Impact of Artificial Intelligence on Climate Change: A Comparative Analysis of China and The United States of America and Policy Lessons for India

The intend of this paper is to see the impact of artificial intelligence on climate change. As AI is increasingly being adopted across various sectors like energy systems, manufacturing, healthcare, and urban infrastructure, it is improving efficiency, reducing wastage and supporting better management through forecasting. Adoption of AI can reduce the energy per unit of output which further reduces greenhouse gas emissions, but at the same time, it can significantly increase the consumption of water and electricity through data centres and computational infrastructure. If this transformative technology is powered by fossil fuels, it can be detrimental for the environment since it increases emissions. Additionally, if there are efficiency gains, the cost of production decreases which further stimulates increase in production and consumption, offsetting environmental benefits. There are three main objectives of the paper- The first objective is to provide a conceptual framework explaining the dual effect of AI in climate outcomes; the second objective is to analyse the trends in AI venture capital investment across the United States, China and India and across key sectors; the third objective is to draw policy lessons for India based on the performances and experiences of China and the United States. Data on AI venture capital investment is from 2012 to 2024, which shows rapid growth in AI funding, especially in manufacturing and transport sector. Trend of emissions from various sectors suggest that more efficiency coexists with more economic activity. By comparing the United States and China, importance of good government policy is observed for positive environmental outcomes. In the United States advanced technologies like AI are mostly market driven, whereas in China the government takes a lead in planning and execution. Both these methods can improve the efficiency and lead to economic growth. However, the emissions depend on the scale of production and use of energy. Developing countries like India should take key lessons on AI policies which align with climate goals. Without strong government policies and clean energy expansion, growth driven by AI can further increase energy demand instead of reducing emissions.