Are You Saving Energy? Taxes and Regulations May Be on the Horizon

September 18, 2012 2 Comments »
Are You Saving Energy? Taxes and Regulations May Be on the Horizon

Estimates of the number of pages in the U.S. Code and the U.S. Code of Federal Regulations differ, with some reaching into the hundreds of thousands of pages. With that much verbiage, you are guaranteed that whatever you’re doing now, it’s probably covered in some regard (and you’re likely breaking some rule or regulation right now). The Internet and, to some extent, data centers have managed to avoid some regulations thus far, but those days may be numbered. In particular, energy efficiency is one area in which companies may be facing upcoming regulations, taxes or a combination of both.

Economic Conditions

One upside of the current economic malaise may be that regulation and taxation of the burgeoning data center industry have been temporarily forestalled. Although politicians like their tax money, they also (whether they admit it or not) recognize that taxation and regulations tend to stifle growth. But since growth is the much-touted economic goal, the faltering (or nonexistent, as some would convincingly argue) recovery makes increased taxes and regulations a hard sell.

An illustrative example of this effect is apparent in the lost momentum for carbon taxes and regulation. At one point, laws mandating a cap-and-trade and/or taxation scheme for carbon emissions seemed inevitable, particularly when Barack Obama captured the U.S. presidency in 2008. But the subsequent recession and lack of any significant recovery (beyond, perhaps, rebounded stock prices) pushed less urgent concerns to the back burner. The stubbornly high unemployment rate (which recently dropped slightly to 8.1% largely because many individuals simply stopped looking for a job), inflation of basic goods and stagnating wages has meant that the essentials of living have taken precedence in the minds of voters, replacing more refined concerns like the environment and so-called clean energy.

Nevertheless, with energy prices rising and with the data center industry consuming more and more power, a situation not unlike that of the health-care sector is emerging. And despite massive and continued public resistance to government control of the health-care industry, the recent semi-nationalization of that industry by way of insurance regulation (Obamacare) was still instituted. And this was even in the midst of a bad economy. Thus, economic conditions may stall energy regulations or taxes for data centers, but they are unlikely to be a permanent barrier.

Energy Efficiency, Not Carbon

The ongoing difficulties in the U.K. regarding that country’s Carbon Reduction Commitment (CRC), which is becoming more of a simple carbon tax than a cap-and-trade scheme, may provide some dissuasive power against implementation of a similar scheme in the U.S. More likely, rather than having a carbon-emission slant, energy regulations in the U.S. would instead involve mandating certain efficiency levels and, perhaps, taxing companies that violate such standards. Of course, the exact nature of nature of future regulations depends mostly on the mood of the politicians at the time, so this is largely speculative.

But with the expanding applicability to data centers of programs like Energy Star and various building efficiency standards, the groundwork is increasingly in place for the government to “borrow” industry standards for use as regulations. DatacenterDynamics (“What 2012 has in store for the data center industry”) notes, “The EPA’s Energy Star programs for data centers will continue expanding to cover virtually all areas of the data center. The UPS, network gear and storage arrays are currently being added to the growing list of equipment covered by the program. More servers (including blades) will be part of version-two of the Energy Star requirements.”

The concern over regulation is not limited, however, to the biggest regulator—the U.S. federal government. States and localities may also serve as tools of regulation through building codes and other meads. “Data center infrastructure efficiency will be subject to further scrutiny and possible local regulations by local building departments, as the data center is now included in ASHRAE 90.1,” as DatacenterDynamics goes on to observe. Another DatacenterDynamics article (“Three forces that will shape the future data center”) states, “Local authorities, under financial, security and sustainability pressures, will ratchet up the laws and tax data centers on carbon, electricity, water, and dissemination of IT information. In the coming years, we see a continuation of the trend driven by energy and regulation.”

Balancing the desire for economic growth is the need for tax revenue to support heavily indebted governments. This threat comes no less from states and localities than from the federal level. And if arguments for sustainability, “fiscal responsibility” and protection of the environment don’t work, national security will be trotted out as somehow justifying these taxes and their accompanying regulations.

What Companies Should Do

Uncertainty about whether and when taxes and regulations on energy efficiency will be implemented is the most difficult part at this point. Companies have little direct guidance in how to improve their facilities in ways that meet standards that have yet to be written. Although taxes and regulations are burdensome, the upside is that energy-efficiency measures, if implemented properly, can provide returns to data centers—meaning not all is lost. Here are a few things to consider with regard to this tentative situation.

  • Regulations will be written by industry experts, not by politicians. You don’t need to worry about Joe Biden writing energy-efficiency regulations for the data center industry. Authors will likely be industry experts—probably from organizations like ASHRAE. So, if you keep up with recommendations and information from such organizations, you probably won’t be surprised by the content of new regulations.
  • Industry best practices are a solid bet. Not everything labeled a “best practice” is necessarily what the name indicates, but regulations probably won’t deviate much from these measures. Learn from the experience of other companies—it’s good policy generally, but it will also help you prepare for potential regulatory changes.
  • Act now, as far as possible. Forget regulations and taxes for a moment. Being less wasteful and saving money are two worthy goals for any company, so if you can improve your data center’s energy efficiency and get a return in the long term, why wait for someone to force you? If the industry is responsible for itself, showing that it is capable of making steady improvement without cajoling from the government, the likelihood of regulations may well decrease. As for taxes, well, nothing the industry does may be of much help.


Had the U.S. not fallen into a recession, which looks increasingly like it will reappear within the next few years, energy-efficiency regulations probably would have been implemented already (possibly in the form of carbon taxes and regulations). Even with the poor economic conditions, however, taxes and regulations may still be on the horizon. Although companies may not be able to do much to stop the legislative train, they can nevertheless prepare by staying informed regarding recommendations and standards from bodies such as ASHRAE and by becoming aware of industry best practices regarding energy efficiency. A well-prepared company may avoid any hassle whatsoever if regulations are implemented.

Photo courtesy of juggernautco

About Jeff Clark

Jeff Clark is editor for the Data Center Journal. He holds a bachelor’s degree in physics from the University of Richmond, as well as master’s and doctorate degrees in electrical engineering from Virginia Tech. An author and aspiring renaissance man, his interests range from quantum mechanics and processor technology to drawing and philosophy.


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