IMF Warns of Rising Emissions From Data Centers

The International Monetary Fund (IMF) highlighted that the expansion of data centers, cryptocurrency mining, and activities related to Artificial Intelligence (AI) are driving a significant increase in electricity consumption, which in turn raises carbon dioxide emissions. This trend could be mitigated through the implementation of taxes aimed at reducing emissions. In its report, AI and Cryptocurrency Carbon Emissions Are Rising, and Fiscal Policy Can Help, the IMF points out that a single bitcoin transaction uses as much electricity as the average person in Ghana or Pakistan consumes over three years.

The IMF notes that in 2022, both cryptocurrency mining and data centers together accounted for 2% of global electricity demand. This share is expected to rise to 3.5% by 2025, equivalent to Japan's current electricity consumption, the fifth-largest electricity consumer in the world. "The climate impact of these activities, despite their social and economic benefits, is a cause for concern," the IMF stated. The fund also projects that by 2027, cryptocurrency mining could generate 0.7% of global CO2 emissions. If data centers are included, their carbon emissions could reach 450MMt  by 2027, or 1.2% of the global total.

To address this issue, the IMF suggests tax systems could be an effective tool to guide companies toward reducing their emissions. According to its estimates, a direct tax of US$0.047/kWh could force the cryptocurrency mining industry to align its emissions with global targets. If the impact of air pollution on local health is also considered, this tax rate could increase to US$0.089/kWh, translating into an 85% rise in the average electricity price for miners. "Such a tax could boost global government revenues by US$5.2 billion annually and cut annual emissions by 100MMt, roughly equivalent to Belgium's current emissions," the IMF concluded.

Francisco Tijerina, Director of Business Development, Escala, emphasizes that data centers will increasingly face regulatory scrutiny due to their environmental impact. Data centers are adopting advanced technological solutions, such as liquid cooling systems that offer higher performance with lower energy consumption compared to traditional air cooling, and hydrogen cells that provide emission-free backup power, aiming to enhance energy efficiency and minimize environmental impact.

Still, the Mexican Data Center Association (MEXDC) informed that this industry is expected to consume approximately 1,492MWh over the next five years. However, Hitachi Energy calls this figure "conservative" and estimates that the industry's energy demand could reach up to 5,000MWh. To meet the estimated energy demand of data centers in Mexico, both the government and the companies in this industry will need to invest at least US$8.732 billion. MEXDC suggests that a significant portion of this investment should be allocated to clean energy sources such as solar and wind, as by 2030, at least 35% of the energy consumed is expected to come from renewable sources, as reported by MBN.