Carbon emissions from Australian data centres have jumped 16 per cent in a year, with the country’s largest operators more than doubling their outputs since the start of the decade.

New figures from the federal government’s Clean Energy Regulator (CER) show that while Australia’s overall direct ‘scope one’ emissions fell in 2024–2025, indirect ‘scope two’ emissions from data centres rose from almost 1.79 million tonnes of carbon dioxide equivalent (tCO2e) in 2023–2024 to about 2.0 million tCO2e in 2024–2025.

The near-16 per cent rise was largely driven by major operators Amazon, AirTrunk and CDC, each of which recorded annual scope two increases above 20 per cent.

Since 2020–2021, the three companies have reported combined increases of more than 100 per cent.

The surge comes as demand from AI and cloud providers fuels rapid expansion across Australia’s data centre sector.

After Australia ranked second globally for data centre investment in 2024, the Albanese government announced plans for “national data centre principles” to align growth with “overall national interests”, including sustainability.

The principles are expected to be finalised in coming weeks.

Lobby group weighs in

The data was published under CER’s National Greenhouse and Energy Reporting (NGER) scheme, which requires large corporations to report emissions annually.

On Tuesday, newly formed lobby group Data Centres Australia (DCA) pushed back on what it described as “confusion” around the latest findings.

DCA chief executive Belinda Dennett said it is 67 per cent “more energy efficient” to run compute from “purpose-built data centres” than on-premise servers.

Data Centres Australia CEO Belinda Dennet says data centres are more energy efficient than on-premise servers. Photo: Supplied

“While data centres have increasingly become more energy efficient in their operations, we are using more digital services which means more energy consumption to drive the compute,” said Dennett.

“The ongoing shift of workloads from on-premise servers to data centres, the ongoing uptake of cloud, and the new adoption of artificial intelligence by businesses and consumers means data centre customers are ‘ramping up’ – that is filling their data hall space with more operational servers.

“This means there is more energy use and therefore more scope two emissions.”

Tim Prosser, founder of advisory Sustainably Digital, said DCA’s response overlooked ‘scope three’ emissions, including the “embodied carbon” in IT hardware installed in data centres.

“Research indicates that roughly 80 per cent of greenhouse gas emissions for IT hardware occur during the manufacturing phase – before a server is ever turned on,” said Prosser.

DCA also said about 70 per cent of the sector’s energy use is offset in part through renewable Power Purchase Agreements (PPAs). Prosser, however, argued that “relying heavily on PPAs is a known weakness in cloud sustainability reporting”.

Tim Prosser, founder of advisory Sustainably Digital, says 80 per cent of emissions occur during the hardweare manufacturing phase. Photo: Supplied

“Offsetting emissions on paper does not negate the physical reality of drawing fossil-fuel-heavy power from the local grid to run compute tasks,” said Prosser.

DCA members include AirTrunk, Amazon Web Services and CDC.

Energy prices in focus

Iain MacGill, joint director at UNSW’s Centre for Energy and Environmental Markets, told Information Age that beyond “environmental implications”, Australians should be concerned about “energy price increases and increased network investment”.

The Clean Energy Finance Corporation (CEFC) recently forecast data centres could account for up to 11 per cent of Australia’s total electricity use by 2035, up from 1 to 2 per cent in December.

With NSW and Victoria drawing the most investor interest, CEFC warned that without new renewable generation and storage, data centre growth could lift NSW wholesale power prices by 26 per cent by 2035 and Victorian prices by 23 per cent.

Greens unimpressed

Greens senator David Shoebridge called the emissions rise a “catastrophic trend” and said the party was “deeply concerned industry is seeking to hide it”.

“We all know AI is driving this boom, taking up much of the capacity of new data centre builds across Australia and demanding further capacity, all without any requirement to show community benefit or to tell the truth about climate impact,” Shoebridge told Information Age.

“When big tech is given the green light for another energy draining data centre it’s not their billionaire backers who end up paying the price.

“That’s paid by locals with spiking power and water bills.

“It’s time to treat big tech as the extractive industry it is and regulate it accordingly.”

Research commissioned for DCA by consulting firm Mandala found 70 per cent of data centre energy demand is already linked to renewable sources.

MacGill said many experts argue new facilities should be “required to source their electricity from new renewables to avoid increasing emissions”.

While several major AI-driven companies have made such pledges, he said they face challenges rolling out renewables fast enough to “cover their new data centre loads”.

“There are also issues with network constraints between where they build renewables and where the data centres are located, and the question of whether they need to 'firm' these renewables so that they match data centre demand profiles,” said MacGill.

“Still, there are realistic ways to ensure new data centres are supplied by 100 per cent renewable energy if the industry is compelled to do them.

“It will however slow data centre deployment, something the key companies are loath to do.”