The climate consequences of the digital revolution
The digital transformation of the economy is a global phenomenon. Half the world’s population is now connected to the internet, although with the spread of “connected devices”1, population is no longer a constraint to growth as the physical world digitises. TVs, cars, machines and buildings are increasingly becoming connected devices. Technology consultancy Gartner estimates that there were 8.4 billion connected devices in 2017, a number they expect to rise to more than 20 billion by 2020. On top of this, the rise of media streaming and growth of cryptocurrencies add to the ever-greater demand for computing power.
What does this mega trend mean for carbon emissions?
There are valid arguments suggesting that data insights from the “Internet of Things” can yield energy efficiencies. In manufacturing, productivity and quality can be improved. Smarter buildings and cities can use energy more efficiently by gathering insights from thousands of sensors.
However, there is no escaping the fact that the digital economy creates massive demand for computing power, and powering and cooling servers requires huge amounts of energy. Bitcoin’s energy demands have been estimated as roughly equivalent to 20 mega tonnes of CO22, or 1 million transatlantic flights. At almost 5 billion plays on Youtube, the carbon footprint of the song “Despacito” is theoretically comparable to the annual emissions of about 100,000 taxis3. Overall, the digital economy is estimated to account for about 7% of the world’s electricity consumption and forecast to rise to 12% by 20204.
The good news is that alongside the data demand growth, we have seen strong momentum in corporate sustainability goals. 145 companies have made the commitment for their global electricity consumption to be 100% renewable5, and this ambition is influencing their computing power needs too. It underpins the trend of outsourcing to more energy efficient computing power providers, like the cloud or multi-tenant collocated data centres. Providers who power their data centres with renewable energy will be better positioned to benefit from this trend.
2. https://www.theguardian.com/technology/2018/jan/17/bitcoin-electricity-usage-huge-climate-cryptocurrency ↩
3. https://www.ft.com/content/779c1102-2d2b-11e8-97ec-4bd3494d5f14 ↩
4. https://www.theguardian.com/commentisfree/2017/nov/26/trouble-with-bitcoin-big-data-huge-energy-bill ↩
5. http://there100.org/re100 ↩
The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.