Microsoft Strikes Major Carbon Reduction Deal as AI-Driven Energy Demand Surges

Big Tech is struggling to cope with a sharp rise in energy-related emissions driven by the rapid expansion of artificial intelligence.

U.S. technology giant Microsoft has signed a multi-million-dollar carbon credit agreement with oil producer Occidental, as it seeks to meet its climate commitments amid growing concerns over the power demands of AI, the Financial Times reported.

Under the deal, announced last week, Occidental will sell Microsoft 500,000 carbon credits over six years, according to the FT. The agreement will allow Microsoft to offset part of its emissions by paying the oil company to remove carbon dioxide from the atmosphere and store it underground.

Big Tech companies are increasingly grappling with a surge in energy consumption linked to AI development, particularly from the expansion of data centres. Microsoft acknowledged in May that its emissions have risen by nearly one-third since 2020, largely as a result of data centre construction and the growing electricity needs associated with AI workloads.