Seattle, WA-Major technology companies such as Amazon, Microsoft, and Meta have been tripping over each other to make high-minded environmental pledges. They tout that their operations are powered by renewable energy. But an analysis by Bloomberg Green finds those claims are not quite as green as they let on. The report focuses on the prevalence of renewable energy certificates, or RECs: credits that enable companies to convey a more environmentally friendly image, without necessarily shrinking its carbon footprint.
Dubious Use of Renewable Energy Certificates
Renewable energy certificates are tradable commodities that represent proof a megawatt-hour of electricity was generated from a renewable energy source. Companies can buy the certificates to claim use of green energy, even while their actual usage of energy is highly dependent on fossil fuels. The practice has come under increasing scrutiny for allowing firms to report lower emissions without making substantial changes in carbon-intensive operations.
That has included heavy reliance on unbundled RECs, Bloomberg’s investigation found, a means for companies such as Amazon.com Inc., Microsoft Corp., and Meta Platforms Inc. to achieve their renewable energy goals. The certificates don’t involve actual energy consumption and can be purchased separately from the physical electricity they supposedly represent. As such, companies can continue to rely on energy derived from fossil fuels while claiming to be powered with renewables.
Impact on Reported Emissions
This also significantly affects how such companies report their carbon emissions. In 2022, Amazon, Microsoft, and Meta reported far lower emissions because they are dependent on unbundled RECs. Without the credits, Amazon’s reported emissions would have been higher by 8.5 million metric tonnes, Microsoft by 3.3 million tonnes, and Meta by 740,000 tonnes.
Some environmental advocates call this a practice that masks the real carbon footprint of these companies. More recently, the Integrity Council for the Voluntary Carbon Market ruled carbon credits from existing renewable energy methodologies, including those paired with RECs, no longer meet its Core Carbon Principles. This move is said to impact 32% of the voluntary carbon market, or some 236 million credits, that would be subjected to more stringent standards in proving real actual emission reductions.
The AI Conundrum
All this is further muddling the house sustainability goals of technology companies amid an unimaginable, mushrooming demand for AI technologies. While the operation of AI needs great computing power, it also requires massive energy resources to compute. Take, for instance, Microsoft: its emissions have surged 30 percent since 2020, despite a pledge to be carbon negative by 2030. The rise largely stems from the carbon-heavy materials used to build new data centers needed to support AI-driven operations.
Microsoft, Amazon, and Meta have all made claims that their AI operations are powered with renewable energy sources such as wind and solar. However, experts say these claims are not reflective of the actual energy mix utilized in powering their data centers. The reliance on such RECs allows these companies to report lower emissions while leaving the carbon footprint from actual AI activities unaccounted for.
Shifting Industry Practice
While Google has moved away from the use of unbundled RECs, shifting focus directly to the purchase of clean energy, Amazon, Meta, and Microsoft remain dependent on such credits for meeting their renewable energy goals. In 2022, Amazon was far and away the most dependent on unbundled RECs among its peers, with 52% of its reported renewable energy usage derived from those certificates. However, it has since expressed its intention to scale this down as direct renewable energy projects increase.
Microsoft also struggles to make the sustainability pledge of the company commensurate with the growing energy appetite of the growing AI operations. The company recently announced plans to invest more than $50 billion over the coming year to expand its data centers, potentially pulling up its carbon footprint. With all these environmental costs attending AI, Microsoft’s president, Brad Smith, admitted that carbon negativity by 2030 will be far from easy to realize.
Outlook
The revelations of major technology companies’ use of RECs raise crucial questions about the depth of effectiveness from the ongoing sustainability practices. Companies would have to turn toward much more substantial reductions in carbon emissions as the demand for AI-and other energy-intense technologies-keeps on growing. The recent ruling by the ICVCM is one step toward more stringent standards in the voluntary carbon market, but it remains to be seen how companies like Amazon, Microsoft, and Meta adapt to such changes.
There is growing pressure on tech giants to move beyond just buying RECs to actually investing in more tangible, longer-term solutions that reduce their carbon footprint. As increased scrutiny gets underway, stakeholders and consumers alike are paying attention to just how these companies fulfill their environmental promises.
Source: Information below adapted and summarized from reporting by Bloomberg Green.
Credits: Content below adapted from Bloomberg Green’s analysis.