Microsoft adjusts climate agenda as emissions leap

Microsoft’s emissions jumped 25 percent in its 2025 fiscal year, reflecting the company’s scramble to build new data centers and secure electricity to run its expanding artificial intelligence and cloud services portfolio.

Google and Amazon likewise reported double-digit emissions increases in their 2025 environmental sustainability updates released in late June and early July, respectively. Google disclosed an 18 percent year-over-year bump, while Amazon posted a 16 percent rise in its footprint, which also includes its massive e-commerce network  

Microsoft pledged to honor its long-time climate commitments anyway, arguing that its emissions would have been much higher without the work it has done so far. 

“We do not see these dynamics as a reason to step back,” said Microsoft Vice Chair and President Brad Smith and Chief Sustainability Officer Melanie Nakagawa in the foreword to the company’s 2026 environmental sustainability report, published July 9. “We see them as a mandate to lead differently.”

The speed of the AI buildout requires “greater operational rigor, stronger integration across our sustainability priorities and a sharper focus on durable outcomes for the local communities where we work and the global value chains that make our work possible,” they said.

At the center of that shift is the company’s Community-First AI Infrastructure approach, its strategy for proactively countering backlash against proposed data center projects and taking a more responsible approach to development. 

Microsoft is also becoming more transparent about metrics such as site-level water withdrawals and electricity use, which it disclosed for the first time in the data tables accompanying the report.

“This report is a candid take about where progress is advancing, where it’s difficult and where new approaches are needed,” Nakagawa told Trellis. 

Portfolio approach to electricity

One striking data point in Microsoft’s report was the big leap in electricity-related emissions, which accounted for 13 percent of the company’s total footprint in 2025, up from 2 percent in 2024. That increase was, in part, due to the company’s decision to stop using non-additional unbundled renewable electricity certificates in Scope 2 accounting.   

Still, Microsoft consumed 37 million megawatt-hours (MWh) of electricity in 2025, up 24 percent from 2024 and enough energy to run 3.4 million U.S. homes for a year. North America accounted for 56 percent of the total. 

The company’s total water withdrawals were 13 million cubic liters; Microsoft “replenished” 14 million liters as part of a deeper focus to manage water amid heightened community scrutiny.

Microsoft for the first time disclosed power consumption and water withdrawal by location in the data tables accompanying the 2025 environmental sustainability report. Its Boydton, Virginia, data center was the biggest power consumer at more than 3 million MWh. 

While Microsoft has been a long-time corporate supporter of solar and wind projects — it has contracts for up to 40 gigawatts of renewables, 19 of which are operational — the company has turned to new natural gas generators for several proposed projects.

“Meeting future demand responsibly is going to require and continues to require making long-term investments in energy systems that are going to support those future capacity needs,” Nakagawa said, when asked about that tension.

For example, Microsoft is simulating how it could potentially automate the distribution of AI workloads between modular data centers that run directly on renewable energy. It is redirecting power loads in existing data centers to improve efficiency, and its backing emerging technologies, such as superconducting cables from startup Veir that can deliver more power to more compact data centers.  

Microsoft has also refined its strategy for matching Scope 2 emissions with so-called “carbon-free” sources; it will seek more opportunities to use nuclear power, including next-generation fusion energy, as well as geothermal energy from startups including Eavor Technologies, another company backed by Microsoft’s Climate Innovation Fund.

Microsoft is also scaling up investments in smaller clean energy projects near existing or proposed data center locations, with new contracts for 1.5 gigawatts in 100 communities across 20 states. 

Carbon removal work continues

Microsoft, by far the largest corporate buyer of carbon removal credits, signed contracts for 29 long-term projects in 2025, enough to contribute more than 45 million metric tons of emissions reductions to its carbon goal over the next 30 years.

Nakagawa downplayed recent reports that the company is pausing investments, and said there has been “no change” to its interest in technologies and opportunities that can deliver emissions reductions over multiple decades.

Aside from the many headline-making deals the company has inked in the past three years, Microsoft is backing pilot projects for early-stage approaches including enhanced rock weathering, direct air capture and ocean alkalinity enhancement.