Orange Creamsicle

What Happens When Data Centers Come to Town

Terry Nguyen | BA Public Policy

Ben Green |Assistant Professor, School of Information and Gerald R. Ford School of Public Policy

Partner | Michigan Environmental Justice Coalition

Introduction. [Abstract].  The rapid growth of data centers, with their enormous energy and water demands, necessitates targeted policy interventions to mitigate environmental impacts and protect local communities. To address these issues, states with existing data center tax breaks should adopt sustainable growth policies for data centers, mandating energy audits, strict performance standards, and renewable energy integration, while also requiring transparency in energy usage reporting. “Renewable energy additionality” clauses should ensure data centers contribute to new renewable capacity rather than relying on existing resources.  If these measures prove insufficient, states should consider repealing tax breaks to slow unsustainable data center growth. States without tax breaks should avoid such incentives altogether while simultaneously implementing mandatory reporting requirements to hold data centers accountable for their environmental impact. Broader measures should include protecting local tax revenues for schools, regulating utility rate hikes to prevent cost-shifting to consumers, and aligning data center energy demands with state climate goals to avoid prolonging reliance on fossil fuels.

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