AI Data Centres Drive Microsoft's Emissions Up 25%

Microsoft's emissions rose sharply in its 2025 fiscal year. The rise puts fresh attention on its position as the largest buyer of durable carbon dioxide removal (CDR), and the company maintains that removal purchasing remains part of its long-term environmental strategy.

Aerial view of a dedicated storage and compute datacenter used to store and process data for the AI datacenter. Source: https://blogs.microsoft.com/blog/2025/09/18/inside-the-worlds-most-powerful-ai-datacenter/ 

Reports earlier this year suggested Microsoft might pause its removal purchases, and the prospect unsettled parts of the sector. The concern proved short-lived: in May, Microsoft signed a new multi-year removal agreement, confirming its buying had continued.

The scrutiny follows Microsoft's 2026 Environmental Sustainability Report, which put total emissions at 20.29 million tonnes of carbon dioxide equivalent for its 2025 fiscal year, up 25% from 16.2 million a year earlier. The company attributed the rise to its data centre expansion for artificial intelligence (AI) and to pausing its use of unbundled renewable energy certificates, with Scope 2 emissions rising most.

The trajectory tests a pledge, set in 2020, to remove more carbon than it emits by 2030. Chief Sustainability Officer Melanie Nakagawa said the company continues "to really be focused around carbon negativity by 2030," and the report reaffirmed its longer-term targets.

Reports earlier in 2026 pointed to a possible slowdown in Microsoft's purchasing. The company has since signed a seven-year deal with Denmark's BioCirc for 650,000 tonnes of removals, its first major agreement since those reports surfaced. The deal was read across the sector as a signal that its buying had not stopped, even as the future cadence stayed uncertain.

Demand pressure looks set to persist. The International Energy Agency projects emissions from data centre electricity use rising from 180 million tonnes today to 300 million tonnes by 2035 in its base case. For the removal market, the scale and pace of Microsoft's future buying remain a defining variable.