Australia could cut AI emissions with data centres

New research commissioned by Data Centres Australia suggests Australia could cut global AI-related emissions by hosting more regional data centre development. Mandala Partners prepared the analysis.

The report argues Australia is well placed to supply AI computing from data centres backed by renewable energy, rather than leaving more of that expansion to Southeast Asian markets with more carbon-intensive power systems. In effect, it says, Australia could export clean energy indirectly through computing services delivered over existing subsea cable networks.

Mandala estimated that hosting a 1.9GW export opportunity in Australia would produce 3.2 million tonnes of CO2, compared with 11.9 million tonnes if the same demand were met in Indonesia. It identified Australia as the best-positioned market in Asia Pacific to deliver lower-emissions AI compute, with projected 2030 emissions less than half those of the next closest competitor.

Economic case

Alongside the emissions argument, the research sets out a case for economic gains from AI infrastructure investment. Capturing the AI export market could add as much as AUD $4.1 billion in annual economic activity, support up to 17,120 additional jobs, and attract up to AUD $52 billion in new investment.

The sector's existing growth path is also substantial, according to the report. On current projections, Australia's data centre industry will generate AUD $5.6 billion in annual economic activity and support 23,040 ongoing operational jobs by 2030. Construction needed to meet domestic demand would contribute AUD $19.8 billion and support another 18,930 jobs during the building phase.

The findings come as policymakers and industry groups weigh how to meet rising demand for computing infrastructure linked to artificial intelligence. Energy supply, grid access, planning rules, and digital connectivity are becoming more important in decisions about where new facilities are built.

Mandala said recent growth in data centre capacity across neighbouring countries has occurred despite heavier reliance on fossil fuel-based electricity. Australia's large renewable resource base is presented as a distinguishing factor, particularly as government policy shifts from a voluntary approach, under which data centres offset 70% of their energy use with renewables, to a mandated 100% requirement.

Tom McMahon, Partner, Mandala Partners, said the opportunity lay in using Australia's energy resources differently. "We know Australia is capable of producing abundant clean energy, but the challenge is how to export that energy to the world. Exporting clean energy via compute takes advantage of existing subsea cables that carry data and internet traffic in and out of Australia," McMahon said.

He added that the scale of expected regional demand meant investment decisions taken now could have lasting effects on emissions and market share. "The high global demand for AI-enabled advances means many data centres will be built in the Asia-Pacific region. What our report finds is if Australia moves decisively to get its policy settings right, we can capture a large section of that opportunity. This won't just mean billions of dollars of investment and thousands of additional highly paid jobs. It will also mean millions of tonnes of carbon emissions are avoided and ensure Australia has a seat at the table when it comes to global AI policy development," McMahon said.

Policy influence

The report also links data centre investment to strategic influence. It argues that if Australia hosts a significant share of the region's AI computing infrastructure, it could gain greater sway over governance standards and exercise legal jurisdiction over hardware located within its borders, including in areas such as data residency, access, and security.

Belinda Dennett, Chief Executive Officer, Data Centres Australia, said the findings point to a broader national role for digital infrastructure. "Investing in new digital infrastructure gives Australia the opportunity to lead in the most profound technological shift we have ever seen and boost our role as a global clean energy powerhouse," Dennett said.

"By creating the right policy environment, we can capture more of the AI value chain locally, support thousands of high-skilled jobs, and play a pivotal role in the clean energy transition. The economic growth opportunities are exciting, but this is about more than that. It's also about securing our sovereign capability and strengthening our influence over the global standards that will govern AI for decades to come," Dennett said.

Industry advocates say the effects would extend beyond data centre operators. The report points to benefits across manufacturers, construction trades, ICT security specialists, and software engineers, arguing that a larger domestic data centre base could deepen the surrounding technology and services ecosystem.

Jackie Trad, Chief Executive Officer, Clean Energy Council, connected the issue to renewable generation investment. "Data centres have the potential to unlock significant new clean energy generation to power the Australian economy. When data centres help bring in renewable energy projects, they can both boost Australia's energy supply and create new, untapped markets for Australian compute. If we get the rollout right, we can use Australian-made power to back a thriving industry that delivers long-term benefits to our economy and our climate," Trad said.

Data Centres Australia said the sector already delivers broad economic benefits through the digital economy and local supply chains. "Australia has a dynamic data centre ecosystem delivering tangible benefits, enabling the digital economy while driving significant economic activity and supporting local businesses and high-value employment," Dennett said.