Forty mayors from around the world have endorsed a pact aimed at establishing conditions for data center development in their cities, signaling growing concern about the fiscal and infrastructure costs of unchecked expansion in metropolitan areas.
The pact, launched Tuesday during London Climate Action Week by C40 Cities—an alliance of nearly 100 cities—reflects mounting pressure from local officials struggling to balance economic growth with the operational demands that data centers place on municipal resources. The initiative represents an attempt by city leaders to reassert local control over development that has increasingly strained electricity grids, water supplies, and land availability.
The Infrastructure Challenge
Data center development is expected to grow by over 40% in 50 of C40's member cities. About 1,700 data centers are already located within the network's urban areas, with projections indicating substantial expansion ahead. The mayors of Phoenix and Melbourne, Australia, initially raised the alarm about data centers consuming massive quantities of electricity and water while competing with housing developers for available land—concerns that proved universal across regions.
Andrew Batson, global head of data center research at JLL, explained that data centers cluster in metropolitan areas to be near companies requiring instantaneous artificial intelligence responses and close to business operations. Major technology firms deliberately locate facilities in cities rather than purely in rural areas for cost reasons, creating ecosystem effects that outweigh land expense considerations.
Phoenix exemplifies the scale of the challenge. The city ranks in the top 10 data center markets in North America, with pending permit requests that would double electricity demand if all proposed facilities were constructed. Developers are attracted to Phoenix for its reliable power infrastructure and predictable weather patterns—precisely the factors that make the city vulnerable to grid strain.
Melbourne faces equally acute pressures. Lord Mayor Nicholas Reece warned that if the city follows through on all data center plans, annual water consumption could reach 20 billion liters—approximately 4% of Melbourne's drinking water supply. This demand arrives as the water supply already faces strain from population growth, prolonged dry periods, and climate-driven extreme heat.
The Pact's Framework
Cassie Sutherland, a managing director at C40, noted that challenges proved consistent across every global region, prompting mayors to unite around conditions for accepting data center development. The pact establishes standards requiring urban data centers to be built on abandoned or underutilized land, powered by renewable energy with battery storage, and designed to minimize water use, emissions, and waste heat. Developments must also create jobs, source local goods and services, fund their own infrastructure upgrades, and incorporate community feedback.
About half the participating mayors represent U.S. cities, including Seattle, Palo Alto, Riverside, Phoenix, Albuquerque, Beverly, Lincoln, Chicago, Cleveland, and Miami. European participation includes cities from Greece, Spain, Italy, Germany, the United Kingdom, and Norway, along with Montreal, African cities in Ivory Coast, Sierra Leone, South Africa, and Kenya, and Asia-Pacific cities in India and Australia.
Notably absent from the pact are Southeast Asian cities, despite the region accounting for a quarter of global energy demand growth and hosting more than 2,000 data centers across Indonesia, Malaysia, Singapore, Thailand, Vietnam, and the Philippines. The International Energy Agency projects that annual energy demand from these facilities will more than double within five years. C40 indicated that several Southeast Asian cities cited national policies or other complications preventing endorsement, though conversations remain ongoing.
Local Control and Market Reality
Phoenix Mayor Kate Gallego acknowledged the economic benefits, stating, "We understand the importance of this innovation, it's creating great jobs in our community." However, she expressed concern that current data center investments are worsening climate change and failing to meet community needs. Gallego framed the mayors' unified position as preventing developers from simply relocating to communities "unable to advocate for their own benefits."
Melbourne's Lord Mayor Reece offered a pragmatic assessment of local authority limits. He noted that data centers will locate where sufficient power, land, and proximity to markets and AI-dependent companies exist—factors largely beyond municipal control. His concern centered on preventing a "race to the bottom" where desperate governments offer data center incentives "on any terms possible." Instead, Reece advocated for a framework ensuring investment becomes "a win-win—a win for investors and also a win for local communities."
Sutherland acknowledged that mayors face constraints in acting unilaterally and will require buy-in from other government officials, utilities, and the private sector. Each participating city must translate the pact's vision into its own regulatory framework and guidelines.
Why This Matters:
This pact reflects a critical tension in contemporary urban governance: the need to attract investment-driving innovation against the fiscal and infrastructure costs that unregulated development imposes on taxpayers and municipal budgets. Data centers generate tax revenue and employment, but their resource demands—particularly electricity and water—create real costs for existing residents and can strain public utilities already under fiscal pressure. The mayors' attempt to establish baseline conditions for development represents an effort to prevent a competitive disadvantage where cities desperate for investment revenue undercut environmental and infrastructure standards. The framework's emphasis on requiring developers to fund their own infrastructure upgrades and renewable energy integration reflects market-based thinking: making private enterprise responsible for the full costs of their operations rather than externalizing those expenses to municipalities. However, the pact's effectiveness depends on voluntary private sector cooperation and coordination among governments with varying regulatory authority—a reminder that local control has inherent limits in a globalized economy where capital flows to jurisdictions offering the most favorable conditions.