Microsoft's Emissions Rise 25% as It Drops Controversial Renewable Credits

Microsoft's carbon emissions rose 25 percent year-over-year to 20 million metric tons, according to its latest Environmental Sustainability Report, driven by the expansion of AI data centre infrastructure and a decision to stop purchasing unbundled renewable energy certificates. The figure has been widely misreported online as 34 million metric tons, a number that does not appear as an actual emissions total in Microsoft's report but rather as part of a hypothetical comparison chart. The real, reported figure is 20 million metric tons, still a substantial year-over-year increase, but a materially different one from what has circulated in recent coverage.

 

Untangling the Confusion Over the Numbers

 

The 34 million figure originates from a chart in Microsoft's report comparing its actual reported emissions against an illustrative counterfactual scenario, an estimate of what emissions would have been had the company not undertaken specific carbon reduction initiatives such as energy efficiency improvements, renewable energy purchases and sustainable fuel certificates. Microsoft's own footnote on the chart states plainly that this counterfactual estimate is directional only, does not represent the company's full decarbonisation effort, and is not part of its reported greenhouse gas inventory. The confusion appears to stem from readers or aggregators mistaking that hypothetical, higher figure for an actual reported emissions total.

That distinction matters because it changes the story from an uncorrected companywide reporting failure to a genuine 25 percent increase against a verified baseline, still significant, but a different scale of concern than headlines suggesting 34 million tons implied.

 

Read more: U.S. Plastics Pact Sets New Design Rules for Recycling, Compost, Reuse

 

Why Emissions Actually Rose

 

Two factors drove the real increase. The first is the continued expansion of Microsoft's AI data centre infrastructure, which requires substantial electricity to power and cool at scale, a well-documented driver of rising emissions across the technology sector as AI compute demand grows. The second, and the more unusual disclosure, is Microsoft's decision announced in February 2025 to stop purchasing what it called non-additional, unbundled renewable energy certificates.

Renewable energy certificates represent the legal claim to the "renewable-ness" of electricity generated somewhere on the grid. When sold unbundled, meaning separately from the electricity itself, a buyer can claim to be powered by renewable energy without any of the actual clean electricity being delivered to them, since the certificate and the physical power are sold to different parties. The US Environmental Protection Agency describes unbundled certificates in exactly those terms, noting they provide no physical delivery of electricity to the purchasing customer. Because of that separation, many observers have long viewed unbundled certificates as a weak form of carbon accounting, since a company can report lower emissions on paper without changing its actual electricity consumption or sourcing.

 

What Microsoft Says the Change Achieves

 

Microsoft has not used the word greenwashing to describe unbundled certificates itself, but its stated reasoning points in that direction. The company said it is refocusing its carbon fee investments toward longer-term, higher-impact measures across carbon reduction, carbon removal and clean electricity procurement, adding that these interventions are expected to more effectively support its goal of becoming carbon negative by 2030, even though dropping the certificates may push the company temporarily out of a carbon-neutral position on paper.

That framing suggests Microsoft is trading a short-term reported number for what it argues is a more accurate and ultimately more effective decarbonisation strategy, prioritising real reductions and removals such as its ten-year direct air capture partnership with Climeworks over accounting mechanisms that lower reported emissions without changing physical energy use. Whether that trade-off proves justified will depend on how quickly the company's underlying reduction and removal investments scale relative to the continued growth of its AI data centre footprint, since the 25 percent increase demonstrates that infrastructure expansion is currently outpacing the emissions reductions those investments have delivered so far.

 

Explore OneStop ESG Marketplace: AI (Artificial Intelligence)

 

Water Use Presented as a Bright Spot

 

Beyond carbon accounting, the report also details Microsoft's water strategy, and notably states that the company replenished more water than it withdrew over the year. That result stands in contrast to the emissions trend and suggests uneven progress across different parts of the company's environmental programme, some metrics improving even as its headline carbon figure moves in the wrong direction, underscoring that assessing a company's sustainability performance from a single number rarely captures the full picture.