Published

2 years ago

January 4, 2024

Alice Rush

Please admit California’s Pajaro Valley to the storehouse of evidence that charging a fee to use scarce resources can stretch those resources, to the benefit of all.

Never heard of Pajaro Valley? Me neither, until I came across NY Times climate reporter Coral Davenport’s compelling end-of-year story, Strawberry Case Study: What if Farmers Had to Pay for Water? Turns out I once hitch-hiked there en route to the spectacular Big Sur coast south of Monterey. But the payoff today is in the story’s subhead: With aquifers nationwide in dangerous decline, one part of California has tried essentially taxing groundwater. New research shows it’s working.

California’s Pajaro Valley, at center of this Google Map, hugs the Pacific Coast midway between Santa Cruz and Monterey and straddles the two counties named for those cities.

What’s working? A charge for groundwater extracted to grow strawberries, raspberries, brussels sprouts, lettuce and kale, administered by the state-chartered Pajaro Valley Water Management Agency to prevent saltwater from the adjacent Pacific Ocean from intruding into underground aquifers. The fee, which began several decades ago at a nominal $30 per acre-foot of water to recover PVWMA’s water-metering costs, now runs as high as $400, according to Davenport.

Lest that rise seem meteoric, and today’s price appear punitive, consider that currently the agency’s total annual water fees, $12 million, equate to barely 1 percent of annual Pajaro Valley crop revenues of $12 million. What’s more, an acre-foot — the standard volumetric for water supply — is enormous: enough to provide 3 million tall glasses of water, by my calculations. Even the projected 2025 price of $500 per acre-foot translates to a mere one-sixtieth of a cent per glass.

To be sure, that calculation is merely illustrative; water for drinking and water for growing crops are two different things. But consider what Pajaro Valley growers get from paying for water.

First, their payments are helping assure increased supplies of crop-worthy water. Revenue from the water fees enabled PVWMA to undertake a $6 million project that captures excess rainwater from a creek near the ocean and injects it into underground wells to be used for irrigation, and a $20 million water recycling plant that cleans 5 million gallons of sewage a day and pipes it to farm fields. Next up, Davenport tells us, is an $80 million system to capture and store more rainwater for irrigation. By replenishing and “stretching’ supplies of groundwater, these investments help ensure that brackish water from the ocean doesn’t seep into Pajaro Valley wells.

Just as importantly, the growers receive a potent incentive to use available water supplies more efficiently. “Gone were the days of sprinklers that drenched fields indiscriminately,” Davenport writes. “To save money, many Pajaro farmers invested in precision irrigation technology to distribute carefully measured water exactly where it was needed.” (See text box.) Though the article doesn’t mention it, these investments by dozens of individual growers might not have materialized had not all growers been subject to the same incentives to conserve as well.

Economics

Undergirding Davenport’s upbeat reporting is a 2023 working paper, The Dynamic Impacts of Pricing Groundwater, by three economists at U-C Berkeley’s Dept. of Agricultural and Resource Economics. In academic parlance, “dynamic” doesn’t connote a Marvel superhero, it refers to changes over time. By examining changes in water usage over time, the authors conclude that each “21% price increase led to a … 22% reduction in average annual groundwater extraction” by Pajaro Valley growers.

The implied price-elasticity is roughly negative 1.3. (The paper helpfully reports that “The reduction in annual water use doubles between the first year and the fifth year after the tax, with the implied price elasticity of demand ranging from negative 0.86 to negative 1.97.) This empirically-derived price sensitivity is far greater than the price elasticities assumed in CTC’s carbon-tax model, befitting not only the greater salience of water use for growers vis-a-vis energy use for consumers and even most businesses, but the greater agency of Pajaro Valley growers who, Davenport’s reporting suggests, over time have increasingly bought into PVWMA’s groundwater fee in both theory and execution.

After reading Davenport’s article I reached out to hydrologist, climatologist and water sustainability expert Peter Gleick, whose latest book, The Three Ages of Water: Prehistoric Past, Imperiled Present, and a Hope for the Future, was published last year by Hachette / Public Affairs. Peter praised the article while preferring to denote the PVWMA groundwater charge “not [as a] tax but a fee or simply a price for a commodity.” He added, “When we pay for something, we’re more conscious of how we use it. When something is free, we’re more likely to misuse and abuse it. That’s certainly been the case historically for California groundwater.”

