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BIS Study: AI Climate Impact Blurs Policymakers' View of Economic Indicators
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A study by the Bank for International Settlements (BIS), reported by Bloomberg, warns that artificial intelligence's environmental impact is clouding the economic indicators policymakers use to set interest rates. Researchers Leonardo Gambacorta and Salvatore Polizzi argue that AI-driven changes in productivity, climate resilience, and energy constraints are altering potential output, making it harder to assess capacity utilization and price pressures. A key challenge identified is that AI may push up energy prices before productivity gains lower them, complicating supply-demand assessments. The ultimate climate outcome depends on whether efficiency gains outpace the electricity consumption of data centers and how that power is generated. The authors state that AI is neither a natural climate solution nor problem, and the next decade will determine its role. The study also flags financial stability risks from large-scale investment in data centers and power grids, echoing BIS warnings that an AI boom could lead to a disruptive bust.
Source report
A study by the Bank for International Settlements (BIS) warns that the environmental impact of artificial intelligence is clouding the indicators officials typically use to set interest rates. The research was authored by Leonardo Gambacorta and Salvatore Polizzi, and reported by Bastian Benrath-Wright.
In a paper released Thursday, the researchers stated that AI-driven changes in productivity, climate resilience, and energy constraints are altering potential output, making it more difficult to assess capacity utilization and price pressures.
Key Challenges Identified
- AI may push up energy prices before productivity gains lower costs, complicating officials' assessments of supply and demand dynamics.
- The ultimate climate impact will depend on whether efficiency improvements outpace the growth in electricity consumption from data centers, as well as how that electricity is generated.
The authors wrote: "Ultimately, AI is neither a natural climate solution nor a natural climate problem." They added: "The next decade will determine whether AI becomes a force that accelerates the transition to a more sustainable economy or a factor that exacerbates existing environmental pressures."
Financial Stability Risks
The scholars also highlighted potential financial stability risks posed by AI, noting that large-scale investments in data centers and power grids could lead to sudden corrections if expectations become overly optimistic.
These concerns echo repeated warnings from the Basel-based institution that a post-AI-boom collapse could cause significant damage. In a September speech, BIS Governor Pablo Hernández de Cos stated that valuations of AI companies are based on "ambitious expectations" and have sparked an "arms race" among them.
Source: Bloomberg
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