The world likely hit peak energy-related emissions in 2024. But the decline in the coming decade will be slowed due in large part to data centre expansion powered by fossil fuels, according to a report by Bloomberg New Energy Finance (BNEF).
While renewables and storage are expected to make up more than half of the power capacity needed by 2035 to meet data centre demand, almost two-thirds of additional electricity generation will come from fossil fuels like coal and gas, BNEF said on Tuesday in its New Energy Outlook report.
That’s because of the possibility of data centres helping to extend the life of existing coal and gas plants, the report said.
Electricity demand globally is expected to surge on back of artificial intelligence use and data centre expansion. That boom has prompted tech companies to secure round-the-clock electricity for their facilities.
Some firms have turned to nuclear power, while others are eyeing natural gas as the most abundant and immediately available source of energy.
This year is likely to be the first that world sees a structural decline in energy-related emissions — that is, a decline driven by fundamental shifts rather than a shock like the Covid-19 pandemic or the 2008 financial crisis. BNEF projects that emissions will fall 13% by 2035, but the increase of power-hungry data centres will blunt the drop.
Higher emissions
Cumulative carbon emissions are expected to be 3.5 gigatons higher — equivalent of 10% of total global emissions today — over the next decade because of additional computing-driven fossil fuel power use, the report said. The US and China are forecast to be the two biggest contributors by far.
The rise of AI is also reshaping US power markets, with data centre demand projected to rise from 3.5% of total electricity demand today to 8.6% by 2035, according to another BNEF report released on Tuesday.
Amazon.com is the biggest data centre operator with close to three gigawatts of capacity and another 12 gigawatts in its pipeline, followed by Microsoft, Meta and Google. US companies have developed the most major AI models, indicating that most large-scale AI training takes place in the US, the report said.
The report found that the global average temperature will reach 2.6 degrees Celsius above pre-industrial levels by 2100, though it is now “very close to slipping to an outcome closer to 2.7C”, the analysts wrote.
The modelling is based on BNEF’s “economic transition scenario”, which models changes in the prices and deployment of technology but only includes present-day policies rather than new ones in its assumptions.
While data centres present a “substantial opportunity in the coming decade” for power demand, estimates for future demand from such facilities is still uncertain and could change, the New Energy Outlook report added.
In the US, President Donald Trump’s administration has touted the Stargate project in a bid to expand data centres, and Trump has signed executive orders to expand fossil fuel use in the service of the AI boom.
But Microsoft, for one, has pulled back on data centre projects around the world as it takes a harder look at its expansion plans.