Carbon Taxes?

A number of posts in this space have touted — we might say “flogged” — other instances of resource or externality pricing, as possible templates for large-scale carbon pricing. In 2016 we wrote about Berkeley’s soda tax, actually a tax on the sugar content of soft drinks, and summarized research showing that sales of sugar-sweetened beverages fell 21% in that city while rising 4% in “control groups,” i.e., neighboring municipalities where soft drinks continued untaxed. Last year we explained why Congestion pricing, coming soon to New York City, could bode well for carbon-taxing — a message we previously broadcast several times in 2019 as the enabling legislation was being enacted in Albany, in March and in April.

We also dug deep in 2017, writing about an incipient NYC nickel fee on carryout bags dispensed at supermarkets, grocery and convenience stores. (The fee was a month away from taking effect, and though we haven’t yet seen before/after comparisons, anecdotal evidence suggests that trees in New York City are today far less encumbered by what we referred to then as “gossamer debris stuck, like tumors, to our half-a-million street trees.”) We can also go back half a century, to 1972, when NYC environmental officials conjured a “dirty oil surcharge” that forced petroleum suppliers to cough up a fee for each barrel of high-sulfur oil they brought into the city, a remarkably successful (but little known) instance of externality pricing that I memorialized in a 2009 post for Grist, Pollution Taxes Work.

Needless to say, none of these fees — not the soda tax, not congestion charging, not the carryout bag fee, and not the dirty oil surcharge — has paved the way for full-on carbon pricing. While each of them has been or will be a resounding success, their scale is far too local and the stakes far too small to translate automatically to national or even state-level carbon pricing. The same will hold for California’s Pajaro Valley groundwater fee. Indeed, California water districts are wrestling today with the hard work of fulfilling a state mandate requiring every part of the state to devise a plan to conserve groundwater.

Happily, Davenport notes that PVWMA officials and even some growers are advising their statewide counterparts to emulate their approach, including “local control” rather than state or even county governance. Less happily, she reports that the Westlands Water District, which serves the state’s giant Central Valley breadbasket, is pushing a plan “that would allow growers to pay for credits to use groundwater above a certain allocation.” The growers “could buy and sell the credits, starting at about $200 a credit,” Davenport notes. While this scheme certainly improves on the status quo of charging little or nothing for groundwater use, it’s complicated and drenched in market ideology, much as carbon cap-and-trade systems needlessly encumber what could and should be straightforward carbon pricing.

Let’s not end on that dour note, however. These instances of resource charging — whether to stretch a limited resource or to internalize pollution or other externality costs — make it easier to build support for enacting new ones. Davenport’s story — here’s the link again — is both brilliant reporting and cause for optimism.

We close with a snap of the story opening and photo as they appeared on the front page of today’s (Jan. 4, 2024) Times, above the fold. Below it are calculations in which we derived figures in the first part of this post.

Calculation #1: Glasses of water in an acre-foot.

One acre = 43,560 ft^2, so one acre-foot = 43,560 ft^3.
One ft^3 (cubic foot) contains 957.5 fluid oz. (per inchcalculator.com; that figure jibes with the 62.4 lb weight of one cubic foot of water).
A tall water glass contains 14 fluid oz. Thus, one ft^3 of water can fill 957.5/14 = 68.4 tall glasses.
One acre-foot then contains enough water to fill 43,560 x 68.4 = 2.98 million tall glasses, which we round to 3 million.

Calculation #2: Groundwater-use price-elasticity inferred from empirical finding that a 21 percent price increase evokes a 22 percent decrease in usage.

It is tempting to reduce this roughly 1-to-1 relationship to a (negative) 1.0 price-elasticity. However, that would ignore the law of diminishing returns and, mathematically, the convex relationship between changes in price and changes in usage.
The price-elasticity is derived by solving for e in the equation, (1 + 0.21)^e = (1 minus 0.22).
Using base-10 logarithms, we have: e times log 1.21 = log 0.78, which (omitting one or two steps) leads to e = negative 1.3.

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Carbon Footprint

Clean Energy Investment Hits Record $2.3T in 2025 Says BloombergNEF: What Leads the Surge?

Published

3 days ago

January 30, 2026

Alice Rush

Global investment in clean energy reached a new high of $2.3 trillion in 2025, according to a major industry report. This total was 8% higher than in 2024, showing that investment in low-carbon technologies continued to grow despite economic uncertainty. Researchers say this shows the global interest in cutting greenhouse gas emissions and creating cleaner energy systems.

