Australia is rapidly becoming a global hotspot for data centres, driven by the explosive growth of artificial intelligence (AI), cloud computing and digital services. While this boom presents economic opportunities, it also raises serious questions about energy, water and climate impacts that governments can no longer afford to ignore.
Without strong national regulation, coordination and best-practice standards, the rapid expansion of data centres risks increasing electricity prices, undermining Australia’s renewable energy transition, extending fossil fuel dependence and placing additional pressure on already scarce water resources.
The companies driving this growth—many of the world’s largest and most profitable technology corporations—must be required to fully fund the renewable energy, storage, transmission and water infrastructure needed to support their operations. Local communities should not be left carrying the costs or suffering the environmental consequences.
The Federal Government is currently considering new requirements for data centres and their social licence to operate, with an announcement expected in July. This is a critical moment. The decisions made now will shape whether Australia harnesses the benefits of the data centre boom while protecting communities and the environment, or whether we allow short-term commercial interests to dictate our energy and water future. We must write to federal and state MPs to respond to our demands.
Momentum is growing for stronger oversight. The Senate has established a parliamentary inquiry into AI data centres, led by Greens environment spokesperson Sarah Hanson-Young, to examine their enormous energy and water demands and impacts on local communities. Calling for a pause on further approvals until stronger safeguards are in place, Senator Hanson-Young and Senator David Pocock both recently stated:
“Until the necessary safeguards are in place and Australia’s resources are protected, approval and development must be paused.”
The concerns are well founded. The Climate Council’s 2026 report Clouded Future: Managing the Risks of the Data Centre Boom warns that if data centres consume a large share of Australia’s new renewable energy supply, there will be less available for homes, transport and industry. This could delay the closure of ageing coal-fired power stations, increase reliance on polluting gas and make it harder for Australia to meet its climate commitments while keeping energy affordable and reliable.
These issues are not just national—they are local.
In the Cities of Port Phillip and Melbourne three data centres have already been proposed for Fishermans Bend. Their development highlights the urgent need for state and local governments to establish clear policies addressing energy use, water consumption and climate impacts before approvals are granted. Local residents and communities deserve the opportunity to assess whether projects meet best-practice sustainability standards and genuinely contribute to the public interest.
Water is emerging as a particularly significant concern too. This month, Greater Western Water announced an agreement allowing a proposed data centre to use recycled water. While this may reduce pressure on drinking water supplies, important questions remain. How many times can recycled water be reused before discharge? What is the quality of water returned to the environment? What impacts could this have on waterways and ecosystems?
These concerns are explored in the recent report Hyperscale Data Centres and Victoria’s Water: Protecting a Public Resource for Communities and Rivers, released by the Concerned Waterways Alliance. The report highlights the need for greater transparency and stronger safeguards to ensure Victoria’s water resources are protected as demand from large-scale data centres continues to grow.
Australia is an attractive destination for data centre investment because of its available land, renewable energy potential and stable democracy and economic systems. Australia also seems to put a very low tax burden on international companies that operate from data centres located here, as discussed by Senator Pocock. However, those advantages should not be treated as a licence for unchecked expansion.
Most experts agree that online business and social activities and increased adoption of AI (Artificial Intelligence) technologies are increasingly leading to major job losses. Serious community discussion is needed to decide whether supporting this transition is good for the future of Australian people. Also, diverting substantial construction industry capacity to building data centres when we are in a housing crisis that many pundits say is partly because of construction industry capacity limitations is questionable. Finally, it is unclear why developers seem to prefer putting these data centres in urban, residential areas instead of industrial zones, or even better, in regional areas.
As citizens, communities and climate advocates, we must ensure governments manage this boom with their eyes wide open and in the interests of ordinary Australians. The challenge is not whether data centres should exist—it is whether they are developed responsibly and contribute fairly to the infrastructure they depend upon and lead to a better Australia.
If Australia gets this right, the data centre boom could help accelerate our clean energy future. If we get it wrong, it risks becoming another example of public resources being stretched to support private profit.
Now is the time for policy to catch up with technology and for governments to ensure that the interests of communities, climate and future generations come before the interests of Big Tech.
Pat Jessen, 24 June 2026