Look Forward — 2 December 2025
Rapid data center growth faces sustainability challenges: Increasing emissions and water stress
Even if data center operators reduce their own environmental footprint, the exponential growth of the industry could still lead to higher emissions and water stress in regions where data centers are located.
By Dan Thompson, Matt Macfarland, Terry Ellis, and Victor Hazell Laudisio
Highlights
Global data center power demand is projected to nearly double between 2024 and 2030. Data center companies are leading clean power procurement efforts to meet their power needs and climate ambitions. But fast growth points to challenges ahead, with broader impacts — in the US, we expect emission reductions in the power grid to slow, and emissions could ultimately grow compared to previous forecasts due to rapid data center expansion.
We also estimate that 43% of data centers globally are exposed to high water stress in the 2020s. While adaptation and resilience measures are being incorporated into data center designs for areas most affected by water stress, water management programs are not yet widespread across the industry in North America and Europe, according to 2024 S&P Global Corporate Sustainability Assessment (CSA) data.
Data center operators’ plans must carefully balance high growth expectations and power demand, with site-specific solutions required, such as using recycled water or treated wastewater to reduce potable water use. Reputational risks could be heightened if stakeholders feel spillover impacts.
S&P Global 451 Research projects that global data center power demand will nearly double between 2024 and 2030. In addition, research from S&P Global Ratings and S&P Global Energy shows that many existing data centers will be in water-stressed regions. Addressing these intertwined challenges — escalating energy needs, rising emissions and water scarcity — requires a broader ecosystem-level analysis. Can the industry navigate this complex interplay of factors while sustaining rapid growth?
Accelerating data center rollout will increase GHG emissions
The explosive growth of AI in the last three years means that data centers, and information technology more generally, represent notable industries where power demand — and associated greenhouse gas emissions — are on the rise. See Sustainability Insights: Global Company Emissions Grow for more. Globally, the pace of data center rollout is accelerating, from a built-out capacity of 200 GW in 2024 to a projected 382 GW by 2030, according to S&P Global Market Intelligence 451 Research estimates. The US, already the largest market accounting for about 40%% of global data center power demand, is expected to grow its share to 45% in 2030.
The largest tech companies have made ambitious sustainability commitments, but the picture is not uniform across the sector. Major tech firms have made net-zero commitments, including companies leading the AI charge such as Microsoft, Alphabet and Meta. However, some have also recognized more recently that meeting those commitments is getting harder. In Google’s 2025 sustainability report, for example, the company described its net-zero goal as a “climate moonshot” and admitted that scaling carbon-free energy technology by 2030 — the target year of its net-zero goal — will be “very difficult.” It also said AI-related energy demand growth has made its future emissions trajectory difficult to project. In Microsoft’s latest sustainability report, it acknowledged that its total emissions have increased about 23% from its 2020 baseline due to factors including AI expansion and said that in 2024, it procured more carbon removal than all previous years combined. Across the wider industry, data center sustainability commitments vary significantly, and net-zero ambitions are not a given. Data from the 2024 S&P Global CSA shows that 38% of assessed companies with data center operations lack a net-zero commitment.
Hyperscalers are most active in securing clean power to meet growing needs, but face headwinds. Those companies led clean energy procurement efforts in 2024, according to S&P Global Energy data, with over 30 GW of deals contracted predominantly through direct third-party power purchase agreements. This significantly outpaces other industries — the manufacturing sector came in a distant second with 10 GW of clean energy procurement, followed by the services sector with 6 GW. That pattern has continued with the hyperscalers each accounting for at least 1 GW of clean energy procurement through 2025 to date. But as noted above, several have also acknowledged the increasing difficulty of meeting their decarbonization goals.
Meeting data centers’ increased power demand in a timely manner will require leveraging all sources of power, which could pressure tech companies’ clean power targets. Changes in US policy, including the recently passed One Big Beautiful Bill Act, are spurring stakeholders to start construction on clean energy projects before key tax credits expire. However, given challenges to deploying new capacity, including permitting and interconnection constraints, we expect much of the increased demand from data centers will be met, in the near term, by increased utilization of existing thermal capacity (both coal and gas) alongside new gas and renewable resources. See Navigating the US data center power crunch: On-site solutions offer a faster path to power for more.
Emissions could increase even if hyperscalers and other data center companies meet their pledges. The relatively limited supply of new renewable projects means that total emissions across the broader energy system — including other businesses, communities and consumers — are likely to increase. This is because data center customers secure these renewable supplies instead of other potential customers, who will then continue to procure fossil fuel power supply, leading to higher emissions overall. That means that tech companies’ corporate reporting can show relatively low impact (including Scope 2 emissions), but on a larger scale, emissions could increase even if other sources of demand remain constant. The cascading impact could also make it more challenging for other stakeholders such as utilities or governments to meet their own climate targets.