The figures come from the BloombergNEF Energy Transition Investment Trends 2026 report. BloombergNEF is a leading research provider that tracks investments in clean energy technologies and infrastructure.

The clean energy transition includes technologies such as renewable power, electric vehicles (EVs), grid improvements, energy storage, and climate-related tech companies. Together, these areas attracted record funding.

Breakdown of the $2.3 Trillion Investment

The global total of $2.3 trillion in 2025 covered several key clean energy sectors:

Electric transport: The largest category, with $893 billion invested. This includes electric vehicles and charging infrastructure, which are expanding rapidly around the world.
Renewable energy: About $690 billion went into renewable power such as wind, solar, and other clean sources. This was slightly lower than the previous year due to changing regulations in China’s power markets.
Power grids: Investment in grid systems reached $483 billion in 2025. This spending supports the transmission and distribution of clean energy.
Emerging sectors: Hydrogen received $7.3 billion, and nuclear energy received $36 billion.

Bloomberg Energy Transition Investment Trends 2025

Although total investment grew, renewable energy funding itself was down nearly 9.5% compared with 2024. This decline was mainly due to new regulatory rules in China, the world’s largest clean energy market.

Overall, clean energy spending has outpaced fossil fuel investment for a second year in a row. Fossil fuel supply investment fell by $9 billion in 2025, mainly due to reduced spending on oil and gas production and fossil power plants.

Global-energy-transition-investment-by-sector-BNEF

Regional Power Plays: Who’s Investing Where

Investment levels differ greatly by region. This shows the impact of policy, industry structure, and economic growth.

In the Asia Pacific, investment accounted for nearly 47% of the global total in 2025. China stayed the top market, investing around $800 billion in clean tech. This was despite some drops in its renewable sector.

India saw investment grow by 15%, reaching around $68 billion in 2025. The increase was driven by renewables, grid upgrades, and electrification projects.

The European Union grew its investment by 18% to about $455 billion, making it a major contributor to the global increase.

In the United States, investment increased by 3.5% to about $378 billion. This rise happened even though some federal policies slowed support for certain clean energy programs.

Global energy transition investment, by economy or region — Source: BloombergNEF

These patterns show that all regions invest in clean energy. However, the pace and focus vary based on local strategies and market conditions.

SEE MORE: Renewables 2025: How China, the US, Europe, and India Are Leading the World’s Clean Energy Growth

Trends Driving Clean Energy Investment

Electrified Transport Leads

Investment in electric transport, like EVs and charging stations, is now a key player in clean energy spending. In 2025, this area alone attracted $893 billion, making it the top category of global investment.

Electric vehicles are growing fast as battery costs fall and more models become available. Many countries and companies have set targets to phase out fossil fuel vehicles, which boosts demand for EV infrastructure.

Renewable Power and Grids

Even though renewable investment dipped slightly, it still remained a large portion of the total. The $690 billion invested in renewables in 2025 supports new solar, wind, and other clean power plants.

Investment in power grids also grew, reaching $483 billion. Upgrading grids is essential to connect more clean energy to the places that need it. These upgrades include transmission lines, smart grid technologies, and energy storage systems.

Clean Tech Supply Chains and Finance

Investment in factories and supply chains for clean tech also expanded. In 2025, spending on clean energy supply chains reached $127 billion, a 6% increase from 2024. These funds went to battery factories, solar equipment production, and mining for battery metals.

Equity funding in climate-tech companies also rebounded strongly, rising to $77.3 billion — a 53% increase from the previous year. This was the first year of growth in equity funding after several years of decline.

In addition, energy transition debt issuance, loans, and bonds to finance clean energy projects reached $1.2 trillion, up 17% from 2024. This reflects strong interest from both public and private financiers.

Historical Context and Recent Growth

Clean energy investment has been growing steadily over the past decade.

In 2024, global energy transition investment reached about $2.1 trillion, surpassing the $2 trillion mark for the first time. This total was driven by electrified transport, renewable power, and grid investment.

In 2023, investment in clean energy surged to around $1.77 trillion, reflecting rising spending despite geopolitical challenges and market pressures. Electrified transport and renewables both hit new highs that year.

