Data centers are the nerve centers of the digital age. As information and communications technology (ICT) evolves, data centers have transformed from basic storage units into sophisticated, high-performance ecosystems. Today, they support everything from cloud-based collaboration tools to AI training and are central to business continuity and innovation across sectors.
The explosion of digital activity has fueled a rapid global expansion of data centers. While advancements in hardware and software continue to improve efficiency, demand consistently outpaces innovation. As global data consumption rises, there is a push towards more sustainable data centers.
Climate tech plays a vital role in leading this shift. Startups and established players alike are deploying breakthrough solutions to optimize energy usage, reduce water consumption, improve circularity, and integrate renewable energy. These innovations reshape the data center landscape and accelerate the industry’s path toward net zero. As sustainability becomes a business priority, Climate Tech emerges as a powerful enabler of cleaner, more resilient digital infrastructure.
What are the different types of Data Centers?
As demand for digital services grows exponentially, data centers have become the invisible backbone of the digital world. Today, businesses often rely on a combination of data center types.
Broadly, data centers are categorized based on ownership, infrastructure model, geographical proximity to end-users, and integration within larger IT ecosystems. For investors and businesses, understanding these distinctions is crucial when evaluating digital infrastructure strategies or climate-aligned technology investments.
Here are the four main types of data centers:
While each type of data center offers unique capabilities and advantages, they all share a common challenge: managing the environmental impact of their operations. As the global digital footprint expands, so does the energy and resource intensity of the infrastructure supporting it. Understanding these environmental challenges is essential to building a more sustainable digital future.
The environmental impact of Data Centers
Like any transformative technology, data centers bring both tremendous benefits and significant challenges. As they power the digital economy and drive technological innovation—from AI to cloud computing—they also exert pressure on communities, ecosystems, and critical resources. While data centers generate jobs and accelerate progress, they also carry costs borne by the environment and society. To future-proof this infrastructure, we must proactively address the sustainability challenges it presents.
For all the benefits that data centers bring to the digital world, there is a disproportionate negative environmental and social impact. Here we list the challenges that the industry needs to address immediately to mitigate long term damage to our surroundings.
Energy demand and greenhouse gas emissions from Data Centers
The exponential growth of data and the rising demand for data centres is challenging global climate progress. The rapid development of AI could undermine decarbonisation efforts worldwide by driving electricity consumption and emissions to extreme levels.
As AI models evolve from simple text generation to more complex image, video, and music generation, data requirements are expanding rapidly, further amplifying energy demand. Since 2022, global investment in data centres has nearly doubled, reaching half a trillion dollars in 2024. However, this boom has also triggered mounting concerns around the sector’s growing energy footprint. Today, data centres and data transmission networks are responsible for about 1 percent of global energy-related greenhouse gas emissions.
AI-optimised data centres, particularly hyperscale facilities, are pushing energy use to unprecedented levels. Some centres now require 100 megawatts or more of electricity. For perspective, a single large-scale facility can consume as much electricity annually as 350,000 to 400,000 electric vehicles.
In 2022, data centres consumed an estimated 240 to 340 terawatt-hours (TWh) of electricity, accounting for approximately 1 to 1.3 percent of global electricity demand. Electricity demand from AI-optimised data centres is projected to more than quadruple by 2030, reaching about 945 TWh, which would exceed Japan’s current electricity consumption.
Data Centers in the USA
As of March 2025, the United States holds the largest number of data centres globally, operating 5,426 facilities. As a result, the USA accounts for the highest share of global data centre electricity consumption, responsible for 45 percent of global usage in 2024, followed by China at 25 percent and Europe at 15 percent.
In the United States, data centres are expected to drive nearly half of the country’s electricity demand growth between now and 2030. By the end of the decade, the USA will consume more electricity for data centres than for the production of aluminium, steel, cement, chemicals, and all other energy-intensive goods combined.
A recent study examined 2,132 data centres operating across the United States, representing 78 percent of all facilities, between September 2023 and August 2024. The findings showed that these data centres accounted for over 4 percent of total US electricity consumption, with more than half of that electricity sourced from fossil fuels. This contributed to more than 105 million tons of CO2e emissions, representing 2.18 percent of total US emissions in 2023.
The strain on local power grids will continue to intensify as more data centres are built. Construction timelines for new centres often outpace upgrades to grid and transmission infrastructure. Several jurisdictions have already paused new data centre projects to process connection backlogs and evaluate grid capacity. Rising concerns over electricity availability and prices have led some regions to consider temporary moratoriums on development.
