UK carbon markets stand to gain from the rapid growth of artificial intelligence, according to Chris Hayward, policy chairman at the City of London Corporation. In a new analysis, Hayward argues that the UK is uniquely positioned to benefit from the increasing demand for carbon credits driven by AI's soaring energy consumption.
The Growth-Sustainability Tightrope
Electricity demand from data centres rose by 17 per cent in 2025, and AI's global energy use is expected to double by 2030. This growth poses a challenge for tech companies and governments that have made net zero commitments. Hayward emphasises that the primary response must be reducing emissions at source through renewable energy and efficiency, but carbon credits play a legitimate role for residual emissions.
Major tech firms like Meta, Amazon, Google, and Microsoft are rapidly increasing their use of carbon credits. Microsoft alone boosted its purchases by 337 per cent between 2023 and 2025. As AI advances, this demand will intensify, creating opportunities for carbon markets.
How UK Carbon Markets Stand to Benefit
Carbon markets currently contribute £1.2 billion in gross value added to the UK economy and support over 11,000 jobs, according to research from the City of London Corporation and the UK Carbon Markets Forum. UK institutions provide much of the legal, financial, and insurance infrastructure for global carbon finance.
The UK also has significant natural capital assets, including peatlands, woodland, and farmland. Existing projects could generate nearly £788 million over their lifetimes in Scotland and over £100 million in the Northwest. This represents a national growth agenda, with global capital flowing into UK regions.
However, other jurisdictions like the EU, Singapore, and the US are also vying to become leading carbon market centres. Hayward calls for policy clarity, including a consistent framework for carbon credits in corporate net zero strategies, quality standards to boost investor confidence, and support for domestic supply. He cites the commitment to link the UK and EU Emissions Trading Systems as a positive example.
The connection between AI growth and carbon market demand is one the UK is well positioned to act on. Whether it does will depend on the choices government makes in the near term.
