A new report reveals that the United States invested a record $338 billion in the energy transition last year, yet this significant investment did not lead to a reduction in the country’s overall carbon emissions.

Solar energy emerged as the leading source, adding 49 gigawatts of new electrical generating capacity in 2024, surpassing all other technologies. According to the report released by the BloombergNEF and the Business Council for Sustainable Energy, solar and wind energy combined now account for nearly a quarter of electricity demand and approximately 10% of total energy consumption in the U.S.

Meanwhile, the demand for natural gas increased by 1.3%, resulting in a 0.5% rise in U.S. carbon emissions. This uptick was primarily driven by industrial users and power plants that rely on natural gas for power generation and heating.

The report’s findings come at a critical juncture for the U.S., which has experienced a 16% decrease in carbon emissions since 2005, with power-related emissions declining by over 40% during the same period. Furthermore, the country has improved its energy productivity, generating 2.3% more economic output last year from the same amount of energy consumed.

However, electricity demand is projected to increase sharply in the coming years. A report by Grid Strategies forecasts that the U.S. may require 15.8% more electricity by 2029, making the source of this additional electricity crucial in determining the country’s impact on climate change for decades to come.

The primary driver of new electricity demand is the soaring demand from data centers, which are being constructed to support cloud operations and artificial intelligence (AI) ambitions. The rapid pace of additions has led to concerns that half of all new AI servers may be underpowered by 2027.

In response to these forecasts, tech companies are securing power sources for the coming years. Microsoft, Google, and Amazon have announced significant investments in nuclear power, supporting startups like Kairos and X-Energy, while also reviving old nuclear reactors, which do not directly emit carbon dioxide or other greenhouse gases.

In addition to nuclear power, tech companies are continuing to add renewable energy sources to their portfolios. This year, Amazon has entered into agreements to add 476 megawatts of renewable energy, while Meta has purchased 200 megawatts and 595 megawatts in separate deals, with solar being the dominant source due to its affordability and rapid deployment.

Efficient energy consumption may also help tech giants optimize their power usage without requiring significant increases in capacity. A recent study suggests that subtle adjustments, such as scheduling computing tasks during periods of lower demand or shifting them to regions with more capacity, could unlock 76 gigawatts of headroom in the U.S., equivalent to 10% of peak power demand nationwide.

Such adaptive strategies may be necessary for the U.S. to maintain its competitive edge globally. Despite record investments in the energy transition, the U.S. still lags behind China, which spent 4.4% of its GDP on the transition last year, compared to the U.S.’s 1.3%.