The jump to $2.3 trillion in 2025 continues this long-term growth trend, even though the rate of growth has slowed compared with earlier years. The annual increase dropped from more than 20% several years ago to 8% in 2025 as markets matured and conditions shifted.

Looking Ahead: The Road to $2.9 Trillion

Analysts expect clean energy investment to keep rising in the near term, though uncertainties remain.

BloombergNEF’s base-case scenario shows that global energy transition investment might hit about $2.9 trillion annually over the next five years. This will be above 2025 levels. It shows ongoing interest from both governments and companies.

The International Energy Agency (IEA) offers a broader forecast for total energy investment in 2025. Overall energy investment could reach around $3.3 trillion. This includes spending on both clean and fossil fuels. Clean technologies are expected to get over $2.2 trillion of that total. This would mean clean energy investment continues to outpace fossil fuel spending.

global clean energy investment 2025 by IEA — Source: IEA

Experts see these future figures as good signs. However, they say annual investment must grow a lot to reach long-term climate goals, like those in the Paris Agreement. To meet net-zero by 2050, analysts say the world may need to invest over $5 trillion each year by the end of this decade.

What The Record Spend Means for the Energy Transition

The $2.3 trillion clean energy investment in 2025 shows that countries, companies, and investors around the world continue to fund the energy transition. These funds support low-carbon technologies that reduce emissions and improve energy security.

Investment in electric transport helps shift away from fossil fuel vehicles. Renewable energy funding builds new wind and solar capacity. Grid and storage investment enables that power to reach homes, businesses, and industries.

Regional investment patterns show strong gains in the Asia Pacific, Europe, India, and the United States. However, China saw a slight drop in renewable energy funding.

The clean energy transition remains robust, though overall growth rates have slowed compared with earlier years. The trend also shows that climate goals are now a key part of economic and infrastructure strategies. Forecasts indicate a continued expansion of clean energy investment soon. However, meeting long‑term climate targets will need even greater flows of capital across all regions.

READ MORE: Japan to Invest US$1.34B on Clean Power to Spur Energy Transition

The post Clean Energy Investment Hits Record $2.3T in 2025 Says BloombergNEF: What Leads the Surge? appeared first on Carbon Credits.

Carbon Footprint

Microsoft Q2 FY26 Earnings: $81B Revenue, AI Momentum, and a 150% Jump in Water Use by 2030

Published

3 days ago

January 30, 2026

Alice Rush

Microsoft’s Q2 FY26 earnings show a company growing fast while facing new sustainability pressures. Revenue surged on strong AI and cloud demand, carbon removal commitments doubled, and data centers expanded. At the same time, rising water use highlights the environmental costs of AI. Together, the results show how Microsoft is trying to balance financial growth, climate action, and resource management as its AI-driven business scales.

Big Numbers, Bigger Momentum: Microsoft’s Q2 FY26 Performance

Microsoft reported strong results for the second quarter of fiscal 2026, ending December 31, 2025. The company’s total revenue was $81.3 billion, up 17% from the $69.6 billion reported in the same period last year.

Net income, the profit after expenses, was $38.5 billion. This figure rose 60% from about $24.1 billion in the second quarter of fiscal 2025. Microsoft also reported a diluted earnings per share (EPS) of $5.16. This was up 60% from $3.23 per share in the prior year. Operating income also increased by 21% year over year to was $38.3 billion.

The tech giant also reported large growth in its cloud and AI-related businesses. Revenue from Microsoft Cloud reached $51.5 billion in the quarter. This was an increase of 26% compared with the prior year.

Breaking this down:

Intelligent Cloud revenue was $32.9 billion, up 29%.
Productivity and Business Processes revenue was $34.1 billion, up 16%.
More Personal Computing revenue was $14.3 billion, down 3%.

microsoft fy26 income statement — Source: App Economy Insights

The company also reported its remaining performance obligations, future contracted revenue yet to be recognized, at $625 billion. This was up 110% compared with the same time last year.

Microsoft continued to return cash to shareholders. In the quarter, it returned about $12.7 billion through dividends and share buybacks — an increase of about 32% year over year.

These results show that Microsoft continued to grow across major business segments in Q2 FY 2026. Cloud services and AI-related products remained key drivers of revenue growth. At the same time, personal computing revenue, which includes Windows licensing, Surface devices, and search advertising, experienced a small decline.

