By Fairus Muhamad Darus and Dr Nik Azlin Nik Ariffin

Digital technology is often portrayed as clean, efficient, and almost invisible. Cloud computing, artificial intelligence, video streaming, and cashless transactions appear to exist in an intangible virtual realm, detached from physical constraints.

This perception, however, obscures a rapidly expanding and energy-intensive reality on the ground: data centres.

As their development accelerates, the environmental implications are becoming increasingly visible and warrant serious policy attention.

Data centres and the surge in energy demand

Data centres form the backbone of the modern digital economy. Every click, search query, and artificial intelligence computation relies on thousands of servers that require a stable electricity supply twenty-four hours a day.

According to the International Energy Agency, data centres accounted for around 1.5 per cent of global electricity consumption in 2024, a figure projected to rise sharply with the rapid expansion of artificial intelligence and digital automation.

In Malaysia, data centre growth is most visible in key hotspots such as Johor, the Klang Valley, and Penang, in line with national ambitions to position the country as a regional digital hub.

However, the substantial energy demand from these facilities places growing pressure on the national power grid, which still relies heavily on natural gas and coal.

Any increase in electricity consumption therefore carries direct implications for carbon emissions if the energy mix remains unchanged.

Within this context, the National Energy Transition Roadmap (NETR) serves as a critical policy reference.

The roadmap emphasises a gradual shift towards renewable energy and improved energy efficiency as foundations for future economic growth.

Without clear alignment, data centre development risks advancing alongside, but detached from, the country’s broader climate and decarbonisation agenda.

Cooling systems and the invisible carbon footprint

A significant proportion of data centre energy use is devoted not to computing itself, but to cooling.

Cooling can represent a substantial share of data centre energy use, with commonly cited estimates placing it in the 20-40 per cent range, depending on facility design, climate conditions, and operational practices.

In hot and humid countries such as Malaysia, cooling requirements are more intensive and continuous, further amplifying overall energy demand.

This reality underscores the need for more efficient design and operational strategies, consistent with the principles of the New Industrial Master Plan 2030 (NIMP 2030), which advocates the development of high-technology, low-carbon, and value-added industries.

Data centres constructed without stringent energy efficiency standards risk undermining national efforts to reduce industrial carbon intensity.

Water as a strategic resource under pressure

Beyond energy, water consumption by data centres has emerged as a growing concern.

Many facilities employ water-based cooling systems, and large data centres can consume water at a scale that reaches millions of litres per day, particularly under continuous high-load operation.

Although Malaysia is relatively water-rich, recurring supply disruptions caused by droughts, river pollution, and treatment capacity constraints highlight the vulnerability of the national water system.

As data centres expand in densely populated areas, industrial water demand may increasingly compete with domestic and agricultural needs.

Over the long term, this issue requires coordinated water resource planning and development approvals aligned with principles of resource security, as emphasised in the NETR.

Land use, urban heat, and ecosystem impacts

The construction of data centres requires large land areas and supporting infrastructure such as substations and backup generators.

In some locations, this development involves converting green or agricultural land into industrial zones.

Without sustainable spatial planning, such changes can result in the loss of natural water infiltration areas, intensified urban heat island effects, and disruption of local ecosystems.

NIMP 2030 highlights the importance of planned and integrated industrial development with environmental considerations.

Data centres should therefore not be viewed as environmentally neutral facilities, but rather as resource-intensive industrial developments that warrant transparent and comprehensive environmental impact assessments.

Electronic waste and recycling responsibility

Another frequently overlooked implication is electronic waste. Data centre servers have limited lifespans and must be replaced regularly, contributing to increasing volumes of electrical and electronic waste.

Electronic waste is a growing and regulated waste stream in Malaysia, and frequent hardware refresh cycles in large-scale digital infrastructure can add to the management burden if end-of-life pathways are not well governed.

Without effective recycling and disposal systems, such waste poses risks of environmental contamination through heavy metals and hazardous chemicals.

Responsible management of electronic waste should be embedded as a core requirement in data centre approval and operational processes, in line with the circular economy approach promoted under NIMP 2030.

Towards low-carbon data centres

Despite these challenges, the data centre industry also presents opportunities for transformation.

Many global technology companies have committed to renewable energy use and carbon neutrality targets. In Malaysia, mechanisms such as green power purchase agreements, rooftop solar installations, and energy-efficient building designs can be deployed to reduce the environmental footprint of data centres.

However, the effectiveness of these measures depends on consistent policy support.

Rigorous environmental impact assessments, transparent reporting of energy and water use, and incentives for low-carbon technologies must become standard practice rather than optional measures.

A policy choice, not a technical footnote

The rapid expansion of data centres is no longer a distant consequence of digitalisation; it is a present and accelerating reality.

What remains unresolved is whether this growth will be governed with foresight or allowed to evolve through fragmented approvals and short-term economic incentives. Digital infrastructure can no longer be treated as environmentally neutral.

It must be recognised as a strategic, resource-intensive industry that demands the same level of regulatory scrutiny as energy, water, and heavy manufacturing.

The National Energy Transition Roadmap and the New Industrial Master Plan 2030 provide Malaysia with a clear policy compass. The real test lies in enforcement and integration.

Energy sourcing, water efficiency, land use planning, and electronic waste management should be embedded as mandatory conditions in data centre licensing and expansion decisions.

Transparent disclosure of energy and water consumption, coupled with measurable decarbonisation targets, should move from voluntary commitments to regulatory expectations.

Malaysia’s ambition to position itself as a regional digital hub will ultimately be judged not only by investment inflows, but by governance quality.

A truly future-ready digital economy is one that internalises environmental costs rather than deferring them to future generations.

The question facing policymakers is no longer whether data centres should grow, but whether they will be allowed to grow responsibly.

-- BERNAMA

Fairus Muhamad Darus and Dr Nik Azlin Ariffin are Senior Lecturers at the Faculty of Applied Sciences, Universiti Teknologi MARA.