Tell me if this sounds familiar: Your city entered into an agreement with a developer to build a massive data center on the outskirts of town. City leaders promise jobs, tax revenue and other perks from the tech company who will build the center. However, leaders are conspicuously silent on whether the center will make residents’ electricity bills jump even higher than they already have. Nor is information forthcoming about how much water the center will use for cooling, what kinds of pollutants it may emit, and, crucially, whether it will be powered by fossil fuels.
This scenario is currently playing out in my Maryland city, along with countless local governments across the country. Data centers present many threats to the environment, but perhaps the most troubling is the danger of locking in fossil fuel infrastructure at a crucial moment for arresting climate change’s most harmful effects. There is an alternative: A new UCS study shows data centers can be powered primarily with clean energy like wind and solar, meeting electricity demand while—if paired with ratepayer protections—protecting public health and pocketbooks. This path would also protect the climate by reducing air pollution and heat-trapping emissions from fossil fuels, lessening the chances of stranded assets and environmental damage if the AI gamble doesn’t pan out.
A lack of transparency and accountability around powering data centers is blocking this path, however. Opaque agreements and absence of oversight are enabling industries including oil and gas to inflate demand for their polluting products, increasing risk to the climate, economy and public health.
The decarbonized data center delusion
The largest publicly-owned oil and gas companies are investing aggressively in data centers. These centers’ demand for electricity is not only voracious, it’s immediate: The long lead times required to connect to regional grids and for grid operators to add capacity and infrastructure make the prospect of bespoke energy attractive to impatient tech companies. Thus, many of the agreements between tech and fossil fuel companies involve supplying electricity directly to data centers, bypassing grids and utilities altogether.
In December 2024, ExxonMobil announced the development of a natural gas-fired power plant specifically to supply electricity to data centers—the first time the company has built power plants that don’t serve its own operations. A month later, Chevron announced a partnership with electricity company GE Vernova to develop gas-fired plants that would directly fuel data centers rather than feeding into local energy grids. More recently, ExxonMobil partnered with NextEra Energy to develop a 1.2 gigawatt power plant for hyperscale data centers.
Both companies portray these projects as “low-carbon” because they plan to combine gas with carbon capture and storage (CCS), a process that aims to capture carbon emissions and store them underground. The technology is still unproven at the scale needed to offset the emissions resulting from feeding hungry data centers, however.
That didn’t stop ExxonMobil CEO Darren Woods from hyping its power stations as “decarbonized” in a January 2025 earnings call, where he claimed more than 90% of the emissions from burning gas could be abated. Woods has cited the company’s 2023 acquisition of Denbury Inc., which gave the company extensive CO2 pipeline infrastructure and storage sites along the US Gulf Coast for CCS, as ExxonMobil’s competitive advantage in the data center race.
Not all oil and gas companies are meeting the AI moment with fossil fuels: BP contracted to provide clean power for a Google data center in Indiana via BP’s solar energy subsidiary. Shell partnered with tech companies such as Intel on providing oil-based cooling fluids to lessen the enormous amounts of water data centers are projected to consume to prevent overheating. These examples demonstrate the availability of clean options for data center builders.
AI is not a license to drill
AI’s insatiable need for power is a gift to fossil fuel companies in more ways than one. In addition to expanding oil and gas production, the industry has rushed to leverage AI demand in order to attract investors and financing. For large oil and gas companies, a major vehicle for projecting these demands are in-house outlook reports that paint self-serving pictures of the world’s future energy mix.
BP’s Energy Outlook 2024 addresses AI in its section on the power sector. In both its low-carbon and status-quo scenarios, fast-growing electricity consumption is driven by “rising demand from data centres to support the growing use of artificial intelligence applications,” the report states. Shell names “data centres and AI” among the drivers of increased gas demand in its 2025 LNG Outlook, leading the company to increase its 2040 demand estimates by 60 percent. ExxonMobil’s 2025 Energy Outlook projects global energy demand rising, though it doesn’t explicitly cite AI or related technologies as a driver.
But these projections—based on proprietary methodologies that are consistently higher than independent studies—are based on assumptions that are far from certain. As the UCS analysis notes, all of the major industrial players involved in data centers have an incentive to overestimate demand. In addition to fossil fuel companies, this includes utilities, which earn a guaranteed return on investment, and tech companies locked in a race to attract financing.
Specifically, demand projections are clouded by duplicate proposals from tech companies racing to obtain permits, overbuilding by utilities chasing returns, and uncertainty about the future role of AI in our society, which tech leaders characterize as a foregone conclusion.
State and federal regulators trying to find clarity are challenged by the fact that data center proposals and contracts are typically confidential. This lack of transparency allows industries to hype up demand, increasing danger of an investment—and carbon—bubble. What happens to data centers that don’t get the processing load they were built for? That’s a problem for tech companies. What happens to the climate when oil and gas wells, pipelines, and export infrastructure produce more fossil fuels than data centers need? That’s a problem for everyone on the planet.
Data centers need transparency and accountability
The data center black box is further darkened by the White House’s efforts to suppress cost-effective investments in wind, solar, and energy efficiency and promote fossil fuels in exchange for industry support. This patronage system extends to the tech sector, with Trump issuing an executive order attempting to prevent states from regulating AI at the same time tech titans rushed to support his $300 million presidential ballroom. By influencing government at the expense of public health and safety, the fossil fuel and tech industries are using a tactic from a time-worn playbook on corporate obstruction of science.
But this heavy-handed selection of winners and losers can backfire. Consumers are already suffering significant surges in energy costs due to AI, and other American industries could suffer as well. Trump has said he’ll make tech companies pay for their energy, but if history is any guide, the government will bail out industries that cause economic crashes, sticking taxpayers with the bill. Meanwhile, the failure to phase out fossil fuels quickly and equitably continues to threaten the earth’s climate and public health, along with political and economic stability.
Transparency is critical for preventing this outcome. Contracts between local lawmakers, data center builders, and power providers should be open to public scrutiny. Fossil fuel companies providing power to data centers must fully disclose impacts to the climate, communities, and the economy. And state public utility commissions need to hold tech companies financially accountable for their electricity use.
Click here to ask your state policymakers to ensure data centers are powered by new clean energy and do not burden ratepayers with unfair costs. While no one knows how the data center story will ultimately play out, these calls to actions are clear.