Despite these robust results, Microsoft’s stock fell about 11% after the earnings. It dropped by $52.95 to close around $428.68 in late trading after hitting a low of $421.11. This is due to investors’ concerns about slow cloud growth and high spending on AI.

Microsoft MSFT stock price

Alongside its strong financial performance, Microsoft is also taking major strides in its environmental commitments.

Carbon Removal Leadership: Doubling Impact in 2025

Sustainability remains central to Microsoft’s strategy. In 2025, the company more than doubled its carbon removal agreements to 45 million metric tons of CO₂, up from 22 million tons in 2024.

microsoft carbon removal contracts 2023-2025

These purchases include a mix of nature-based solutions. They cover forestry and soil carbon projects, plus direct air capture technologies. The agreements span North America, Europe, and Africa, targeting high-quality, verified removal credits with long-term permanence.

SEE MORE: Microsoft More Than Doubles Carbon Removal Deals to 45 Million Tonnes in 2025

Microsoft’s move reflects a broader trend among tech giants committing to net-zero and carbon-negative strategies. Other big buyers are Amazon, Google, and Stripe. They’re investing in carbon removal to offset emissions that can’t be cut yet.

By securing long-term offtake agreements, Microsoft ensures these projects receive funding to scale operations and deliver measurable climate impact. Analysts predict that global corporate carbon removal purchases might exceed 150 million metric tons each year by 2030. This shows a fast-growing market that mixes corporate sustainability goals with investment chances.

AI’s Hidden Cost: Data Centers and Water Demand

Microsoft also released projections on AI-driven data center water consumption. With AI workloads surging, water use in Microsoft’s global data centers is expected to rise 150% by 2030 compared with current levels. That’s equal to using about 18 billion liters over the said period.

The increase is mainly due to liquid cooling systems used to maintain GPU and CPU performance in AI servers. Water is essential to prevent overheating and maintain efficiency. Microsoft’s water needs are spiking hardest in dry areas.

In Phoenix (hit by 20 years of drought), the company cut its 2030 estimate from 3.3 billion liters to 2 billion by running hotter data centers.
Near Jakarta, Indonesia (a sinking city with drained underground water), the forecast dropped from 1.9 billion to 664 million liters.
In Pune, India (where shortages caused protests and a “No Water, No Vote” push), it fell from 1.9 billion to just 237 million liters—Microsoft wouldn’t say why.

As AI adoption grows, data centers will consume more energy and water, especially in regions with concentrated cloud infrastructure.

global data center water use projection Bloomberg

In an interview, Priscilla Johnson, Microsoft’s former director of water strategy until 2020, stated:

“Water took a back seat. Energy was more the focus because it was more expensive. Water was too cheap to be prioritized.”

Microsoft is now exploring solutions such as:

Advanced cooling technologies to reduce water intensity per compute unit
Use of recycled water in data centers where feasible
AI-driven energy and resource optimization to manage electricity and water demand

The company emphasizes that AI deployment must be balanced with sustainability practices, ensuring growth does not lead to unsustainable water consumption or carbon emissions.

MUST READ: AI Drives a Transformative Wave in Global Data Centers – and Energy Is the Real Bottleneck

Where Growth Meets Responsibility

Microsoft’s Q2 results show that growth and sustainability are connected. Investments in AI, cloud, and enterprise services boost revenue while increasing resource demand. The company’s carbon removal goals and energy-efficient data center plans help reduce environmental impacts.

Key metrics illustrate this balance:

Revenue growth of 9% year-over-year
Cloud revenue of $30.5 billion, up 12%
Carbon removal agreements totaling 45 million metric tons
Projected AI data center water increase of 150% by 2030

These initiatives demonstrate that Microsoft is trying to align profitability with long-term climate goals. Investing in clean technology, energy efficiency, and carbon removal shows that big companies can grow responsibly. This approach also helps reduce environmental impacts.

What Comes Next for AI, Climate, and Capital

Microsoft expects AI adoption to boost demand for:

Data center capacity
Cloud computing
Specialized hardware like GPUs

Analysts predict the global AI data center market could double by 2030, creating both financial and sustainability challenges.

The carbon removal market is also expected to expand. With 45 million tons already contracted, Microsoft’s continued leadership signals corporate influence in scaling carbon removal projects.

Forecasts show that voluntary carbon removal deals might exceed $15 billion each year by 2030. This growth is mainly due to tech companies, industrial firms, and financial institutions.

