AI's Rising Energy Demand and India's Growth Amid Global Slowdown: An IMF Outlook AI-driven electricity demand could lead to a 1.2 per cent increase in global greenhouse gas emissions between 2025 and 2030
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Artificial Intelligence (AI) is shaping the next wave of economic transformation—but with it comes a significant rise in energy demand and environmental challenges. According to the International Monetary Fund's (IMF) latest report, "Power Hungry: How AI Will Drive Energy Demand," the integration of AI into global systems is expected to raise global output by about 0.5 percent annually between 2025 and 2030. However, these economic gains are not evenly distributed and bring with them increased energy consumption, higher emissions, and policy trade-offs.
The report, released during the IMF's annual spring meetings in Washington, notes that electricity demand driven by AI could rise steeply, reaching an estimated 1,500 terawatt-hours (TWh) by 2030—equivalent to India's current total electricity usage. This rise in demand is primarily attributed to the growing need for data centers and high-performance computing infrastructure used to train and operate AI models. While this level of energy use reflects the scale of digital expansion, it also raises concerns about sustainability, particularly in the context of global climate commitments.
The IMF highlights that under current energy policies, this AI-driven electricity demand could lead to a 1.2 per cent increase in global greenhouse gas emissions between 2025 and 2030. If efforts are made to accelerate the use of renewable energy, that increase could be capped at 1.3 gigatons of COâ‚‚ equivalent. The estimated social cost of these additional emissions ranges between USD 50.7 and USD 66.3 billion, calculated at USD 39 per ton. While this cost is relatively low compared to projected GDP gains, it adds to an already concerning trajectory of emissions growth.
However, if AI is applied effectively—such as in improving energy efficiency or supporting low-carbon technologies in key sectors—it could offset some of its environmental impact. However, the market forces alone are unlikely to direct AI development toward climate-friendly goals without policy intervention. This includes the need for regulatory frameworks, public investment in AI research for sustainability, and efforts to prevent the concentration of benefits among a limited number of countries or firms.
Meanwhile, the broader economic landscape is shifting. The IMF's latest World Economic Outlook shows global growth slowing to 2.8 percent in 2025, down from 3.3 percent in 2024. Advanced economies are decelerating, weighed down by higher tariffs, rising inflation, and shaky investor confidence. The U.S., once a bright spot, is expected to see growth fall to 1.8 per cent in 2025, partly due to supply-side shocks from a recent surge in tariffs.
India remains an exception in this trend, with growth projected at 6.5 per cent in 2024, followed by 6.2 per cent in 2025 and 6.3 percent in 2026—making it one of the fastest-growing major economies in the world. This is more than just a statistical win. It's a reflection of strong domestic consumption, surging infrastructure investments, and a vibrant services sector that includes IT, fintech, and AI development.
