Microsoft is losing ground on climate ambitions as hunger for AI demands more power

During the Biden era, Microsoft was a leader in Big Tech’s push to eliminate fossil fuels and power the world with energy from wind and solar farms. 

In January 2020, the company set ambitious goals to become carbon negative within a decade. This meant it would not only power all its operations with energy that produced no greenhouse gas emissions, it would also reduce some of the carbon emissions that other sources produce. 

While the company has regularly promoted its commitment to anti-fossil fuel policies since announcing the plan, reports in the past few months suggest its easing back on some of those ambitions. It turns out carbon-negative pledges aren’t easy to meet if energy demands don’t remain flat. 

The need to grow its artificial intelligence business is driving higher electricity demand, and that’s forcing some of Microsoft’s climate goals into retreat.

Microsoft’s ‘match’ accounting

Over the years, Microsoft remained committed to the carbon-negative goal, while trying to force others to adopt the same standards. The company boasted in 2022 of using its influence to advocate for anti-fossil fuel policies. And last year the company tried to force its suppliers to adopt its emission standards. 

Microsoft has also been investing in carbon removal schemes, which seek to suck carbon dioxide out of the air and store it in underground geological formations. Last year, the company invested in a low-carbon cement startup, and it planned to use some of the company’s products in the construction of its data centers. Offsetting emissions from cement production would also count toward its carbon negative goal. 

In February, Microsoft announced it had “matched” 100% of its annual electricity consumption with renewable sources, a phrasing critics argue is misleading because it gives the impression that the company’s operations are powered with intermittent wind and solar farms. And that’s how media outlets often report the achievement. 

Aside from hydroelectric, which is difficult to scale up, renewable energy is unreliable and cannot satisfy 24/7 energy demand without backup from some other source. Microsoft cannot rely solely on wind and solar power for its operations. 

In reality, the company signed power purchase agreements with wind and solar companies. This meant it purchased the electricity produced by solar and wind farms, but these weren’t plugged into Microsoft facilities. Those facilities tapped the grid for their power, which contained a mix of power from intermittent sources – but also fossil fuels, nuclear and hydroelectric to ensure a reliable, 27/7 power supply. 

The power that Microsoft purchased from disparate wind and solar farms across the world was dumped onto whatever grids they were connected to. 

Microsoft is not the only tech giant claiming to run its operations on 100% renewable energy. Along with Microsoft, Google claims to have “matched” 100% of its electricity use with renewable energy since 2017, and Apple claims to have done so since 2018. 

Next climate step falters

By 2030, Microsoft is planning to “match” its hour-by-hour electricity consumption with renewable energy, a much more ambitious target than its annual “match.” However, that goal may be put aside. 

The company’s most recent sustainability report conceded that it was producing more emissions today than it had when it set itself in the past to being carbon negative. 

“While our total emissions ... have increased by 23.4% compared to our 2020 baseline due to growth-related factors such as AI and cloud expansion, we are encouraged by the fact that this increase has been modest compared to the 168% increase in energy use and 71% revenue growth that has taken place over the same period,” the report stated. 

As the report explained, the race to develop artificial intelligence systems in an increasingly competitive business environment has pushed Microsoft into the position where its climate goals are at odds with its business goals. 

Now, Bloomberg reports, citing unnamed sources, that the company may shelve a more ambitious goal to “match” its hourly electricity use with renewable energy. It may abandon the target altogether. A spokesperson for Microsoft told Bloomberg that the company continues pursuing opportunities to match its annual demand with power purchase agreements but didn’t comment on the company’s ability to reach the hourly demand goal. 

Natural gas for the future

And according to Heatmap, the company is also telling suppliers and partners to pause future purchases of carbon removal. 

Microsoft’s chief sustainability officer told the climate news publication that the company is continually reviewing and assessing its carbon-removal portfolio along with market conditions for the best means to reach its carbon-negative goals. 

The pause may be related to financial challenges the company faces as more capital expenditure goes toward data centers. The company plans to spend $190 billion by December on such facilities. Many divisions, including those dedicated to the company's anti-fossil fuel policies, are having to work with slimmer budgets. 

As the hunger for AI grows, Microsoft has been adding about a gigawatt of data center capacity to its operations every three months. Assuming 1 billion watts consumed an hour per day for 90 days, that’s enough power for 72,000 average American homes over the same period. Meeting that with intermittent power, even through power purchasing agreements, is becoming infeasible. 

The days of heady climate ambitions may be at an end. Last March, Microsoft, along with the investment firm Engine No. 1, entered into an agreement with Chevron to get exclusive access to the power from a proposed natural gas-fired power plant to power AI.

It’s not just Microsoft. A recent study by Cleanview, which advocates for the wind and solar industry, found that natural gas is becoming the go-to source for powering data centers.

Big Tech is coming to terms with the fact that climate goals and economic growth don’t always align, and climate policies will always take a backseat to the needs of business.