Digital growth in APAC outpaces green policy

The Asia-Pacific region is fast becoming the engine room of the global digital economy. It hosts approximately 1,811 data centers to date, forecasted to grow by 17% across the region over the next five years. It is being driven by surging demand for cloud services, artificial intelligence, e-commerce and mobile connectivity across a rapidly digitizing population. But with data centers accounting for just over 1% of global energy consumption, the tension between digital transformation in the region and climate responsibilities is acute, and a policy reckoning is underway.

China is emerging as a case study in how to confront this dilemma head-on. In July 2024, President Xi Jinping set in motion bold green targets for its data centers to lower the average Power Usage Effectiveness (PUE) by 2025, increase the use of renewable energy by 10% each year and enforce new standards for energy and water efficiency (State Council of China). The impact of these goals has yet to be reported on, but their strategic ambition is clear: improve operational efficiency and align with global benchmarks to improve competitiveness in a global market that increasingly values sustainability.

The same cannot be said for all APAC countries, however. Regulatory lag is evident as private-sector infrastructure growth far outstrips policy. This is often because most power markets are government-led, which creates bureaucratic hurdles and slows the decision-making processes. This leads to policies often being reactive with governments imposing resource usage requirements as grid stresses emerge, not beforehand. Another challenge is that many APAC grids are dominated by government-led or monopolistic utilities, leading to centralized planning but sometimes slow adaptation and investment cycles.

Malaysia, for example, the region’s fastest-growing data center market, is attracting heavy investment thanks to its geography and power capacity. Yet this rapid expansion risks outpacing the nation’s environmental safeguards, particularly around energy diversification and water management. Indonesia has also emerged as a key destination for hyperscale facilities but lacks a unified regulatory framework to ensure energy-efficiency is optimized. India has shown encouraging signs of progress, with several states introducing incentives for green data center design, but national-level policy cohesion remains patchy.

Without a deliberate effort to strengthen regional standards, the long-term consequences may include stranded assets, increased stress on energy sources and emissions trajectories diverging enormously from national climate pledges.

Lessons from Europe and the push for policy alignment

A useful comparison lies in how Europe has approached the same challenge. The EU has adopted a top-down, standardized regulatory model that includes the EU Code of Conduct for Data Centres and public-private initiatives like the Climate Neutral Data Centre Pact. These initiatives set explicit energy efficiency requirements, carbon reduction targets and transparency obligations. 

Europe recognized early on that digitization and the growth of data infrastructure would have massive implications for energy use and carbon emissions. Countries like Sweden, the Netherlands, and Germany began noticing that data centers were consuming outsized portions of their national electricity — particularly given Europe's relatively high energy costs. This caused grid stress in certain regions and public backlash over land use, water consumption, and electricity prioritization. In tandem, it was setting itself bold legally binding climate commitments, subjecting all industries to rigorous emissions reductions.

Europe now treats data center sustainability as an extension of climate law, with data centers defined as “essential services” subject to environmental performance benchmarks. Europe and the US also operate far more interconnected, mature, and market-driven grids.  By contrast, APAC economies tend to use a more decentralized and incentive-led approach, driven by investor pressure, which is harder to enforce and results in inconsistencies. Power grids in APAC are often fragmented, less integrated, and in many countries, largely isolated from one another. There is limited cross-border electricity trade, and regional interconnections (like the ASEAN Power Grid) are still in early stages. Europe’s grid is highly integrated, allowing for significant cross-border electricity flows, which helps balance supply and demand and supports large-scale renewable integration. Though more difficult without the centralized governance system that Europe has, synchronization across the APAC region and shared modelling will lead to much greater efficiencies.

Closing the policy gap

Across the region, there’s growing recognition that if data centers are allowed to become energy sinks without policy safeguards, they could undermine national climate goals. If managed wisely, however, they could become powerful drivers of clean energy deployment and technological innovation. Thankfully, momentum is building. Singapore, for instance, has begun issuing conditional approvals for new data centers based on their environmental performance, while Thailand and Japan are gradually aligning national strategies to support greener digital infrastructure .

By setting out clear policy frameworks and incentivizing data center innovation— such as AI-optimized cooling systems or modular, low-carbon design—APAC could set a new global benchmark for sustainable digital infrastructure. This would not only future-proof the region’s tech economies but also strengthen their hand in global climate negotiations and ESG-conscious supply chains. Get this right, and Asia could lead the world in building a digital economy fit for a net-zero future. Get it wrong, and we will see crucial environmental targets missed at a massive cost for the region’s economy and - most importantly - for the planet.