AI-driven datacenter builds drive Microsoft's emissions up a quarter in one year

on-prem

Firm faces quandary of wanting to help the environment, but also wanting to force AI on everyone

Microsoft says it matched its entire electricity consumption with renewable energy last year. The bad news is it also increased greenhouse gas (GHG) emissions by 25 percent due to datacenter construction.

The cloud and software biz has released a 2026 Environmental Sustainability Report [PDF], claiming its environmental sustainability work is entering a new phase due to rapid technological change.

A global shift towards AI is reshaping economies, the report claims, which is becoming “foundational” to how technology is built and used.

Producing the infrastructure to support AI, however, is also upping demand for energy, water, land, and materials required to support it, Microsoft admits.

The foreword, penned by President Brad Smith and Chief Sustainability Officer Melanie Nakagawa, says that “AI can deliver broad societal, economic, and environmental benefits,” and “We do not see these dynamics as a reason to step back. We see them as a mandate to lead differently.”

In 2020, Microsoft set itself the goal of becoming "carbon-negative" by 2030. Its own figures show emissions heading only upwards, from 13 million tons of CO₂ equivalent in 2020, to 20 million tons in 2025.

However, Microsoft estimates that without the carbon reduction initiatives it has already put in place, emissions would now stand at 34 million tons.

We asked Microsoft what this meant for its goal of becoming carbon-negative by 2030. It has yet to reply. 

As noted previously, Microsoft's rise in GHGs is primarily driven by the expansion of its datacenter infrastructure, though it also points to a decision to stop purchasing non-additional, unbundled renewable energy certificates.

The construction spike means that Scope 3 emissions are still the largest part of Microsoft’s carbon footprint, but 2025 saw a growing contribution from Scope 2, due to generation of energy the company purchased. These represent 13 percent of total emissions – up from 2 percent in 2024.

This underscores the growing role energy systems play in shaping environmental outcomes and why advancing carbon-free energy sources remains critical to long-term progress, the report says.

When it comes to water consumption, another hot topic for those living near to datacenters, Microsoft says it focuses on cooling systems, improving water usage effectiveness (WUE), and reducing reliance on municipal water supplies.

It claims the facilities it owns and operates achieved a 25 percent reduction in WUE since the 2022 baseline. The exact figures listed in Microsoft’s Environmental Data Fact Sheet put the company’s total global water withdrawal for 2025 at 13,266 million litres (3,504 million gallons), and total water consumption at 8,170 million litres (2,158 million gallons).

For the first time, Microsoft claims to have replenished more than it withdrew during 2025, returning 14,278 million liters (3,771 million gallons).

Elsewhere, the corporation says its Circular Centers program reused 92 percent of decommissioned servers and their components.

In the past, Microsoft said it tried to cut the emissions from building datacenters by using concrete mixes with lower overall embodied carbon, and it experimented with facilities made out of wood, estimated to produce a carbon footprint 65 percent lower. ®