Generative AI has not only become the talk of the day, drawing attention previously reserved for crypto, but is also attracting major investments. However, under the radar of the regulators, this new tech race has a heavy hidden price, which may harm international attempts to curb the climate crisis, at this most critical juncture.
According to a recent report by PitchBook, VC fund investments have moved from crypto to the new golden goose – generative AI. Whereas, in 2018 $408 million was invested in generative AI companies over 41 transactions, in 2022 the number has jumped to $4.5 billion over 110 transactions. All while investment in crypto crashed by 70% from its peak in the first quarter of 2022 to the last quarter.
In many ways the two industries are extremely different, but in one specific area they are very similar – their operation and success require enormous computational power, which is accompanied by extraordinary environmental damage that includes mining of rare minerals, enormous carbon emissions, water and noise pollution. According to PitchBook’s report, by 2025, 3.2% of all carbon emissions in the world will come from server farms. Their environmental cost is only growing as the industry scales in a way that prioritizes expansion rather than efficiency.
According to estimates, by 2040 server farms may account for 14% of global carbon emissions, making it even more difficult to reduce emissions and combat the climate crisis. In Israel alone, according to estimates from the consulting firm BDO, the electricity consumption of the 10 planned server farms in Israel is equivalent to 250,000 households, or an addition of 170,000 cars to Israeli roads.
The need to increase the growth of huge server farms means that the industry will move to underpopulated areas where they can get low-cost electricity, multiple water sources, cheap land and relaxed local planning regulations. Establishing a server farm in Israel may be of great environmental significance, but it is economically attractive especially for larger corporations due to relatively low electricity prices – roughly half that of most European countries, especially since the Russian invasion of Ukraine and the increase in energy prices.
Like with crypto, the generative AI industry is engaging in an effort to try to replace existing systems regardless of the environmental cost. The crypto market, which mainly serves as an alternative trading arena, is already incurring a massive energy cost, all this before it even came close to achieving its goal of replacing traditional financial markets. According to the Cambridge Bitcoin Electricity Consumption Index (CBECI), Bitcoin alone consumes 0.5% of all electricity in the world, and if it were a country it would be in 32nd place in terms of electricity consumption. The New York Times reported that the excess use of electricity to mine Bitcoin was the carbon equivalent of 3.5 million more cars on the road in the U.S. alone.
Similarly, the generative AI industry is already having a disproportionate impact on the climate, and this is only the beginning. According to the International Energy Agency, AI language models and data centers are responsible for 1% of all carbon emissions in the world. In January, ChatGPT – which today serves about 13 million daily users and allows Bing to handle about half a billion queries a day – consumed as much electricity as 175,000 people. An analysis done at the beginning of the year by the University of Berkeley estimates that the training of GPT3, on which the first version of the chat is based, led to the emission of 550 tons of carbon dioxide.
The technology at the base of the crypto market, the blockchain, requires a huge investment in server farms called “mining farms.” Companies operating in the field financed their activities over the years by selling coins they “minted,” but with the growing interest in the field, they began to pay their electricity bills by raising capital and debt from VC funds, and indirectly from Goldman Sachs, Fidelity and JP Morgan, which today offer crypto trading and management services.
The environmental cost of the crypto market is not only the huge electrical consumption, but also water and noise pollution. A report published last week by an environmental working group examined the type of pollution and the direct harm to communities that are forced to live next to mining farms. For example, the pipeline that feeds water to the Bitcoin mining company Greenidge in Dresden, New York, draws about half a million cubic meters of water a day from nearby Seneca Lake to create the steam needed to mine Bitcoin.
The water is returned at a temperature of 42 degrees Celsius, while the…
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