The Growing Impact of Data Centers on Energy Demand and the Environment

The impact of data center expansion on energy and the environment has been a topic of discussion for years. Energy affordability, grid reliability and water usage have been the focus of lawmakers and other stakeholders in states where data center growth is ongoing or projected.

State-level action to address energy affordability, grid reliability and water usage include:

• Utah’s enactment of legislation that enables power suppliers to directly contract with data centers to supply their energy, which ensures costs are not passed onto other ratepayers.
• Minnesota’s amendment of its tax incentive to remove the sales tax exemption for large data centers and implementation of a fee to be levied annually based on energy use.
• California’s requirement for data centers to disclose and certify their water consumption as part of the local business licensing process.

Increased GHG emissions resulting from data center expansion is also a concern for many states, but only initial steps have been made on this matter. While the urgency to address this impact continues to rise, the ability to do so remains challenging for several reasons. One key reason is that there are major information gaps regarding data centers and their carbon footprint. Without this foundational information, quick and meaningful progress is practically unobtainable.

State-level action to gain information on data centers and their impact on GHG emissions include:

• Oregon Gov. Tina Kotek’s establishment of the Data Center Advisory Committee on Jan. 20. Of the many efforts tasked to the committee, it will work to understand how data centers might affect Oregon’s economy, climate, clean energy and natural resource goals.
• In Maryland, the state legislature’s overriding a veto of SB116 /HB270, which funds a study on the data center development impacts on the grid, environment and state economy, requiring a final report to the General Assembly by September 2026.

Focused analysis on select aspects of data centers can help shed some light on their carbon footprint. Components used by data centers, such as electricity consumption and building materials coupled with their attributed CO2 emissions, provide insight and guide progressive action.

Electricity

According to the U.S. Department of Energy (DOE), data centers are an energy-intensive building type, which consume 10 to 50 times more energy per floor space than a typical commercial office building. This is due to high electric power demand from electronic IT equipment and cooling systems.

In 2023, data center annual energy use reached approximately 176 terawatt-hours (TWh), which is roughly 4.4% of U.S. annual electricity consumption with about 56% derived from fossil fuels.

Studies indicate that electricity consumption of 2,132 data centers in 2023, generated more than 105 million metric tons (mt) of CO2e. Further, the carbon intensity of the CO2e emitted per unit of electricity consumed was 48% higher than the national average.

As data center deployment is expected to grow exponentially, so will CO2 emissions if the electricity sector continues to depend on fossil energy. Electricity consumption from data centers may increase to 580 TWh per year by 2028, representing nearly 12% in total U.S. electricity demand.

Steel

Steel is a fundamental component in data centers, primarily used for structural framing, server racks and cable management due to its high strength, durability and corrosion resistance. As cooling for data centers shifts from air cooling to liquid cooling, copper and brass are being replaced with stainless steel in many system designs.

Large data centers operated by hyperscale providers rose to 1,136 at the end of 2024, with the U.S. accounting for over 50% of the global total. Projections indicate that an additional 130-140 hyperscale data centers will come online each year.

Estimations vary for the amount of steel required by large hyperscale centers. Some studies reveal that approximately 10,000 mt of steel are required for roughly 75,000 square meters (807,000 square feet) of facilities, with 200,000 mt for multi-building sites of roughly 1.7 million square meters. Others indicate 3,500 metric tons of steel are necessary for every 250,000 square feet of data center construction.

The steel sector is one of the most difficult to decarbonize. In 2024, 1 mt of steel produced 2.18 mtCO2e emissions, on average. That same year 1,886 million mt of steel were produced, leading to a total emission of 4.1 mt billion mtCO2e.

With growing steel demand from data center development, the sector will need to shift toward cleaner methods of steel production, primarily through new technologies, alternative fuels and leveraging scrap usage to keep emissions down.

Cement

Cement is essential for data center construction and primarily used for structural foundations, floor slabs to support heavy server loads and reinforced walls.

Data center buildout was anticipated to require about 247,000 mt of cement in 2025, increasing to roughly 860,000 mt by 2028. Despite this increased demand, the impact on total cement consumption is expected to remain limited, accounting for 25.7%.

Like steel, the cement sector is also difficult to decarbonize due to significant emissions during processing and the use of fossil fuels for high heat needed for chemical conversion. One mt of cement produces about 0.8 to 0.9 mtCO2e, resulting in roughly 25% of all industry carbon emissions.

Federal Action

While states have worked to advance their own efforts regarding data centers, the federal government has yet to take significant action to address energy or environmental impacts of data center expansion. Quite conversely, steps have been taken to accelerating their permitting and construction under the Trump administration. For instance, in July 2025, President Trump signed an Executive Order to advance the buildout of data center infrastructure, specifically targeting artificial intelligence-related facilities that require more than 100 megawatts of power.

Congress has worked to advance efforts, but nothing has been finalized. As an example, the Clean Cloud Act of 2025 (S. 1475) was introduced to Congress in April 2025 and has only been referred to the Committee on Environment and Public Works. It would establish an emissions standard and fee system regarding the electricity used by data centers that exceed a specified size. It would also require the Environmental Protection Agency (EPA) and the Energy Information Administration (EIA) to collect data and information on annual energy consumption of data centers, and to determine the GHG emission intensity of the total annual electricity consumed.

While it is likely that the Trump administration will continue efforts to increase data center deployment, legislation that is similar to the Clean Cloud Act may only gain traction if Democrats gain majority in either the House or Senate after mid-term elections.