Experts are cautioning that the transition period before Australia’s first comprehensive datacentre regulations take effect may trigger a wave of hastily approved projects, locking in infrastructure that does not meet the environmental standards the government aims to impose.
The proposed rules, which the prime minister will put to national cabinet on Wednesday, would require new datacentres to build or contract renewable energy plants to offset their electricity consumption and to adopt technologies that minimise water use. The policy response follows mounting concern about the rapid expansion of energy-intensive AI computing clusters, which have already contributed to rising electricity demand in some regions.
Under the current planning framework, datacentre proposals can be approved at the state level without meeting federal sustainability benchmarks. Developers who gain approval in the next several weeks could potentially bypass the stricter federal requirements, which are expected to apply to all future projects once enacted.
“There is a real risk of a gold rush mentality as builders and AI firms try to get shovels in the ground before the new rules lock in,” said one expert familiar with the negotiations, who spoke on condition of anonymity. “If that happens, we may end up with a generation of datacentres that are less efficient than they could be, and that’s hard to undo.”
Environmental groups have called for a moratorium on new datacentre approvals until the federal regulations are in place. They argue that the current absence of binding standards allows developers to externalise the environmental costs of their operations.
The Australian Information Industry Association, which represents many technology companies, has urged the government to avoid overly prescriptive rules that could deter investment. The industry body argues that Australia is competing with other nations to attract AI infrastructure and that excessive regulation could push projects to countries with less stringent requirements.
If adopted, the regulations would mark a significant shift in Australian energy and planning policy, tying the growth of digital infrastructure directly to the nation’s renewable energy targets. The rules are also expected to include monitoring and reporting obligations to ensure compliance.
The national cabinet meeting on Wednesday is the culmination of months of consultation between the federal government, states and territories, and industry stakeholders. A final decision is expected by the end of the week.