As artificial intelligence (A.I.) continues its exponential rate of development, the demand for data has never been higher. However, meeting the expected need of 11,000 centers globally comes with a high cost in natural resources. Data centers consume excessive amounts of water and have prompted federal and state governments to explore policy solutions to support sustainable data centers.
While data centers use water differently based on their geographic location, operating conditions, and demand, the uses of their water fall into three categories:
- Cooling: Water circulates through data centers to reduce the heat generated from computing and cool machinery. Large data centers can consume up to five million gallons per day, equivalent to the water usage of 10,000 to 50,000 people.
- Water-Intensive Electricity Generation: Data center electricity is often sourced from thermoelectric or hydroelectric plants. Compared to data center cooling systems, thermoelectric and hydroelectric plants use two to three times more water.
- Water Consumption of Supply Chains: Water is consumed during the manufacturing, disposal, and transportation of IT equipment and other data center components. A chip manufacturing facility can consume approximately ten million gallons of ultrapure water per day.
Data centers and their water consumption have spurred debates over how governments should address or regulate data center water use. As less than a third of data center operators actively track water use metrics, recent global legislation has focused on encouraging transparent reporting of water use. The European Union’s Energy Efficiency Directive (EED) “requires data center owners and operators in its 27 member countries to report data on energy and water usage annually to an EU database.”
In the U.S., California Senator Steve Padilla introduced SB 58 in January 2025, which would provide a “tax credit for data centers that adopt sustainable practices, such as utilizing at least 70 percent carbon-free energy, sourcing 50 percent of their energy supply from behind-the-meter sources, avoiding diesel fuel, and employing water-efficient cooling systems.” In Minnesota, new environmental regulations will require data center developers to partner with the Minnesota Department of Natural Resources before construction to ensure they have an adequate water supply and “closed loop systems” that recycle water for cooling. As the demand increases, stakeholders continue to seek ways to balance water conservation, energy use, and the growing computational demands of AI; even so, some have their doubts about the success of regulations.
Resistance to Regulation
Along with fueling advancement in new complex computing technologies like A.I., widespread data center development also promises significant economic benefits that regulations could stifle. Between 2017 and 2023, the U.S. data center industry increased their direct employment by 50 percent. For each job that works directly in the data center, the industry supports more than six ancillary jobs elsewhere in the U.S. economy. As a whole, data centers’ total annual employment jumped 60 percent within the same frame, an increase from 2.9 to 4.7 million jobs. Considering their regional economic benefits, the industry’s total fiscal contribution to local, state, and federal taxes skyrocketed by 146 percent between 2017 and 2023, from 66 billion to 162 billion dollars.
Demanding substantial upfront investments in cooling technologies, water treatment systems, and monitoring equipment, regulations may threaten these economic benefits by raising operating costs and even restricting expansion in certain regions. U.S. stakeholders also worry high upfront costs will drive data centers offshore, where environmental regulations are less stringent. This move would reduce economic gains in local communities and offload environmental burdens elsewhere.
Stricter regulations disincentivizing water consumption may even inadvertently cause environmental detriments. For example, water limits or increased taxes may incentivize cheaper and riskier forms of cooling that have negative environmental effects. While evaporative cooling towers consume significant amounts of water directly, air conditioning systems require more water-intensive energy consumption.
Due to U.S. overreliance on data centers, some argue regulation could shake the so-called “foundation for future economies,” as Bill Thomson, vice president of marketing and product development at D.C. B.L.O.X., remarked. Powered by data center computing, A.I. currently helps electric vehicles, wind and solar energy, and the smart grid to optimize energy utilization. In the future, it could even help solve crucial water-related challenges by streamlining agricultural irrigation, improving wastewater treatment, and detecting harmful chemicals in drinking water.
Support for Regulation
Nearly half of the world’s population could live in water-stressed regions, and 700 million people could be displaced due to excessive water consumption by 2050. Data centers exacerbate water scarcity problems by consuming the water sources regions rely upon and upending the water cycle. Treated with chemicals to prevent corrosion and bacterial growth, water is often left unsuitable for drinking or agricultural use. In many cases, wastewater cannot be recycled back for cooling purposes due to other dust, mineral, or chemical contaminants.
Excessive water withdrawals can have social and economic impacts on nearby communities. Intensified demand can lead to farmers experiencing reduced crop yields. As irrigation water becomes scarce, water and food prices rise and have the potential to ignite unrest, as seen in Holland, Chile, and Uruguay. In 2023, a major tech company’s proposal for a large data center sparked widespread protests in Uruguay, where residents feared increased agricultural losses and exacerbated drought conditions.
Water regulations may mitigate these negative impacts without crippling data centers. Regulations can incentivize innovation in cooling technology like closed-loop systems, which involve wastewater recycling or rainwater capture. These techniques have already shown the potential to increase freshwater savings by 50-70 percent, depending on location. Regulations can also encourage new data center development in more sustainable regions that support free-air cooling systems or ocean water processing. Regardless of location, studies on European data centers show free-cooling methods can cut energy consumption and water consumption by an average of 5.7-7.9 percent. Using seawater as a coolant can also substantially decrease potable water use. Facilities like Google’s data center in Hamina, Finland, are already finding success with this sustainable technology.
Conclusion
As both populations and data center demand continue to rise, water will become an increasingly scarce resource. Regulation that selectively promotes sustainability can limit overall efficiency and decrease sustainability overall. On the other hand, a lack of regulation may not catalyze innovative solutions that benefit both data centers and the environment. Whether regulation will ultimately be effective in promoting water access for communities and essential industries while still supporting the development of digital infrastructures will depend on its ability to balance efficiency and sustainability in data center operations.