Europe at ‘fork in the road’ between AI competition and climate

Europe stands at a crossroads: compete meaningfully in the AI race or stick to its world-leading climate goals. 

“It’s like a fork in the road moment for Europe,” Wedbush Securities’ Dan Ives told CNBC. The bloc can either “play in the future” or risk “missing a big part of this technology wave.”

The dilemma is compounded by the region’s mandates for green energy. 

Globally, energy is the biggest bottleneck for building out AI-related data center projects. While the U.S. fires up fossil-fuel plants to power its build-out, Europe requires developers to disclose energy and water efficiency measures, adding red tape that can slow project launches. 

The European Union is often celebrated for its suite of agenda-setting environmental policies and how it has made strides with new mechanisms, such as the forthcoming carbon border tax. However, some critics argue it gets in the way of business. The continent is seen as “anti-entrepreneur,” Ives said, which pushes European technology names and startups to move to the U.S., Middle East, or Asia in pursuit of more favorable policies. 

As Europe attempts to catch up in the AI race, the need for power-hungry infrastructure increases, demand for electricity surges — and that friction has become harder to ignore. Additional renewable energy capacity was intended to replace more polluting sources, but there are now concerns that this will play out differently.

“You can see in the U.K. that we’re already rowing back on some of our commitments,” Paul Jackson, regional Global Market Strategist at Invesco, told CNBC – and Europe will likely follow suit. 

“This is a fairly regular process that when times are good, it’s easy to persuade individuals, businesses, governments, to move in the right direction on things like climate change, and to take some of the cost associated with doing that,” Jackson said. However, pushing the climate agenda down the priority list is one of the easiest things legislators can do when faced with tougher times and competing interests, he added. 

The U.K.’s energy grid is free of coal, which is significantly dirtier than gas — Europe’s, however, is not.

“I’m worried that, at a certain stage, coal power plant closures might get actually postponed,” Jags Walia, head of global listed infrastructure at Van Lanschot Kempen, told CNBC.

Taking fossil fuels offline as renewables come online works when energy demand is flat, but that’s no longer the case, he said. Data centers also require constant connection, so the intermittency of wind and solar could prove tricky.

“Electricity wise, we might not be able to afford to close down coal power plants, which is going to be a real headache for the energy transition and energy security as well,” Walia said.

Over the course of the year, Europe has rolled back a number of environmental commitments. 

On Dec. 16, the EU watered down its effective ban on new combustion-engine cars from 2035. On Dec. 9. it approved a one-year delay to the…