Microsoft’s Emissions Jump Shows Why AI Needs Honest Power Accounting

Microsoft’s newest environmental disclosure has an inconvenient number in it: total greenhouse gas emissions rose 25 percent in fiscal year 2025, the company said on July 9, 2026. It is the clearest sign yet that the AI buildout reshaping Microsoft’s business is also reshaping its carbon footprint, and it landed in the same week that Google and Amazon published their own sustainability reports showing double-digit emissions growth of their own.

The number is real, but it is not simple. Part of the jump reflects Microsoft building more data centers to run AI workloads. Another part reflects a deliberate accounting change that, in a twist, makes the company’s clean-energy claims more credible even as it makes the reported emissions number worse. Sorting out which is which matters for anyone trying to judge whether Microsoft’s 2030 carbon negative pledge is still realistic.

A 25 percent jump, by the numbers

In a blog post titled “Responsibly building the AI future”, published July 9, Microsoft vice chair and president Brad Smith and chief sustainability officer Melanie Nakagawa disclosed that the company’s combined Scope 1, 2, and 3 emissions rose 25 percent year over year in fiscal year 2025 (the year that ended June 30, 2025), measured against Microsoft’s 2020 baseline. The 2026 Environmental Sustainability Report, published the same day, is Microsoft’s primary annual disclosure of progress toward that pledge.

Smith and Nakagawa wrote that the increase was driven “primarily by the expansion of our datacenter infrastructure,” WIRED reported. Data centers built to run AI chips draw enormous amounts of electricity, and each new one both consumes materials up front (concrete, steel, chips) and locks in years of ongoing power demand.

Scope 2 jumped more than sixfold

The headline 25 percent figure obscures a sharper story inside the report. Scope 3 (emissions from Microsoft’s supply chain and the full lifecycle of the hardware it buys) remains the largest slice of the company’s footprint overall. But the fastest-growing slice was Scope 2: the emissions tied to the electricity Microsoft purchases to run its own operations. Microsoft’s own blog post says Scope 2 now represents 13 percent of total emissions, up from “nearly 2 percent” a year earlier, more than six times its prior share of the total.

That swing is not purely a story about buying more electricity. It is largely a story about how Microsoft counts the clean electricity it already buys.

Why Microsoft stopped buying “paper” clean energy

What unbundled RECs are, and why they draw criticism

For years, large electricity buyers like Microsoft have been able to report their operations as carbon free partly by purchasing unbundled renewable energy certificates, or RECs: tradable credits that represent a unit of renewable generation somewhere on the grid, but that are not tied to a specific power plant or delivery. Critics have argued for years that unbundled RECs let a buyer claim clean power on paper without causing any new clean electricity to actually get built.

Microsoft’s report says the company has paused its use of these “non-additional, unbundled” RECs, prioritizing instead power purchase agreements and other long-term contracts that fund new carbon-free generation. Because RECs had been offsetting a portion of Microsoft’s reported Scope 2 footprint, dropping them pushed the reported number up, even though the change in accounting method, not a change in electricity use, is what moved the figure.

An outside researcher calls the shift “commendable”

Danny Cullenward, a researcher at the University of Pennsylvania who studies clean-energy accounting (Cullenward is also a visiting faculty member at Google but told WIRED he was not speaking for the company), described unbundled RECs as a “paper transaction that is physically disconnected from real-world consequences.” He called Microsoft’s move away from them “highly commendable,” saying it reflects a shift toward investments that bring new clean electricity onto the grid rather than simply reallocating credit for power that was generated anyway.

Microsoft says it matched 100 percent of its annual global electricity consumption with renewable energy in fiscal year 2025, and the company reports its emissions figures, including the 25 percent increase, using a market-based accounting method under the GHG Protocol. The accounting change does not mean Microsoft became less clean; it means the company chose a stricter, harder-to-game way of counting what “clean” means going forward, and that stricter method is part of why the headline number looks worse.

Microsoft is not alone

Microsoft’s report landed the same week as similar disclosures from two of its biggest cloud rivals. Amazon reported a 16 percent increase in its carbon dioxide emissions in its own recent sustainability report, according to WIRED’s review. Google said its annual greenhouse gas emissions rose 18 percent last year compared with 2024, the largest single-year increase the company has recorded; Google has aggressively invested in renewable energy but has also begun adding fossil fuel power at some of its data centers, per WIRED.

The pattern across all three companies is consistent: data centers built to run AI chips are pushing corporate net-zero targets further out of reach, even at companies that have spent years building some of the most sophisticated clean-energy purchasing programs in the corporate world.

The gas-fired pipeline that could push next year’s number higher

Microsoft’s fiscal 2025 reporting window closed in June 2025, before several major new power deals were finalized, which means next year’s report may look worse before the accounting benefits fully show up. WIRED’s review of recent Microsoft deals and public permitting records identified three that stand out:

• A partnership with Chevron, announced last month, to build a natural gas power plant supplying a future Microsoft data center in West Texas. Permits reviewed by WIRED show the plant could emit more than 11.5 million tons of carbon dioxide equivalent annually, an amount greater than the entire state of Rhode Island emits in a year.
• Leased buildings on the Stargate campus in Abilene, Texas, which will draw power from an onsite plant that could emit more than 7.8 million tons of CO2 equivalent each year.
• A nonbinding letter of intent for computing capacity at a West Virginia data center that would run on off-grid gas power, with potential emissions of more than 11 million tons of greenhouse gases.

In a statement to WIRED, Nakagawa said Microsoft’s strategy “includes exploring a variety of options for mitigating the emissions from its electricity consumption, consistent with our sustainability ambitions.” None of the three deals are reflected in the 25 percent figure Microsoft just reported, since all were announced or signed after the fiscal 2025 window closed.

The 2030 pledge is still on the books

Despite the increase, Microsoft has not walked back its commitment to be carbon negative by 2030, a target the company measures against its 2020 baseline, leaving four years on the clock. Smith and Nakagawa wrote that the global race to build AI infrastructure is increasing demand for energy, water, land, and materials, and that Microsoft “has a responsibility to help ensure that technology strengthens, rather than strains, the systems and communities on which it depends,” per WIRED’s reporting. The company says it will keep expanding its purchases of carbon-free electricity for the grids where it operates, on top of existing investments in sustainable aviation fuel and efficiency programs for products like Xbox and Surface, calling it a “balanced, all-of-the-above decarbonization strategy.”

Whether that portfolio can absorb the emissions from gas-fired data centers built to serve AI demand is the real test of the pledge, and it is a test that will show up in next year’s report, not this one.