft and Meta are considering a combined nearly $700 billion bill this year to further their AI ambitions, including building massive data centers that would also increase emissions.
They increased purchases for permanent carbon removal from 14,200 credits in 2022 to 11.92 million credits in 2023, based on market data available from Ceezer, a carbon credit management platform, and also analyzed information from carbon market data insights providers Allied Offset and Cdr.fyi. According to Ceezer, there will be 24.4 million people in 2024, an increase of 104% from the previous year, and 68.4 million people in 2025, an increase of 181%.
While Ceezer’s data focuses on carbon removals that are considered permanent, Microsoft’s acquisition covers a range of time-limited carbon removals defined as high, medium, and low durability, the latter including technologies that sequester carbon for less than 100 years, such as soils and forests.
Amazon declined to comment on its carbon credit strategy, while Meta and Google did not respond to requests for comment.
low starting point
Of the four largest tech companies, only Microsoft consistently reports annual purchases dating back to 2022 or earlier. Credits are purchased in bulk over multiple years, which can skew the numbers.
Also, there is no obligation to report. Some purchases may not be reported due to potential reputational risk — the initial carbon credits were controversial because they did not represent true emissions reductions, Ceezer CEO Magnus Drewerys told CNBC.
Drewrys said it would be “impossible” for Big Tech companies to reach net zero without carbon removal, as the supply of clean energy to support building AI is tight.
Technical carbon removal includes a variety of techniques, including direct air capture, which uses machines to suck carbon dioxide from the air, and processes that accelerate nature’s ability to capture and store carbon.
Ben Rubin, executive director of the industry coalition Carbon Business Council, told CNBC that the surge in purchases reflects the United Nations’ 2022 IPCC report, which says carbon removal is needed in all pathways to keep global warming below 1.5 degrees Celsius.
“The surge in demolition demand in 2023 is not a short-term reaction, but the beginning of a structural shift consistent with increased private sector action and public policy support,” he told CNBC, adding that the purchase price reflects a shift from small-scale demonstration purchases to multi-year offtake agreements.
“These buyers are seeking to secure future supplies, send demand signals to markets and address residual emissions in their long-term climate strategies,” he said.
Build AI sustainably
Among Big Tech, Microsoft is considered a leader on climate change. Shilpika Gautam, CEO of climate finance platform Opna, told CNBC that the carbon removal market is “basically Microsoft.”
When asked about carbon credit purchases, Microsoft provided Ceezer with other data. The company’s data reflects all types of carbon credits, not just permanent carbon removal.
Microsoft told CNBC that credit purchases increased 247% to 5 million from fiscal 2022 to 2023, then 337% to 21.9 million from fiscal 2023 to 2024, and will increase by about 100% next year, but did not provide exact numbers.
Melanie Nakagawa, Microsoft’s chief sustainability officer, told CNBC that the company is focused on reducing emissions and eliminating what can’t be eliminated, as it expects to become carbon negative by 2030.
“As pioneers in the carbon removal market, we are uniquely positioned to send demand signals that lead to increased supply. A carbon removal market with more solutions and more buyers will move us all closer to achieving our common goals and have a positive impact on our planet and economy,” she said in an emailed statement.
Microsoft did not specifically say whether the purchase of carbon credits was related to its AI strategy.
Renewable energy will play a key role in meeting the growing demand for AI data centers.
“As AI has risen, emissions have increased slightly if you look at large companies, but not by much. This means hyperscalers have been able to react relatively quickly, including by transitioning to renewable energy,” Caesars-Drewleys said, drawing on data from the platform to show that they are not relying solely on carbon credits.
Opna’s Gautaum said Microsoft’s purchase of carbon credits “could be primarily driven by its AI data center ramp-up.”
Gautaum added that Microsoft’s investments in companies developing low-carbon materials, such as Sublime Systems and Stegra, make sense because once they scale, they enable the creation of sustainable infrastructure.
He said the “hoarding” of carbon credits by big tech companies to offset emissions was inconsistent with “their beliefs and their desire to build better.”
Last year, Amazon launched a platform that allows partners to buy carbon credits. We are also reducing the impact of the materials we use, investing in water and energy efficiency, and renewable energy.
She added that it would be “great” if in 10 years there were no more people working in the carbon removal business. Because it means “I decided to make something better.”
Drewrys noted that commitments to net zero predate the AI surge, adding that without it carbon credit purchases would “probably” have increased.
“There is a good chance that AI substantively supports the need for carbon removal as a rapid and flexible means of dealing with rising emissions,” he added.
