Microsoft (MSFT) and Google (GOOGL) are at the forefront of AI advancements, making them powerhouses in the industry.
However, their high energy consumption has eclipsed that of over 100 countries, raising concerns regarding their dedication to the climate change initiatives they have been so vocal about.
AI's recent rise has intertwined itself into our daily lives beyond our favorite chatbots (CHAT-GPT) and personal shopping helpers (Amazon's Rufus). AI is in everything from our maps and personalized advertisements to social media algorithms and vision AI overtaking manufacturing operations.
Related: CrowdStrike stock tumbles after update triggers global IT chaos
AI's Carbon Problem
While many technological advancements promote reducing carbon emissions, the most recent technological advancement, Artificial Intelligence, presents a challenge; the data centers supporting AI are guzzling electricity at the rate of entire nations.
Data centers are the backbone of all AI and cloud services, accounting for 1 to 1.5 percent of global electricity use, according to the International Energy Agency. The exact cost of a single AI model is difficult to estimate. Still, researchers, for example, estimate that creating the GPT-3 model consumed 1,287 megawatt hours of electricity and generated 552 tons of carbon dioxide equivalent. That was the consumption before its launch, which is equivalent to the consumption of 123 gasoline-powered personal vehicles driven for one year.
New research shows that in 2023 alone, Microsoft and Google each consumed 24 terawatt-hours (TWH) of electricity, equivalent to the amount of energy consumption as Azerbaijan and surpassing nations like Iceland, Ghana, and the Dominican Republic.
Over the past few years, tech giants like Microsoft and Google have made massive pledges and promises to reduce carbon emissions. But is this a true commitment or another fad, as seen in the mid-2000s with carbon offsets, vegan leather, and sustainable coffee cups?
More Business of AI:
- Google falling behind climate goals thanks to AI ramp up
- Analyst reboots Microsoft stock price target on AI integration
- How to use ChatGPT for investing: From graphs to calculations
Carbon-neutral solutions aren't long-term
Many of these companies plan to be carbon-neutral by the mid-century, meaning they aim to remove more carbon from the environment than they produce; a primary method is carbon offsets. In carbon offsets, one company emits greenhouse gases (carbon pollution) and then pays another company to offset this pollution by providing a carbon-reducing project, such as reforestation and renewable energy.
The problem is that there is no way to predict and monitor the impact of these green projects in reducing carbon emissions. Carbon offsets divert attention from the source of pollution to a cover-up, essentially a band-aid on a bullet hole.
Verra is the world's leading carbon standard in carbon offsets market. However, a study by TheGuardian found that only a handful of Verra's rainforest projects showed any environmental impact. Moreover, 94% of the credits were deemed ultimately useless.
Critics argue that carbon offsetting plans are less effective than direct reductions, as offsets do not reduce the actual emissions from the source, which is critical for long-term sustainability.
Related: Stranded by the airport IT outage? Here is what you can do
Microsoft and Google's Solutions
Microsoft and Google have pledged carbon-reducing initiatives by 2030, with Microsoft investing $1 billion in their Climate Innovation Fund and Google committing to carbon-free data centers. They are stepping out of the box of carbon offsets into innovation.
In January, Microsoft made a startling announcement: Not only will it reduce its output emissions 55 percent, but it plans on going carbon negative by 2050, drawing down enough carbon to account for all the company’s emissions since its founding in 1975. To minimize its carbon footprint, Microsoft is focusing on the entire supply chain, from suppliers to production.
Google has invested in energy-efficient data centers by digitizing and sourcing clean energy regionally.
The two tech giants are leaders in technology innovation, and considering their mass energy output, they aim to be sustainability leaders.
Related: Veteran fund manager picks favorite stocks for 2024
