“Power Hungry: How AI Will Drive Energy Demand” Report

April 23, 2025

The integration of artificial intelligence (AI) into global economies is projected to enhance annual GDP growth by approximately 0.5% from 2025 to 2030. This growth is expected to surpass the costs associated with increased carbon emissions stemming from energy-intensive data centres. The International Monetary Fund (IMF) has brought into light this potential in its recent report, emphasising the need for balanced approaches to harness AI’s benefits while mitigating its environmental impact.

Projected Economic Growth from AI

AI is anticipated to contribute to global output. The IMF estimates that the economic gains will outweigh the costs of rising emissions. However, these benefits will not be distributed evenly. Some regions may experience substantial gains while others lag behind. Policymakers are urged to address these disparities to ensure inclusive economic growth.

Energy Consumption and Emissions

The demand for data processing power is expected to surge as AI adoption increases. This could lead to a tripling of global electricity needs, reaching around 1,500 terawatt-hours (TWh) by 2030. This consumption level is comparable to India’s current electricity usage. The rise in energy demand raises concerns about greenhouse gas emissions, which could increase by 1.2% globally during the same period.

Environmental Implications

The carbon footprint associated with AI will largely depend on the energy sources used in data centres. The IMF report suggests that the social cost of additional emissions could range between $50.7 billion and $66.3 billion. While this figure is lower than the projected economic gains, it still contributes to the growing concern over climate change and environmental degradation.

Potential for Energy Efficiency

There is a possibility that AI could drive improvements in energy efficiency. If implemented correctly, AI technologies might lead to more sustainable consumption patterns and lower carbon emissions. However, achieving these outcomes will require intentional actions from governments and businesses. R&D funding and supportive policies are critical to ensuring that AI contributes positively to climate action.

Role of Policy and Industry

The successful application of AI in a manner that benefits the environment will necessitate collaboration among governments, tech companies, and energy sectors. Market forces alone are insufficient to guide AI towards sustainable practices. Active involvement and strategic planning are essential to address the inequalities and environmental challenges posed by AI advancements.

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