The EU imposes a “green label” on energy-hungry data centers

Translated by Angela Simoncini

The growth of artificial intelligence is increasing demand for digital infrastructure and, consequently, for energy and water. The European Commission is working on a common rating scale to make data center impact measurable.

Every request sent to an artificial intelligence model, every streaming video, every digital transaction or cloud service goes through a physical infrastructure. Behind the seemingly immaterial digital economy are buildings, servers, cooling systems, network equipment, and electrical systems, all designed to run continuously.

These are data centers, key infrastructure for the digital economy and for technology development, such as cloud computing, 5G, the Internet of Things, and artificial intelligence. However, they require large amounts of energy to function properly and, in some cooling systems, water too. The growth in computing capacity is therefore bringing what has until now been a predominantly technical issue into the debate on European energy policy.

According to the European Commission, data centers could represent more than 3% of EU total energy demand by 2030. At the same time, the EU aims to strengthen its computing capacity and digital infrastructure, which are key to European competitiveness and technological sovereignty. Therefore, it is essential to balance the digital economy with the availability of energy, water, and infrastructure.

In this context, the Commission’s new initiative comes into play: to make the environmental performance of data centers more measurable, comparable, and transparent.

From monitoring to European rating

The new rating system represents the next step in a process already initiated by the EU. The Energy Efficiency Directive has introduced data collection and reporting obligations on energy performance and data center sustainability. In 2024, the Commission adopted a European database and defined common sustainability indicators for measurement.

The next step is to use this information to build a common European rating system.

The European proposal regards data centers with installed IT power demand of 500 kW or more. For data centers below this threshold, participation will be voluntary. The rating should be generated automatically by the European database on the basis of data reported by operators and updated annually. The first labels should be released starting August 15, 2027, after the European Parliament and the Council finalize the scrutiny period.

However, the system would not be a simple “green label”. The proposal outlines an environmental transparency sheet that will use, for some indicators, a score from A to G. It will also provide quantitative and qualitative information on how centers function.

These indicators include Power Usage Effectiveness (PUE), which measures infrastructure energy efficiency, and Water Usage Effectiveness (WUE), which addresses water use. The report should also detail the energy sources used, including on-site renewable energy, renewable energy purchase agreements, guarantees of origin, and nuclear energy.

The report should also consider the data center’s contribution to grid flexibility and its ability to recover heat generated by the servers.

What is PUE?

Power Usage Effectiveness measures the total energy a data center uses compared with the energy used by IT equipment. The closer the value is to 1, the more efficient the infrastructure.

When efficiency becomes a territorial issue

Measuring data center efficiency means going beyond the single building. Advanced computing systems require high-capacity infrastructure and adequate cooling, while operational continuity requires an extremely reliable power supply and backup systems. Some centers may also need specific electrical substations.

Demand, therefore, is not just about how much energy a data center consumes, but also where it is built, which grid supplies it, and how it fits into the local energy system.

A report by Padua University, with a contribution from WWF Italy, examines the growth of data centers’ electricity demand today and in the future in Italy, linking it to the availability of renewable sources and other sustainability factors, including water, soil, and emissions.

This is a key issue in Italy, as it enters the new European geography of data centers. According to an analysis published by CorCom, Italy and other southern European states are attracting new investment, while power availability and grid connections remain key infrastructure issues.

In this scenario, one factor complicates the idea of a common European metric: the conditions under which data centers are likely to vary considerably from one area to another.

Climate, water availability, electricity grid structure, and the presence of district-heating infrastructure could vary significantly from one region to another. The same energy or water performance could mean different things depending on the context.

This is one of the issues raised in the debate on the new rating. A Latham & Watkins analysis notes doubts from some operators about the indicator’s ability to indicate differences across operational environments, particularly regarding water usage. In this regard, the European proposal requires the data to be accompanied by contextual information on national climatic conditions.

Therefore, the goal is to develop common criteria without ignoring territorial differences.

From water to heat: efficiency as circular economy

The same logic applies to the heat servers produce. The equipment’s continuous operation generates heat that cooling systems must dissipate. Recovering it and using it for district heating can turn a by-product of digital activity into a resource.

The Commission estimates that reusing around half of the total waste heat produced by European data centers could meet the heating demand of around four million homes.

Here too, however, efficiency depends on local conditions. Recovering waste heat requires infrastructure to transport it, as well as sufficient heat demand. A data center located in a northern region with a well-developed district-heating network therefore operates under very different conditions from one located in an area with higher temperatures and lower heating demand.

The sustainability of digital infrastructure thus involves energy, water, networks, and spatial planning.

The problem with existing data centers

Another issue regards the difference between new centers and already operational ones.

Newly built data centers can be designed to incorporate more efficient cooling, power supply, and energy recovery systems right from the start. Adapting existing facilities, by contrast, may require more complex work.

Retrofit, however, can provide an alternative to fully replacing existing installations. In addition to the economic and technical costs of new construction, the embodied carbon associated with constructing new buildings and using construction materials must also be taken into account.

Efficiency is therefore not necessarily synonymous with replacement: in some cases, upgrading existing infrastructure may offer an alternative to building a new facility.

This is also why the European proposal provides for updating the rating scheme over time. The first review is scheduled by the end of 2028, followed by reviews every three years; these may introduce additional environmental indicators and update the rating scales and thresholds.

From rating to minimum standards

However, transparency is just the beginning of the European plan.

On 21 September 2026, the Commission launched a 12-week public consultation on possible minimum performance standards for data centers. The consultation will remain open until 14 December 2026 and will contribute to the preparation of a new legislative proposal in the second quarter of 2027.

It is important to distinguish what has been defined from what still needs discussion. In fact, the final thresholds for the minimum standards have not yet been set.

The aim of the consultation is to identify requirements capable of improving the sector’s performance, taking various aspects into account: energy consumption, water use, heat recovery and grid integration.

The European approach therefore unfolds on two distinct but linked levels: on the one hand, making the performance of data centers transparent and comparable; on the other, assessing whether and which minimum requirements should be made mandatory.

The dual transition put to the test by resource constraints

The case of data centers highlights one of the central issues of Europe’s transformation: the digital transition and the energy-environmental transition must take place within the same physical space and depend, at least in part, on the same resources.

The EU regards the expansion of digital infrastructure as vital to its competitiveness and technological sovereignty. At the same time, their growth may increase demand for electricity and put pressure on local resources and networks.

The new rating does not resolve this balancing act, nor is it designed to do so. Its immediate objective is more limited: to make performance metrics measurable and comparable, metrics that until now have remained largely within the technical realm of digital infrastructure.

It is also a significant step in terms of governance. Determining which indicators to measure, what information to make public, and which standards, if any, to impose means, in fact, defining the conditions under which the growth of digital infrastructure can develop within the European market.

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