Setting Data Center Standards
C40 Cities Leaders Sign Global Pact to Standardize Data Center Operations as Growth Strains Urban Resources
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Key Points
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Phoenix's pending data-center permit requests could double the city’s electricity demand if approved, highlighting the immediate grid pressure from rapid expansion.
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Melbourne’s data-center footprint is sizable and growing: about 50 major centres already operate, with projections that they could account for roughly 10% of local power demand by 2030 and up to 20% by 2040 in a city of 5.5 million, while using around 20 billion litres of water a year (about 4% of the city’s drinking supply).
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Data centers are often built in clusters near urban hubs to form ecosystems near the firms they serve, which can intensify localized pressure on land, energy, and housing markets.
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"Data centres are the biggest thing to hit the energy grid since air conditioning in the 1950s... where the rollout of air conditioning took decades, this is happening in a few short years," Melbourne Lord Mayor Nicholas Reece warned, underscoring how quickly the sector is reshaping urban energy demand.
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There is growing political pushback to incentives for data centers, with some states suspending tax breaks or considering moratoria as concerns about blackouts, rising electricity costs, and water use rise.
Forty mayors from four continents signed the Global Urban Data Centres Pact on June 23, 2026, setting the first international rules for how urban data centers must be planned and run. The pact, launched during London Climate Action Week and led by C40 Cities, requires clean energy use, water limits, and community benefits before cities approve new facilities, according to C40 Cities.
The stakes are enormous. About 1,700 data centers already operate across C40 member cities, and more than 40% growth is projected in 50 of those cities, AP reported. City leaders say the AI boom is pushing that expansion faster than any regulation can keep up — and they are determined to get ahead of it.
Phoenix and Melbourne Sound the Alarm First
The pact grew directly from warnings by Phoenix and Melbourne. Phoenix already has 225 existing or planned data centers. If all pending permits are approved, they would double the city's entire electricity demand, according to Reuters. Mayor Kate Gallego, also a C40 vice chair, pushed for strict water-recycling rules and zoning limits to protect the desert city's scarce resources.
Melbourne's numbers are just as stark. About 50 major data centers operate there now. They already consume roughly 20 billion litres of water per year — about 4% of the city's drinking supply. Power demand from data centers could hit 10% of Melbourne's total by 2030 and 20% by 2040, Reuters reported. Lord Mayor Nicholas Reece compared the speed of growth to the arrival of air conditioning. "Data centres are the biggest thing to hit the energy grid since air conditioning in the 1950s," he said. "Where the rollout of air conditioning took decades, this is happening in a few short years."
A "Race to the Bottom" Cities Are Trying to Stop
Before this pact, cities acted alone. Some offered tax breaks to attract tech investment. Others had no rules at all. That let companies shop for the most permissive city, threatening to move projects if local demands were too strict. C40 Managing Director Cassie Sutherland said the pact uses a "global mayoral voice" to set the conditions under which data centers are accepted, according to AP.
The pact creates a united front. A tech firm can no longer threaten to move from Phoenix to a neighboring city with lower standards. Rules will still adapt to local conditions, but the core requirements — clean energy, water efficiency, and community benefits — apply everywhere signatories are. C40 Executive Director Mark Watts called data centers "one of the hottest topics" for mayors today, Capacity reported.
Grids and Water Supplies Already Under Serious Strain
The pressure on infrastructure is not a future problem — it is happening now. Arizona's main utility, APS, noted that the state took 100 years to build its current grid but now needs to double that capacity in just four to five years to meet data center requests, according to Axios. Some states have already suspended tax breaks for data centers. Others are weighing full moratoria as fears of blackouts and rising electricity bills grow.
Public support for more data centers is fragile. Only 26% of Americans and 30% of Britons support new construction, citing worries about utility costs and water use, The Globe and Mail reported. By contrast, support runs much higher in Nigeria at 74% and India at 65%, where residents see the infrastructure as an economic opportunity rather than a burden.
What Cities Get in Return for Saying Yes
The pact is not a ban. It is a bargain. Data centers that meet the standards — such as using 100% renewable energy or hitting a 30% water recycling threshold — can get faster permit approvals, according to C40 Cities. London Mayor Sadiq Khan pushed for data centers to feed waste heat into local heating networks, which could lower residential heating costs across the city.
Signatories plan to present the pact as a global model at the COP31 Climate Summit in November 2026, BusinessGreen reported. The goal is to show that cities can absorb the AI data center boom without sacrificing housing, water, or clean energy targets — but only if they set the rules before the investment arrives, not after.
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