The (dis)advantages of data centers

Jorge Costa Oliveira

Over the past decade, we have seen rapid growth in data centers – whether for cloud data storage, cryptocurrency mining, or the development of artificial intelligence (AI). Data compiled by Statista show that the economic bloc with the largest number of data centers is the United States (4,165), reflecting the country’s robust technology sector, with companies such as Amazon, Google, and Microsoft operating extensive cloud infrastructure. It is followed by Europe (3,476), and Asia and Oceania (2,068, of which 381 are in China).

The benefits associated with hosting data centers in a country include: (i) job creation (limited); (ii) foreign investment; (iii) infrastructure development; (iv) improved connectivity with the rest of the world (making the country more attractive to companies and investors); (v) tax revenue; (vi) economic diversification; (vii) skills development and specialized know-how in technology and infrastructure; and (viii) improved data security and protection of sensitive information.

However, the installation of data centers also entails significant environmental and social impacts.

In the United States, a coalition of more than 230 environmental groups – including Greenpeace, Friends of the Earth, and Food & Water Watch – is calling for a nationwide moratorium on new data centers. They accuse these facilities of generating planet-warming emissions (the carbon intensity of the electricity used by data centers is 48% higher than the US average and is expected to increase power-sector emissions by 30%, reaching 275 million metric tons of CO₂ annually by 2030), consuming enormous quantities of water and electricity (8.9% of total US energy consumption), driving up electricity bills.

With regard to electricity consumption, researchers from Harvard’s Electricity Law Initiative analyzed agreements between utility companies and technology giants such as Meta, which determine how much these companies will pay for power at new, massive data centers. They found that discounts granted by utilities to large tech firms can raise electricity tariffs for consumers. A 2024 report by the Virginia Legislature estimated that the average residential consumer in the state could pay an additional $37.50 per month in electricity costs attributable to data centers.

Projections indicate a significant increase in these centers, with BloombergNEF predicting that energy demand for data centers in the US will rise from 25 GW in 2024 to 106 GW in 2035.

The need for large volumes of water to cool equipment has also proven controversial, especially in drier regions where water supplies are already scarce.

According to McKinsey, by 2030 nearly $7 trillion will be invested worldwide in data center infrastructure by companies such as Meta, Google, and OpenAI – more than 40% of this investment in the United States – mainly to meet the enormous computing demands of AI. More than $4 trillion of this amount will be allocated to computing hardware, with the remainder invested in areas such as real estate and energy infrastructure.

Leaving aside the question of whether these levels of investment are realistic, growing opposition among Americans to data centers and the difficulty of generating additional energy at the pace required by technology companies help explain the accelerated investment in data centers in other parts of the world.

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