In today’s Finshots, we break down whether the world’s tech giants are truly carbon-neutral.

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The Story

Companies, big and small, are proudly announcing their carbon-neutral status, and it’s all the rage these days.

But what does it actually mean when a company claims to be carbon-neutral?

Think of it as an exercise to erase all the environmental harm they’ve caused—their carbon footprint. This includes the total greenhouse gases they emit. So, being carbon neutral is a mix of cutting emissions and investing in projects that absorb CO2. The goal is to leave no net impact on the environment. Sounds great, right?

Now, it all sounds good in theory. But are these companies really doing what they claim? Well, a recent report from the Guardian put some big tech giants under the microscope.¹

And here’s what it found. Companies like Google, Microsoft, Meta, Apple, and Amazon have been boasting about their carbon neutrality or reducing emissions for years. But from 2020 to 2022, these big U.S. internet companies’ real emissions were about 7.6 times higher than what they officially claimed. For a bit of perspective, since 2019, the emissions from these companies have been greater than the total emissions from all Bitcoin mining since its inception in 2009.²

And, the culprit behind this is their data centres. These massive facilities are the lifeblood of big tech operations, but they’re churning out more carbon dioxide than reported.

Think of these data centres as the beating heart of the internet. Inside, they store and process all the data for websites, cloud storage, streaming services, and even Artificial Intelligence (AI) tools like ChatGPT.

Every time you send an email, stream a video or open a cloud file, your request passes through a data centre somewhere. They’re essential to keeping the online world running smoothly, but they are also incredibly power-hungry. In fact, the International Energy Agency (IEA) estimated that in 2022, data centres were responsible for 1% to 1.5% of global electricity consumption.

And that was before the AI boom took off.

And now, tech giants are pouring billions into AI development, which means even more energy consumption. Sundar Pichai has even called Google an “AI-first” company. Meta is adding chatbots, and Apple is partnering with OpenAI to develop Siri’s future. It’s a full-blown AI race, and data centres are working overtime to keep up.³

In fact, a single ChatGPT query uses ten times more energy than a regular Google search. To put it another way, the energy used for one ChatGPT query could power a light bulb for 20 minutes. Now imagine that multiplied by millions of queries every day!

And as we move towards more advanced AI solutions, this energy demand will only continue to skyrocket. A Goldman Sachs report predicts that by 2030, energy consumption from data centres could grow by 160%, contributing to even more carbon emissions. And in countries like the U.S., much of this energy still comes from burning fossil fuels like coal and gas.

Morgan Stanley has also chimed in, estimating that data centres could emit 2.5 billion metric tons of CO2 by 2030. That’s massive!

But how are these tech giants reporting lower emissions than reality in the first place?

It comes down to some clever accounting tricks.

You see, most of these companies rely on ‘renewable energy certificates’ (RECs) to meet their green energy targets. These certificates let them buy credits from renewable projects, like wind or solar farms, allowing them to claim a share of the environmental benefits without generating the energy themselves.

But here’s the catch. The renewable energy doesn’t have to power their operations directly. So, a data centre might still run on coal-powered electricity, but by purchasing RECs, it can technically say it’s using renewable energy on paper.

This lets companies claim carbon neutrality without really changing the way they operate.⁴

For instance, an estimate suggests that 78% of Amazon’s US energy comes from non-renewable sources. The company’s creative carbon accounting techniques (RECs) allow it to sidestep environmental responsibility on paper, giving the impression that it is doing a great job. The same is true for other tech giants.

And even if we strip away the RECs and focus on the actual energy consumed, the picture changes dramatically. If Big Tech were a country, their combined emissions in 2022 would make them the 33rd largest emitter globally, between the Philippines and Algeria.

But again, the discrepancies between what’s reported and what’s real are massive here.

Take Meta. While they reported 273 metric tons of CO2 from their data centres in 2022, the real number, accounting for location-based emissions, was over 3.8 million metric tons. That’s a 14,000-fold difference. Microsoft had a similar story, with a 21-fold gap between reported and actual emissions.

Now, if you’re wondering what location-based emissions are, they simply measure the actual carbon footprint based on where the electricity is generated. Say a data centre is running in region ‘A’ that uses coal or gas to generate electricity; the emissions will be much higher than in region ‘B’ that is powered by clean energy like wind or solar. So, while this looks good on paper, it doesn’t change the fact that they’re still relying on fossil fuels.

And here’s another layer to the problem: many tech companies lease capacity from third-party data centres. These are called “scope 3” emissions and are notoriously difficult to track. Whether these emissions are fully accounted for in their reports is still a big question mark.

So, how do we solve this, you ask?

Well, by holding tech giants accountable and pushing them to address the damage. Fortunately, it seems like they’re starting to take notice, at least for now.

Google, for example, has pledged to run its data centres on renewable energy 24/7 by 2030, eliminating the need for RECs entirely. Microsoft is setting a similar goal, aiming to use 100% carbon-free energy 100% of the time by that same year.

But again, not all companies are on board with this level of commitment.

So, while Big Tech’s promises of carbon neutrality sound great on paper, the reality is a bit more complex.

If the industry truly wants to reduce its carbon footprint, it’ll need more transparent reporting and serious investments in renewable energy infrastructure. Switching to location-based accounting would give us a more accurate picture of their emissions.

Ultimately, Big Tech’s lofty climate goals will only be credible if they reflect what’s happening on the ground. And right now, there’s a disconnect.

Until then…

Story sources: The Guardian [1]; Crypto Times [2], npr.org [3]; MIT Technology Review [4]

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