The data centre rush: Can law and policy manage the environmental costs of digital growth?

DIGITAL INFRASTRUCTURE is the spine of modern innovation – from the clouds that fuel e-commerce and artificial intelligence (AI), to the everyday apps. Yet, beneath the gleaming facades of hyperscale server parks lies a fast-unfolding crisis. Data centres have become the new “gold” of investment, attracting a global rush of tech giants and governments alike. But this large-scale infrastructure planning and spread carries high, underexamined costs across several fronts. Currently, cloud platforms run much of the internet, bringing each terawatt-hour of data processing from the working of coal plants, concrete cooling towers, and plunged aquifers.

As nations and corporations race to build more data centres, are we locking in ecological and social harms that our laws and institutions are ill-prepared to manage?

A global data centre rush

Tech titans and states view data centres as high-value strategic assets. The industry is already worth roughly $240 billion globally in 2024, and is projected to more than double by 2032. Hyperscale data centres are campus-scale facilities that often span hundreds of thousands of square feet, and dominate global digital infrastructure. Big tech firms like Amazon, Google, Microsoft and Meta have driven rapid expansion in hyperscale data centre capacity to meet the rising demand for cloud and AI services. Such facilities have not only served as passive repositories of data but have also become critical digital infrastructure underpinning national competitiveness and security.

Northern Virginia’s ‘Data Center Alley,’ the world’s largest concentration of such facilities, is an example of this shift – processing a substantial share of global internet traffic and meeting the needs of millions of users worldwide. Governments across jurisdictions are increasingly recognising data centres as strategic infrastructure rather than ordinary commercial real estate.

Singapore, Saudi Arabia, India and the UAE now bid aggressively to host data centres, offering tax breaks, quick permits, and dedicated power zones. Many Indian states have data-centre policies which offer capital subsidies, power rebates, and single-window clearances to attract investors. In July 2024, an executive at Colliers reported an 80% increase in planned capacity in South India, driven by government incentives and digital demand.

This wild expansion is driven in large part by AI. Training a single advanced model can burn through millions of kilowatt-hours (for example, GPT-4 reportedly consumed over 1.7 million kWh). Projects like Amazon’s Project Rainier and Meta’s $10 billion AI hub in Louisiana attest to AI’s hunger for compute. The demand for powerful, intelligent and sustainable data centres is set to accelerate as AI grows.

Hidden resource footprints

As the rhetoric of digital growth continues, it covers stark environmental realities. Presently, data centres require an estimated 1-1.5% of global electricity to keep themselves functioning, and this percentage is climbing. Researchers warn that by 2030, data centre demand could reach 9% of worldwide electricity use. In one analysis of an illustrative German cloud facility, energy use was projected to rise 20% and carbon emissions 13% between 2020 and 2030. Cornell researchers found that, in the US, AI-driven growth alone could add 24-44 million tonnes of CO₂ per year by 2030 - roughly equivalent to 5-10 million additional cars on the road. Even with aggressive renewables, the study finds that without structural changes, “the AI industry’s net-zero targets [will be] out of reach.”