Meeting the growing electricity needs of data centres will require access to a diverse mix of energy sources and better alignment between infrastructure development and energy planning. Without urgent action, the accelerating growth of digital infrastructure risks placing even greater pressure on power grids and hindering global climate goals.
Water overconsumption in Data Centers
Data centers consume water primarily to cool servers from overheating. A Cornell University study estimates AI demand alone could require 4.2–6.6 billion cubic meters of fresh water annually by 2027, roughly half of the UK’s yearly usage.
The demand for water for data center cooling is exacerbating the water crisis in water-sensitive regions already suffering from the effects of climate-related water shortages. Stakeholder engagement is most necessary while choosing a location to set up new data centers. While huge data centers generate employment and create an uptick in the economy, the environmental cost of setting up a data center needs to be assessed first. One such example was the proposed approval for a data center in Arizona which is known for its arid landscape and water woes.
In 2021, Google’s global data centers consumed approximately 4.3 billion gallons (16.2 billion litres) of water altogether. Though water-cooled data centers consume less energy to cool heating and emit roughly 10% less carbon emissions than air-cooled data centers, they still place immense stress on freshwater resources.
As data centers continues to exert demand on limited freshwater resources, companies must remain committed to investing in technologies that reduce data center water consumption. Low-water alternatives and the latest liquid cooling systems are some of the latest data center cooling solutions.
Electronic and Toxic Waste
Data centers contain thousands of components with varied life cycles. While servers, batteries, and networking equipment typically require replacement every 3–5 years, infrastructure such as air conditioning systems and generators may last over a decade.
Short upgrade cycles—especially in high-performance facilities—result in significant volumes of e-waste. In a 2020 survey, 42% of IT managers reported replacing servers every 2–3 years. Given the scale of global data centers, e-waste volumes are staggering.
Server longevity is shaped by a combination of factors like engineering design, workload intensity, maintenance protocols, and ambient operating conditions. Beyond wear and tear, many operators choose to upgrade equipment to capitalize on the superior performance, energy efficiency, and scalability of newer technologies.
Demand for Land from Data Centers
Data centers require substantial real estate and resources, often competing with agriculture, housing, or other commercial sectors. In some regions, their expansion fuels gentrification, increases land costs, and stresses local infrastructure.
Green data centers need thoughtful planning. Zoning must account for:
- Power grid and water infrastructure
- Proximity to renewable energy sources
- Impact on surrounding communities and industries
While renewable energy adoption is a cornerstone of sustainability, solar and wind farms also require vast land areas. Strategic siting of data centers can mitigate these impacts and foster balanced growth.
Yet, amidst these escalating issues, significant steps are being taken and milestones achieved. Take a look at the pioneering startups actively engaged in driving sustainable practices in data center operations. There are also commercial agreements between large tech companies and budding climate tech companies collaborating to reduce the environmental impact of data centers.
Noise Pollution
Noise pollution from data centers is rarely ever spoken about, even though it increasingly affects nearby communities. The constant hum of servers, network switches, routers, air conditioning systems, and industrial cooling fans creates significant and persistent noise levels. This mechanical chorus can generate sound levels exceeding 80 dBA, comparable to a leaf blower.
Communities living near large data centers frequently report health concerns linked to the unceasing background noise. Chronic exposure causes sleep disturbance, headache, hearing loss, elevated stress hormone levels, hypertension, anxiety, and even cardiovascular risks.
Persistent land-based noise pollution also affects other species. Noise from data centers disrupts animal communication, alters natural behavior, and forces wildlife to change migration patterns.
Charting a sustainable path forward for Data Centers
As digitalization accelerates, sustainable infrastructure has become more than a regulatory requirement. Green data centers now offer real business advantages. They help in improving operational resilience and strengthen brand reputation at a time when climate accountability shapes business decisions.
The next wave of innovation focuses on reducing the environmental cost of digital growth. New technologies are helping data centers boost energy efficiency, connect to renewable energy grids, improve cooling systems, and optimize operations.
For investors and business leaders, championing the shift toward sustainable data centers presents both an opportunity and a responsibility. The growing number of partnerships between data center operators and climate tech innovators shows that companies are waking up to the long-term risks of inaction.
While mature technologies will play a pivotal role in the immediate future, the real transformation lies in scaling the next generation of climate solutions. By investing early in emerging technologies, leaders can accelerate innovation, reduce costs over time, and position themselves at the forefront of a rapidly evolving industry.
In this regard, climate tech partnerships are powering the next wave of sustainable data centers. From liquid cooling to renewable integration and operational efficiency, early commercial agreements are creating a blueprint for decarbonizing digital infrastructure. Find out more about the key players, technologies, and opportunities shaping this space.