As a result, we now project higher US power sector emissions compared to forecasts in 2023, before the AI boom. Emission reductions will be less significant than previously expected, and emissions could even grow compared to today in an unconstrained data center deployment scenario. The net change in emissions between forecasts prior to the data center boom and our latest forecasts could be as high as 200 million to 250 million metric tons of CO2 equivalent per year by 2030, based on S&P Global Energy’s forecasts, as renewable deployment struggles to keep up with demand. In a scenario where data center growth is not constrained by availability of grid-supplied power, emissions could be as high as 400 mmtCO2 e per year more than previously forecast.
Power and water — a consumption challenge
Data centers generate heat through power use, and their operations must include cooling. Water-based cooling is among the least expensive methods, but the amount of water consumed is significant. If data center water usage exceeds available quantities, areas become water stressed, affecting domestic, industrial and agricultural stakeholders. There are alternatives to water-based cooling, but they entail tradeoffs. For example, air-cooling systems do not use water but consume more energy. No single optimal solution exists, and each facility must account for location-based factors to limit impacts on water and emissions.
Our research shows that 43% of data centers globally are exposed to high water stress in the 2020s, though this varies greatly by region. The US and China, global leaders in data centers by power demand, exhibit divergent levels of water stress exposure. Approximately 60% of China's assets are exposed to high water stress in the 2020s, versus 38% of US assets.
Data center water stress exposure in the US is concentrated in the Midwest and the West. Arizona, California, Colorado, Nevada, Nebraska and Wyoming face higher stress. These states represent around 15.5% of US data center power demand and are likely to remain the most vulnerable through the 2050s, potentially presenting some constraints on development in the long term.
Data centers’ water stress mitigation practices and consumption trends
Given the extent of growth, the US will likely double its water footprint for cooling. University of California researchers estimated that US data center water usage will likely rise to 150 million cubic meters by 2028 from an estimated 70 million cubic meters in 2023. Most of that is freshwater, as the use of recycled “greywater” for cooling is currently limited. Despite such an increase, when comparing the data center industry's historical and projected water-cooling consumption to other industries, the footprint should remain limited. That said, the industry may need to take action if it continues operating in the areas of greatest water stress. Some data center developments, such as Amazon’s Project Blue in Tucson, Arizona, have been rejected by local city councils due to water and other concerns. Community pushback regarding data centers’ impacts on water availability and electricity prices could become increasingly commonplace.
In areas subject to water stress, new facility designs are incorporating adaptation and resilience measures as part of comprehensive data center sustainability strategies. These measures include sourcing water from lower-impact supplies such as recycled water or treated wastewater, which can shift demand away from potable water. For example, Meta’s Gallatin, Tennessee, data center uses 100% reclaimed municipal wastewater. Existing data centers have used various methods to adapt to high water stress, but retrofitting entirely new cooling systems is operationally disruptive and often cost-prohibitive. Data center operators have introduced alternative water supplies, such as municipal greywater or adopted recycled water loops. Another option has been to run data centers at higher ambient temperatures to reduce cooling demand or leverage optimization software to decrease water usage.
Some operators are setting water management programs and targets. Google reported that its water replenishment rates were at 64% in 2024, aiming for 120% by 2030. While individual companies may make strides toward mitigating their water use, water management programs are not yet widespread across the data center industry in North America or Europe. Furthermore, replenishment projects are often distant from consumption sites, which means they do not always alleviate water stress. According to 2024 CSA data, water management programs are near-ubiquitous for Asia-Pacific, where 84% of operators in our analysis are actively seeking to reduce water consumption. However, the share in North America and Europe is significantly lower, at 53% and 38%, respectively.
Based on 2024 CSA data, we observe that the increase in data center water usage predated the recent AI surge. Our sample consists of 103 companies that own or operate data centers and four years of water use data assessed in the 2024 CSA. Between 2020 and 2023, Asia-Pacific operators experienced the most significant increase, with a 50% rise in consumption (25 million cubic meters in 2023, from 17 million in 2020), followed by North America's 37% increase (50 million cubic meters in 2023, from 36 million in 2020). European operators exhibited a slight decrease of 3%.
Looking forward
As the data center industry experiences unprecedented growth, operators face increasing scrutiny to mitigate the climate and environmental impact of their operations. In the US, the industry has encountered some headwinds in securing renewable power sources, and some states have significant exposure to water stress. The industry will need improved data center sustainability practices to mitigate the environmental impact of its growth. However, we expect that systemic effects will still emerge, even if individual entities achieve their decarbonization and water stewardship goals.
Contributors: Alessandro Badinotti, Patrick Luckow, and Roman Kramarchuk
This article was authored by a cross-section of representatives from S&P Global and in certain circumstances external guest authors. The views expressed are those of the authors and do not necessarily reflect the views or positions of any entities they represent and are not necessarily reflected in the products and services those entities offer. This research is a publication of S&P Global and does not comment on current or future credit ratings or credit rating methodologies.
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