Keeping pace with Australia’s data centre laws
Regulations on data centre developments are changing across the country and environmental due diligence is now more important than ever.
As demand for AI computing and cloud services surges, data centres are becoming one of the most active development sectors across the globe.
Large-scale digital facilities present an opportunity for incredible economic growth.
However, without the right environmental and planning safeguards, the benefits of new data infrastructure could be overshadowed by adverse impacts to our environment and our water security.
In response, the federal, state and territory governments are overhauling the regulations on data centre development – and developers face more stringent obligations for planning, land, water and energy access and environmental due diligence.
These laws are changing very quickly, and many proponents are left uncertain about what their obligations are, when these new laws will take effect, if and how existing projects will be affected, and exactly what they need to do to obtain planning approvals.
To answer all these questions, we brought all our experts together to take a deep dive into this regulatory landscape through a series five articles, each focusing on one of five of the key environmental and health and safety considerations shaping data centre planning approvals in Australia today.
In this first piece, we will outline those key pillars and take you through all the news to date, including what has already changed and what changes we can expect in the future.
Where are we now?
In March 2026, The Department of Industry, Science and Resources published its first formal guidance, Expectations of data centres and AI infrastructure developers, which set out non-binding expectations for how new and expanded facilities should manage energy, water and community impacts. Then, on 15 July, the Federal Government announced that it would introduce dedicated AI laws and opened consultation to inform the design of nationally consistent AI standards giving effect to that commitment on 17 September.
In conjunction, the Australian Energy Market Commission (AEMC) provided advice to the Energy and Climate Change Ministerial Council (ECMC) on regulatory pathways that would require data centres to fully offset their electricity demand, through investment in new renewable generation and by demonstrating firmed capacity. At its July 2026 meeting, the ECMC agreed to progress these arrangements, with Queensland and the Northern Territory dissenting. Related changes to the National Electricity Rules were scheduled for ECMC consideration in September 2026.
Separately, Federal Minster for Energy, Chris Bowen, lodged two rule change requests with the AEMC to amend the National Electricity Rules so that data centres contribute to the network costs their connections cause or accelerate, rather than those costs being recovered from existing electricity consumers.
On 26 August, National Cabinet endorsed the development of nationally consistent mandatory standards for large data centres, covering energy, water and land use, with Commonwealth legislation targeted for early 2027.
States have since introduced their own measures ahead of that legislation. New South Wales released the Electricity Infrastructure Investment Amendment Bill 2026, which would give the state energy minister powers to control grid access and require data centres to pay for network infrastructure. On 22 September, Victoria imposed the strictest state-based data centre rules in the country under its Sustainable Data Centre Action Plan, which requires new facilities to source their own renewable energy and storage, maintain a 150m buffer from residential buildings, and use recycled or non-drinking water for cooling.
On 26 September, the Commonwealth opened formal consultation on a tiered national AI infrastructure standard. Under the proposed model, facilities below 30MW of electricity connection capacity would be excluded from the standard, facilities between 30MW and 100MW would face baseline requirements, and facilities above 100MW, or with a cumulative portfolio equivalent of 150MW, would face more substantial requirements. Submissions closed on 9 October 2026.
While much of this legislation is yet to take enforceable effect, planning authorities and regulators are already applying a level of environmental scrutiny that goes well beyond a standard commercial or industrial development. For proponents, understanding these requirements early is the difference between a smooth approvals pathway and a costly, drawn-out one.
Air quality
While data centres currently draw most of their power from the grid, nearly all rely on large banks of diesel backup generators to guarantee uptime during outages. These generators are increasingly the focus of air quality assessment requirements in planning approvals, with regulators asking proponents to model the emission of combustion products and assess against state air quality criteria. In precincts where data centres are clustering, proponents are also being asked to account for the cumulative impact of nearby facilities as well as their own.
Under Victoria’s new legislation, proponents are required to restrict back-up diesel generation to emergencies and mandatory testing, deploy best-available technology, continuously monitor and report runtime/emissions and mitigate residual greenhouse gas/air quality impacts through appropriate crediting.
Getting the air quality assessment right, and understanding how backup power generation will be tested, operated and mitigated, is now a core part of any data centre approval.
Water sustainability
Cooling is by far the most water-intensive part of a data centre’s operation, and water use has become a headline environmental issue for the sector nationally.
In March 2026, the Federal Government released its Expectations of Data Centres and AI Infrastructure Developers, with water use singled out as one of five national expectations shaping how developments are assessed and approved. In Victoria, proponents are expected to engage early with water utilities, use efficient cooling technologies, consider non-potable and recycled water sources, build in drought resilience, and report transparently on water use and efficiency. States are now building on this: NSW’s own Data Centre Guidelines go further, setting specific design targets for both power and water usage effectiveness, with ‘Water Usage Effectiveness’ emerging as a benchmark metric alongside ‘Power Usage Effectiveness’, the efficiency measure already well established across the sector. Proposals that cannot show genuine engagement with water utilities and a credible water strategy at an early stage are facing greater scrutiny and delay. (We should include a link to our other data centre article about water sustainability).
Greenhouse gas emissions inventory and compliance
As data centres consume a bigger share of national electricity demand, emissions accounting is becoming a genuine point of competitive differentiation, not just a compliance exercise. Developers and operators are increasingly required to prepare robust greenhouse gas emissions inventories covering both direct emissions (including the same backup generator activity discussed above) and indirect emissions from grid electricity consumption, and to demonstrate a credible pathway toward emissions reduction through renewable procurement or offset commitments. As reporting obligations under Australia’s evolving climate disclosure and NABERS frameworks continue to develop, a defensible, well-documented emissions inventory is fast becoming a practical necessity for approval and ongoing compliance, and can be a genuine selling point to investors and government customers alike.
Health and safety
Data centres present a distinct occupational and community health and safety profile: extensive diesel fuel storage, large lithium-ion or lead-acid battery banks for uninterruptible power supply, and refrigerant-based cooling systems. Noise impacts in residential neighbourhoods also need to be considered.
Each carries its own handling, storage and emergency response obligations, and increasingly, its own approvals conditions. A robust health and safety approach covers hazardous materials management, emergency planning and integration with site design from the outset. Regulators expect it, and it is far more effective and less costly when built in early rather than retrofitted after construction. (We should include a link to our other data centre article about health and safety).
Site due diligence
Data centres are large, capital-intensive facilities, and site selection carries real environmental risk. Contaminated land, groundwater conditions, historical site use and proximity to sensitive receptors can all materially affect feasibility, cost and approval timeframes. In Victoria, for example, previous activities on a site such as heavy industry, chemical use or fuel storage can trigger a requirement for a contamination assessment under the state’s planning provisions, regardless of the land’s intended new use. Data centres themselves, with their substantial diesel fuel storage, can also become a contamination consideration for that site in the future. Thorough environmental due diligence at the site selection and acquisition stage, well before design and planning submissions are finalised, allows developers to identify constraints early, price risk accurately and avoid costly surprises later in the approvals process.
PJRA has extensive experience delivering air quality assessments, health and safety advice, water sustainability planning, greenhouse gas emissions inventories and site due diligence for developers operating in complex, highly regulated sectors. As the data centre sector continues its rapid growth across Australia, we are well placed to help proponents navigate these environmental requirements with confidence, from early feasibility through to planning approval and ongoing compliance.
If you are planning, acquiring or operating a data centre and would like to discuss how we can assist, we would welcome the opportunity to talk.