AI’s energy demands set to triple, but economic gains expected to surpass costs

The International Monetary Fund projects that artificial intelligence will boost global economic output by 0.5% annually between 2025-2030, creating benefits that outweigh the environmental costs of increased energy consumption from data centers. This finding highlights the complex trade-offs between technological advancement and sustainability, as AI adoption accelerates amid growing concerns about climate impacts and energy demands in the digital infrastructure sector.

The big picture: AI-driven economic gains will exceed the environmental costs of increased carbon emissions from data centers, according to a new IMF report titled “Power Hungry: How AI Will Drive Energy Demand.”

• The IMF estimates AI will boost global GDP by approximately 0.5% annually between 2025 and 2030, generating more economic value than the social costs of additional carbon emissions.
• However, these economic benefits won’t be distributed equally worldwide, prompting the IMF to call on policymakers and businesses to minimize broader societal costs.

Behind the numbers: AI’s electricity demands could more than triple to around 1,500 terawatt-hours by 2030, equivalent to India’s current electricity consumption.

• This projected energy consumption would be 1.5 times higher than the expected demand from electric vehicles over the same period.
• Data center expansion is already substantial, with server-filled warehouses in northern Virginia alone occupying floor space equivalent to eight Empire State Buildings.

Environmental impact: Strong AI adoption would increase global greenhouse gas emissions by 1.2% between 2025-2030 under current energy policies.

• The IMF quantifies this environmental cost at between $50.7 billion and $66.3 billion, using a social cost of carbon at $39 per ton.
• Greener energy policies could potentially limit the increase in emissions, though specific strategies weren’t detailed in the report.

Why this matters: The relationship between AI advancement and sustainability represents a crucial balancing act for governments and technology companies globally.

• How AI is deployed will significantly influence both its economic benefits and environmental impacts, particularly whether it leads to efficiency gains in energy use or more sustainable consumption patterns.

Counterpoints: AI could potentially reduce overall carbon emissions if properly directed toward climate solutions.

• The Grantham Research Institute suggests AI could accelerate advances in low-carbon technologies across power, food, and transport sectors.
• However, Grantham policy fellow Roberta Pierfederici cautions that “market forces alone are unlikely to successfully drive AI’s application toward climate action.”

Where we go from here: Intentional policies and collaboration between governments, tech companies, and energy providers will be essential to maximize AI’s benefits while minimizing environmental harm.

• R&D funding and policies addressing inequalities exacerbated by AI advances will be needed to ensure the technology is deployed “intentionally, equitably and sustainably.”