S&P Global — 15, July 2024
Daily Update: July 15, 2024
Big Tech Builds Out AI at the Cost of Climate Goals
By Nathan Hunt
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy
Technology wasn’t supposed to be one of the hard-to-abate sectors when it came to achieving net-zero emissions. In 2019 and 2020, many large technology companies committed to aggressive net-zero targets and decarbonization decades ahead of many governments. That was before generative AI. As excitement built around the offerings associated with AI, leaders in generative AI, such as Microsoft and Google, expanded their datacenter footprint to capture some of the growing market. As a result, their emissions have increased significantly. Datacenters are notoriously energy intensive because of their endless racks of processors and the cooling systems that reduce the heat these processors generate. With technology emissions headed in the wrong direction, industry decarbonization targets are looking increasingly unrealistic.
On July 2, Google published its annual environmental report. The company had committed in 2019 to achieving net-zero emissions by 2030. However, the report revealed that the company’s emissions have grown 48% between its 2019 baseline and 2023. Google attributed the increased emissions to datacenter demand in “hard-to-decarbonize” regions such as Asia-Pacific and AI product demand.
The International Energy Agency projected that electricity demand could double by 2026 from 2022 levels due to increased datacenter usage. Datacenters use 10 to 40 times more energy per square foot than a typical office building. In 2024, year-over-year datacenter industry revenue is projected to grow 14% in Europe and 18% in the US, according to S&P Global Market Intelligence 451 Research. Many datacenters have been built in areas that depend upon high emissions coal-burning energy generation. Analysts have suggested that datacenter demand is keeping many coal plants, which would otherwise be slated for retirement, operational.
Microsoft’s carbon footprint is also trending in the wrong direction since its previous net-zero commitments. According to the company’s May sustainability report, emissions have increased 29% since it set a baseline in 2020, largely due to an expanding datacenter footprint.
Like many other companies, Google has claimed that scaling up generative AI will enable it and its customers to accelerate environmental technologies that will reduce emissions. To date, there is no evidence for environmental and energy technologies that are being accelerated to market through generative AI. Assuming such technologies arrive, they will have to confront a growing volume of emissions.
Today is Monday, July 15, 2024, and here is today’s essential intelligence.
Listen: What Do Updated Climate Disclosure Rules Mean For Industry?
Sophie Casenave, policy affairs manager at environmental trader and consultancy Strive by STX Group, joins the podcast to discuss the the latest alphabet-soup of climate regulations. These include the EU's new reporting directive, some new reporting rules in the US and carbon border mechanisms in the EU. The podcast discusses what the different rules mean for industry, how reporting and regulatory requirements are changing and the impact of new rules on chemical companies' decarbonization strategies.
—Listen and subscribe to the podcast from S&P Global Commodity Insights
Covered Bonds Outlook Midyear 2024: Growth And Rates Support Performance
S&P Global Ratings' covered bond rating outlook remains stable, underpinned by the ample credit enhancement available to most of the programs that it rates and the presence of unused rating notches, both of which reduce the risk of downgrades. S&P Global Ratings expects that eurozone GDP growth will gradually recover toward the potential on the back of an increase in consumer spending in the second half of 2024 and investments in 2025.
—Read the article from S&P Global Ratings
Global Banks: Our Credit Loss Forecasts
Across the 87 banking systems that S&P Global Ratings covers, it expects credit losses of more than $1,667 billion over the two years to end-2025. This represents an annual rise in losses of $82 billion (11%) in 2024, and a further, more modest rise of $10 billion (1%) in 2025.
—Read the article from S&P Global Ratings
A Breakdown On Europe’s Chinese EV Tariffs
The European Commission put provisional tariffs on Chinese battery electric vehicles (BEVs) as of July 5, 2024. An investigation, which began in September 2023 and concluded in June 2024, by the EU's legal arm determined that the BEV value chain in China benefits from unfair subsidization — causing a threat of economic injury to European Union (EU) BEV producers. The investigation also examined the likely consequences and impact of these tariffs on BEV importers and consumers in the EU.
—Read the article from S&P Global Mobility
Listen: Eyes On Tomorrow: The Future Of Global Oil & Gas Exploration
The future of global oil and gas exploration has been widely discussed recently, with the number of discoveries year on year for the past decade gradually declining. But with growing energy demands in emerging markets, a call to end 'energy poverty' and efforts to ensure energy security, exploration to boost companies' portfolios remains ever important. On this week's episode, Hill Vaden and Sam Humphreys talk to S&P Global International Upstream VP Michael Wynn about the current upstream climate, and the driving factors behind continued exploration and why operators are reaching out to deep water 'frontier' regions.
—Listen and subscribe to the podcast from S&P Global Commodity Insights
Indian Telcos Eye Next Phase Of Market Repair
The Indian telco sector is poised for the next stage of repair. S&P Global Ratings believes rising stability in the sector will boost earnings and solidify credit metrics. India's telco market is now more securely a three-player competition. Vodafone Idea Ltd.'s recent equity raising has bolstered its viability.
—Read the article from S&P Global Ratings
There May Be Trouble Ahead: Q3 2024 Trade And Supply Chain Outlook (July 17, 2024)
Supply chain decision-makers have had a particularly thorny 2024 to navigate so far because of network disruptions and regulatory uncertainties. The second half of the year and early 2025 offer no respite, with the peak shipping season set to be particularly challenging.
—Register for the webinar from S&P Global Market Intelligence