Data, Power and Emissions: The Environmental Cost of AI

Alessandra Bonfiglioli, Rosario Crinò, Mattia Filomena and Gino Gancia

No 12158, CESifo Working Paper Series from CESifo

Abstract: We study the environmental impact of artificial intelligence (AI) using a novel dataset that links measures of AI penetration, the location of data centers and power plants, and CO2 emissions across US commuting zones between 2002 and 2022. Our analysis yields four main findings. First, exploiting a shift–share identification strategy, we show that localities more exposed to AI experience relatively faster emissions growth. Second, decomposition results indicate that scale effects dominate, while changes in industrial composition exert at most a weak mitigating effect; at the same time, electricity generation becomes more carbon intensive. Third, AI penetration raises dependence on non-renewable electricity. Fourth, proximity to data centers is a key driver of this effect, as nearby power plants shift toward greater fossil fuel use. These findings suggest that, absent a rapid decarbonization of power generation, the diffusion of AI is likely to exacerbate environmental externalities through the energy demand of data centers.

Keywords: artificial intelligence; data centers; environment; emissions; pollution (search for similar items in EconPapers)
JEL-codes: O33 Q55 R11 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-ain and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12158

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