Water management in data centers is another critical area. Companies need to invest in better cooling and recycled water solutions to help meet rising demand while protecting local water resources. Microsoft’s transparency around water use provides a model for responsible AI deployment globally.

Overall, Microsoft’s earnings report not only reflects strong financial performance but also highlights the company’s sustainability leadership. Growth, carbon removal, and AI infrastructure are linked. They provide insights for companies like Microsoft trying to balance profit with environmental responsibility.

READ MORE on Microsoft’s carbon removal deals:

The post Microsoft Q2 FY26 Earnings: $81B Revenue, AI Momentum, and a 150% Jump in Water Use by 2030 appeared first on Carbon Credits.

Carbon Footprint

Royal Caribbean’s (RCL) Record 2025 Profits Meet Carbon Challenges of the Cruise Industry

Published

3 days ago

January 30, 2026

Alice Rush

Royal Caribbean Cruises Ltd. (NYSE: RCL) kicked off 2026 with strong financial results for 2025. The company’s success reflects a broader recovery and growth in the global cruise industry. Alongside financial gains, the industry faces growing scrutiny over environmental impact.

Cruise ships are highly carbon-intensive per passenger, prompting major lines—including Royal Caribbean, MSC, Carnival, and Norwegian Cruise Line—to invest in cleaner fuels, energy-efficient technologies, and shore power solutions.

This article looks at the cruise sector’s financial health, passenger growth, and environmental issues. It also discusses how companies are working to balance profits with sustainability.

Smooth Sailing: 2025 Profits and 2026 Outlook

Royal Caribbean Cruises had solid financial results in 2025 and a positive outlook for 2026. The company made nearly $18 billion in revenue in 2025, up from about $16.48 billion in 2024.

Net income also grew to about $4.27 billion, compared with roughly $2.88 billion the year before. Adjusted earnings per share (EPS) rose to $15.64, showing improved profitability.

Royal Caribbean Cruise financial results 2025 — Source: Royal Caribbean Cruises

The company also generated a strong operating cash flow of about $6.4–6.5 billion and returned around $2 billion to shareholders during the year. Record cruise bookings and higher ticket prices helped drive these results.

Royal Caribbean’s board expects double-digit revenue growth in 2026, along with higher capacity. Adjusted EPS is projected between $17.70 and $18.10. Around two-thirds of 2026 cruise capacity is already booked at strong pricing, supporting this forecast.

Jason Liberty, the company CEO, remarked:

“2025 was an outstanding year, and the momentum is further accelerating into 2026… and we continue to see strong and growing preference for our leading brands and differentiated vacation experiences. We expect another strong year of financial performance with both revenue and earnings growing double digits, and we remain on track to achieve our Perfecta goals by 2027.”

After the earnings call, the company’s stock climbed over 6%, mainly due to strong 2026 guidance.

Royal Caribbean Cruises RCL stock price

These results show not only a recovery from pandemic lows but also sustained demand for cruises. Analysts expect this trend to continue as global travel and premium leisure spending grow.

Passenger Waves: Cruise Industry Expansion and Emissions

The global cruise industry is growing fast. Projections show over 38 million passengers by 2026, up from around 37.7 million in 2025. This growth follows strong momentum from 2024 and reflects overall travel trends.

cruise passengers outlook — Source: Cruise Lines International Association

Higher demand is encouraging cruise lines to add ships and expand routes. Royal Caribbean, for example, has ordered new Discovery Class vessels and is growing its river cruise segment with more ships planned through 2031. This shows long-term confidence in the market.

Carbon Wake: Cruise Emissions vs Other Travel

Cruising, however, has a higher environmental impact than many other types of travel. Cruise ships are among the most carbon-intensive forms of travel per passenger per distance traveled. This is because they need fuel not just to move but also to run cabins, restaurants, pools, and entertainment.

Even large, efficient cruise ships by Royal Caribbean emit around 250 grams of CO₂ per passenger-kilometer. That is higher than most long-haul flights or hotel stays. Onboard services and hotel-style energy use make cruises even more carbon-heavy.

For perspective:

A five-night cruise of 1,200 miles produces about 1,100 pounds (≈500 kg) of CO₂ per passenger.
A flight covering the same distance plus a hotel stay produces roughly 264 kg of CO₂ per person.

This means a cruise can generate about 2x the greenhouse gas emissions of an equivalent flight-and-hotel trip.

