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Jefferies ranks data center demand growth outside the top five emissions drivers
Aniket Shah of Jefferies and Al Gore's Generation Investment Management both say AI power is a small part of a 50 billion ton problem, while the share of asset owners calling AI an environmental risk has doubled to 25%.
The Investor · Invest desk
What happened
- Generation Investment Management, the firm founded by Al Gore, argued in a recent report that data centers are not the most important driver of energy demand in most countries, Bloomberg reported on the 20th.
- The report put rising air conditioning use as the biggest factor lifting energy demand in most countries, and named electric vehicles and heat pumps as major sources of power consumption too.
- A Morningstar survey found 25% of asset owners identifying the environmental impact of AI use as a risk, more than double the 12% recorded a year earlier.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- contradiction The sell-side argument and the buy-side survey point in opposite directions, and a screen backed by a quarter of asset owners survives two managers publishing a ranking.
- constraint A 3% global electricity share is an average, and it leaves open which individual grids are short. Underwriters price the physical power trade grid by grid.
- decision Shah is making an allocation argument about attention: analyst hours spent on data center emissions are hours not spent on transportation and heavy industry, which he calls the far larger footprints.
- exposure Six in ten respondents expect data center and generation demand to raise consumer energy prices. Developers are exposed on bills, and that sits outside any emissions ranking.
Generation Investment Management's report is about electricity demand. It puts rising air conditioning use first in most countries, with electric vehicles and heat pumps named alongside it [1][2]. Aniket Shah's is about emissions, and it is a ranking. "Climate change is about reducing 50 billion tons of greenhouse gases to zero, and we need to properly define what is driving those emissions," he said [4]. "Growth in data center demand is actually not even in the top five" [5]. He pointed to transportation and heavy industry as the sectors with far larger footprints. The account of his remarks skips the list of five [6][16].
Shah's ranking rests on estimates, because no definitive assessment of AI's greenhouse gas emissions exists yet [7]. The figures in circulation are projections. The IEA said in April that data centers would reach 3% of global electricity demand by 2030, and that data center-related emissions would be about 2% of global power sector emissions by 2035 [8][9]. Those two numbers are five years apart and sit on different bases, one a share of electricity, the other a share of power sector emissions. A single point between them measures nothing about carbon intensity [1].
A global 3% is an average. For anyone underwriting the physical build, what counts is where the marginal megawatt lands, and a worldwide percentage does not say where that is. In my view the Generation and Jefferies argument undercuts AI-linked climate screens, which are assembled out of relative rankings. Turbines and transmission stay priced roughly where they were.
The buy side is moving the other way. Morningstar found 25% of asset owners naming the environmental impact of AI use as a risk, against 12% a year earlier [10]. That is 13 points, or a little better than a doubling, in twelve months [2]. Six out of 10 respondents said they were concerned that demand from data centers and power generation would push up energy costs and consumer prices [11].
Both messengers have positions. Generation is an investment firm founded by Gore [1], Shah runs sustainability and energy transition strategy for a broker [3], and Wall Street has repeatedly warned that AI power demand is crowding out the climate debate [15]. The remarks landed a day before the opening of New York Climate Week, which was expected to draw more than 100,000 people [12]. Gore, in an interview, called the growing concern about AI data centers understandable but "not a reason for panic," and said emissions from uncapped landfills worldwide are several times those of all AI data centers combined [13][14]. The landfill comparison can be tested. A measured inventory that put AI data centers anywhere near uncapped landfills would sink the top-five ranking too.
What to watch
- A measured inventory of AI data center emissions has yet to be produced; when one is, it tests both Shah's top-five ranking and Gore's landfill comparison.
- Morningstar's next asset owner survey: whether the 25% flagging AI environmental risk keeps compounding off last year's 12%.
- Whether the consumer-bill worry held by six in ten respondents shows up in siting and tariff decisions rather than in emissions screens.