Evaluating Data Centers Through the Lens of Environmental Economics

As artificial intelligence and cloud computing continue to drive unprecedented demand for hyperscale data centers, communities across the Southeast are being asked to evaluate billion-dollar development proposals. While these projects often promise significant tax revenue and economic investment, they can also create costs that traditional economic impact studies rarely consider.

Key Environmental Consulting developed a comprehensive cost-benefit framework to evaluate whether the public benefits of a proposed hyperscale data center outweigh the environmental and economic costs imposed on surrounding communities.

Why this Research Matters

Communities considering large-scale data center projects deserve more than projections of jobs and tax revenue.

Decision-makers should also understand:

• Electricity demand and grid impacts

• Water consumption and infrastructure needs

• Climate impacts

• Effects on nearby residents

• Environmental justice considerations

• Distribution of costs versus benefits

  
  

Traditional fiscal analyses often overlook these external costs.

Our Approach

Using principles from environmental economics, we estimated four categories of external costs:

Climate Impacts

Estimated greenhouse gas emissions associated with electricity consumption and monetized using the EPA's Social Cost of Carbon.

Electricity Costs

Potential infrastructure utility costs that could ultimately be borne by residential customers.

Water Resources

Projected cooling-water demand and associated impacts on local water infrastructure and watershed resources.

Community Impacts

Potential effects on nearby residential property values using established hedonic pricing methods from environmental economics.

This framework incorporates low-, medium-, and high-impact scenarios to reflect uncertainty rather than relying on a single estimate.

Key Findings

Our analysis found that:

• Climate-related costs represented the largest share of total external costs.

• Water and utility infrastructure impacts could become significant depending on operating conditions.

• Traditional fiscal analyses may underestimate the full public costs of hyperscale data centers.

• Incorporating environmental externalities provides a more complete picture for local decision-makers.

  
  

While every project is unique, this analysis demonstrates why communities should evaluate both direct fiscal benefits and indirect public costs before making long-term infrastructure decisions.

How we can Help

Key Environmental Consulting can provide independent analyses for:

• Counties evaluating data center proposals

• Local governments

• Economic development organizations

• Community groups

• Environmental justice organizations

• Utilities

• Planning agencies

• Attorneys involved in land use and environmental matters

  
  

Services include:

• Cost-benefit analysis

• Environmental justice assessments

• Infrastructure impact analysis

• GIS and spatial analysis

• Community impact assessments

• Economic impact review

• Decision-support tools for elected officials

Contact us for more details about our Cost-Benefit framework: info@keyenvi.com