Trains and electric cars have much lower emissions per passenger. For example, traveling by national rail produces about 35 g CO₂ per kilometer, and international trains like Eurostar are even lower at 4.5 g CO₂ per kilometer.

The Carbon Footprint of Cruise Ship vs Major Travel Methods — Data source: Voronoi App

Other comparison insights:

Emissions per passenger-kilometer: Large cruise ships emit 0.43–0.65 kg CO₂, depending on occupancy and efficiency. Economy-class flights emit 0.15–0.20 kg, while high-speed rail is around 0.04 kg. Cruises can be 2–10x more carbon-intensive per passenger.
Fuel and technology impact: Using LNG instead of heavy fuel oil reduces CO₂ by 20–25%, but methane slip and upstream emissions can reduce gains. Air lubrication and optimized routing can cut fuel use by 5–10% per voyage.

Ship engines burn huge amounts of fuel. Amenities like air conditioning, theaters, pools, and restaurants add to the energy demand. Cruises remain a luxurious experience, but travelers should know that they usually have a higher carbon footprint than flights, plus hotels or land-based travel. This shows that while cruises are luxurious and convenient, they have a much higher carbon footprint than most other ways of traveling.

Cruise ships also emit sulfur oxides (SOx), nitrogen oxides (NOx), and fine particles, which can harm air quality in port cities and marine ecosystems. Many passengers also fly to and from cruise ports, adding more carbon emissions that are often not included in cruise footprint estimates.

How Cruise Lines Are Addressing Environmental Impact

Cruise companies, including Royal Caribbean, are working to reduce their environmental impact. Many aim to reach net-zero greenhouse gas emissions by 2050 or earlier.

Royal Caribbean’s Destination Net Zero strategy focuses on:

Alternative fuels: LNG-powered ships, biofuels, and fuel cell technology.
New ship technologies: Advanced hulls, air lubrication systems, and shore power connections.
Operational efficiency: Optimized routes and engine improvements to reduce fuel use per passenger.

Royal Caribbean Cruise emission reductions pathways — Source: Royal Caribbean Cruises

Other cruise lines are also taking action to tackle their environmental footprint:

MSC Cruises used efficiency tools and smart itinerary planning to cut 50,000 tonnes of CO₂ in 2024. They are testing hybrid propulsion and shore power at multiple ports. Carnival Corporation is expanding LNG and biofuel use while increasing shore-side electrical connections. They are also researching carbon capture for ships.

Likewise, Norwegian Cruise Line (NCL) is adding LNG-powered ships, battery-assisted propulsion, and energy-efficient onboard systems. NCL is also expanding shore power at ports.

Disney Cruise Line uses hybrid exhaust gas cleaning, advanced wastewater treatment, and fuel-efficient hulls while eliminating single-use plastics onboard. Meanwhile, Princess Cruises applies energy-saving tech, waste reduction, and wastewater treatment, while testing LNG as a fuel alternative.

Overall, the cruise industry faces pressure to reduce carbon intensity. Cleaner fuels, new technologies, and operational efficiency are becoming standard. Environmental responsibility is now a key part of long-term business strategy.

Forecast Horizon: Growth, Finance, and Green Goals

Royal Caribbean and the cruise industry are financially strong. High bookings, growing revenue, and positive forecasts show that demand for cruises is rising. Investments in new ships and offerings aim to meet demand across different traveler groups.

Cruise forecasts show over 38 million passengers by 2026, highlighting ongoing interest. Electric and hybrid propulsion, shore power, biofuels, and fuel-saving technologies are slowly becoming standard.

Challenges remain. Reducing cruise carbon intensity to levels similar to other travel modes will require more alternative fuels, stricter rules, and continued innovation.

Still, many cruise lines have pledged net-zero targets, often aligned with global shipping goals. Passengers are also more aware of environmental impact, driving demand for greener cruises.

Balancing Growth and Emissions

Royal Caribbean’s strong earnings and positive outlook show a resilient and growing industry. Record bookings and strategic investments indicate financial health and long-term growth.

However, carbon emissions remain a major issue. Cruises generally produce more CO₂ per passenger than many other vacations. Cruising is also considered to emit the most emissions compared to other travel methods. Thus, the industry faces pressure to reduce this impact.

Understanding both the financial and environmental sides can help travelers make better choices. For cruise companies and policymakers, balancing growth with emissions reductions is key for the future of cruising.