Digital, cloud, and AI transformations are creating new offerings and business models. Fast-growing spaces and ecosystems are emerging at the intersection of existing industries. These transformations have been linked to a range of benefits for individuals, organizations, and societies. At the same time, there have been calls to address their environmental impact. A key example is the significant increase in energy consumption. Other developments include increased water use and the extraction of scarce minerals to support the cooling and constant renewal of the digital infrastructure that underpins these transformations.

Although environmental consequences are now on legislators’ radar, the challenge of targeted and effective regulation in the digital age is significant. Regulators often lack the skills and resources to effectively regulate and monitor the rapid and ongoing changes associated with digital and AI transformations. More participatory governance arrangements are needed, in which regulators engage in systematic dialogue with self-regulatory initiatives from the digital sector.

However, many digital fields are fragmented and still maturing. This can impede the collective action necessary for broader and more detailed self-regulatory initiatives to emerge. For instance, industry coordinating organizations are still inexperienced and may only represent firms from specific networks.

This Advisor introduces the Climate Neutral Data Centre Pact (CNDCP), which brought together a diverse group of data center operators to collaborate with the European Commission to limit the negative environmental impact of data centers.¹

CNDCP

The CNDCP, which was set up in close collaboration with the European Commission, pledged to achieve climate neutrality by 2030. Frans Timmermans, former executive VP of the European Commission for the European Green Deal, explicitly expressed his support:

Today’s pledge from important parts of the data industry constitutes a promise to society and offers a welcome first step toward achieving our common ambitions for a smart and sustainable future.

Pact members have committed to the European Green Deal, achieving greenhouse gas reductions that come with climate legislation, and leveraging technology to contribute to the ambitious goal of making Europe climate-neutral by 2050.

As is often the case in industry self-regulation, increased attention to sector regulation at the European level was an important trigger for the pact. In 2019, the newly installed von der Leyen European Commission administration outlined an ambitious climate agenda that could lead to stricter regulation for data center operators. Although the field was not against regulation, there were concerns that new legislation would not be well adapted to the day-to-day operations of data centers. Data center operators wished to engage in further dialogue with the European Commission, and to do this more collectively, the pact was launched at the beginning of 2021.

CNDCP Focal Areas

The pact comes with target setting, monitoring, and focal points for collaboration with legislators in several areas:

• Energy efficiency. Digital services will continue to grow, but the impact of this growth on energy consumption will be determined by the pace of energy-efficiency gains. The pact commits to high standards of energy efficiency. Legislators are urged to reduce administrative barriers and facilitate cooperation toward more efficient information and communications technology (ICT) systems.

• Clean energy. The members of the pact are committed to meeting a significant proportion of the electricity needs of data centers with renewable energy. Members emphasize that the availability of renewable energy is a critical factor in realizing this goal.

• Water. Many data center operators use water for cooling. Recognizing that water is becoming scarce, the pact sets standards for water conservation.

• Circular economy. Data center operators plan to participate in the circular economy, an economic model that features prominently on political, governmental, and business agendas, particularly in Europe. The circular economy promotes sharing, lending, reusing, repairing, upgrading, and recycling in a closed-loop system that aims to maintain the maximum utility and value of products, components, and materials in production and consumption. Pact members are committed to establishing, normalizing, and advancing circular economy business models and practices. The focus is on repairing and reusing equipment to reduce consumption. In this area, the pact calls on the EU to support policy frameworks that focus on and promote circular methods.

• Circular energy. Pact members agreed to explore the recovery and reuse of heat from new data centers. Heat recovery includes circular energy systems that use heat from a facility as a sustainable source for homes and buildings. Recovery can reduce emissions by displacing other energy sources used for heating and play a role in making Europe climate-neutral by 2050. However, optimizing heat recovery requires a policy framework that values the environmental benefits of recovered heat and reduces regulatory barriers to developing these projects.

• Reporting/governance. To increase transparency and support the quality of self-regulation, the pact will meet with the European Commission twice annually to review its status. Furthermore, in its second year, an audit framework was developed, and participants are required to certify adherence.

To focus efforts, some targets (e.g., the ones for energy efficiency) were set right after the pact’s initiation. Others, such as those on water use, were defined later or are still under development, including circular economy and circular energy. 

Note

¹The information for this article largely comes from CNDCP archival data, including interviews with pact insiders and observers. I am grateful to pact insider Ben Maynard for acting as a sounding board during the writing of this article.

[For more from the author on this topic, see: “Establishing Collective Environmental Self-Regulation in Fragmented Digital Spaces.”]