How is the UK Decarbonising AI Data Centre Growth?
The expansion of AI has placed data centres under growing scrutiny as energy demand climbs – but how can carbon credits mitigate the effect?
According to an IEA report, electricity use from AI data centres increased by 50% in 2025, with projections showing that energy use linked to AI will double by 2030.
A new report from The City of London Corporation and the UK Carbon Markets Forum links this rise in data centre energy use to growing demand for carbon credits, as companies look to offset the emissions tied to expanding AI infrastructure.
The credits allow organisations to fund projects that either reduce or remove greenhouse gases, forming a key part of net zero strategies across the data centre sector.
How is data centre growth driving carbon markets?
The scaling of AI infrastructure is reshaping procurement strategies across the technology sector.
Companies such as Microsoft and Google have increased their near-term demand for engineered greenhouse gas removal credits, which permanently remove carbon dioxide (CO₂) from the atmosphere rather than avoiding emissions entirely.
As AI workloads require vast processing power, which in turn drives electricity consumption and heat generation, operators are looking to carbon credits to balance their emissions while continuing to expand capacity.
The report captures the pace of this shift.
Amazon, Alphabet, Microsoft and Meta increased their purchases from 14,200 credits for permanent carbon removal in 2022 to 11.92 million credits in 2023.
Dame Clara Furse, Chair of the UK Carbon Markets Forum, says: “As demand grows for high integrity carbon credits, including from energy-intensive emerging technologies, the question is how markets channel this capital at scale.
“The UK already has a sophisticated financial and professional services ecosystem that is well placed to support Carbon Markets growth.
“This report shows that with the right policy framework, the UK can lead in scaling markets that deliver real climate impact and long term economic value.”
UK market positioned for expansion
The UK plays a central role in this evolving ecosystem. Carbon credit markets already generate £1.2bn (US$1.6bn) in annual gross value added and support more than 11,000 jobs.
This economic activity ties closely to the country’s financial and professional services sector, which channels investment into global carbon projects.
Between 2023 and 2025, UK financial institutions and corporates committed US$5.8bn to carbon projects worldwide.
These initiatives included nature restoration, flood protection and air quality improvement, all of which contribute to emissions reduction or removal.
As the UK aims to develop a greenhouse gas removals strategy, this strengthens the UK’s position, placing it second only to the US.
This standing enables the UK to export expertise and services to international markets as global data centre operators seek high-integrity carbon credits.
Insurance plays a significant role in enabling these projects as many carbon initiatives require coverage before proceeding.
Global gross written premium for carbon insurance products is projected to reach about £30bn (US$40.7bn) by 2050.
This represents an approximately 80-fold increase, with the UK currently leading the market.
Policy decisions shape future growth
As AI continues to expand across data centres, policy has become a vital factor in keeping its growth sustainable.
A government consultation on carbon markets is expected this summer, creating an opportunity to define how the UK responds to rising demand driven by digital infrastructure.
The carbon credit report sets out six recommendations for the government.
- Champion carbon market use: Provide businesses with clarity and support to plan future credit use, through either regulated pathways or endorsement of voluntary standards
- Help define quality: Set or endorse a quality threshold that gives developers, investors and businesses long-term confidence to invest in impactful projects
- Help protect corporate claims: Support UK businesses in making credible claims on credit use, protecting them from greenwashing risk
- Build global capacity: Use the UK's international influence to promote high-integrity carbon credits and support capacity building in emerging markets
- Develop a UK greenhouse gas removals strategy: Provide developers and investors with clarity on domestic demand and maintain support for credit inclusion in the UK ETS
- Incentivise nature investment: Unlock returns from the UK's underutilised natural capital assets through targeted nature investment incentives.
Chris Hayward, Policy Chairman of the City of London Corporation, says: "Carbon markets are a significant and growing part of the UK's financial services offer – generating over a billion pounds of economic value, supporting thousands of jobs and attracting billions in investment from around the world.
"As AI accelerates global demand for carbon credits, the City of London is well-positioned to be the home of that market.
"But that position is not guaranteed.
"We are calling on government to treat carbon market development as the industrial and financial services strategy priority it deserves to be."
As AI continues to scale, the relationship between data centre operations and carbon credit markets is tightening, shaping environmental strategy and economic opportunity.
Executives
Chris Hayward
Policy Chairman
Dame Clara Furse
