“Read all about it, carbon tax kills Data Centres!”

Benjamin Franklin once said, "The only things certain in life are death and taxes”. 

Currently, the hot topic of discussion in Australia is the Australian carbon tax. The ramifications of this tax are not yet fully understood and the various political parties and independents who are negotiating the framework are themselves divided so it is anybody’s guess as to the detail. 

It is highly unlikely that even with detailed treasury modelling our elected members will even appreciate every nuance of the tax and thus from a data centre perspective one may even envisage that the tax in the fullness of time could lead to a rather quick extinction of energy inefficient data centres.  Don’t forget that this tax is only the precursor to a full blown Emission Trading Scheme which will be initiated in three years of the carbon tax implementation.  The trading scheme will be subject to full global market forces and thus the likelihood of carbon prices increasing significantly is a very likely scenario.  That extinction may be swift like that of the dinosaurs.

Data centre users are not only going to have the pleasure of paying for their energy usage (electricity) which is used to power IT, cooling and a host of ancillary services, but also the CO² which is produced.  A double whammy!

The carbon tax debate in Australia, or lack off, has been dogged more by politics than rational debate. So, as to how it will affect our society commercially at the industry level and the domestic user level is anyone’s guess at this point in time. 

The sitting government has yet to set a price per tonne, however one can be sure that there will be a price and that the set price will climb from day one.  Couple this with the rising energy costs in Australia and any data centre user who believes that they, like King Cnut can hold back the tide will be rudely awakened.

So where will this tax place the Australian Data Centre user when it comes to pass? 

Will it:

  • Directly or indirectly affect how data centres operate?
  • Affect how they will be built in the future?
  • Affect where they are built? 

Fortunately there are others who are already experiencing carbon regulatory controls beyond the Australian border so we can start to gauge what the impact may be in Australia. 

In Europe there are numerous initiatives in place that are engineering individuals and companies away from carbon intensive products and processes.   Some of these initiatives are:

  • European Union directives are pursuing reductions in greenhouse gas emissions and more efficient use of energy. They are also labelling entire buildings and individual products so users can appreciate the performance from a carbon emissions perspective. 
  • Building codes that seek to maximise energy performance and carbon reduction have now evolved to cover the data centre rather than just office building environments and the domestic home.
  • Best practice guidelines and initiatives have been created that the industry uses to regulate itself.  The EU Code of Conduct for Data Centre Energy Efficiencies V1.0 is one such guideline and is now being looked at as a basis for legislation and regulation of the data centre industry across EU member states.

Across the channel in the United Kingdom (UK) the government has taken steps to modify carbon usage through a tax known as the CRC Energy Efficiency Scheme.  This scheme is in its infancy and is undergoing change so industries have no certainty as to how it affects them in the long run. 

The CRC Energy Efficiency Scheme was initiated on the 1st April 2010 by the UK Government.  Its primary aim is to drive down the UK’s greenhouse gas emissions by 80% by 2050 to levels that existed pre-1990.  It was initially designed as a cap-and-trade scheme targeting private and public organisations with an energy usage of 6,000MW per year, equating to approximately 20,000 users. 

A review of this scheme, completed in October 2010 by George Osborne has changed the way the revenue raised by the scheme is disbursed.  The change has been seen by many as nothing more than a carbon tax by stealth. The money raised will now flow to general revenue rather than recycled to participants with the incentive aspect of the scheme now diluted leaving nothing more than a business tax.

Presently CRC has direct implications on data centres. Regardless if the data centre sits as an independent entity or is a larger part of a company’s energy portfolio it will contribute to the overall company’s CRC performance.  The data centres must have auditable systems to report CO² (monitor, measure and manage). If they don’t comply, they will incur penalties on a daily basis or contribute to penalties in the larger mix of energy use. Also on the cards, is the creation of an annual report through a public league of tables and the ability to purchase carbon allowances (the right to pollute).

How does all of this play out in Australia with its proposed carbon tax? 

Australia will of course look to capitalise on carbon reduction initiatives by adopting overseas ideas. However these coupled with our own flavour of building codes e.g. NABERS and the imposition of the carbon tax will effectively over time drive out data centres which do not look to minimise their energy usage and thus their CO² production.

Could this lead to a time when Australian data centres will predominately implement “free air cooling” systems?

To do so, they must be located in a higher latitudes (say at 51deg South or beyond) or high elevation geographical terrain (maybe the ACT) to capitalise on ambient atmospheric conditions which permit greater utilisation of such systems. 

Of course Australian data centre users could just as easily build facilities off shore in countries that have far less stringent environmental regulations and associated cost imposts.  This action would of course require that there is suitable telecommunication links to the greater worldwide web.

But then there is cloud computing.  The concept whereby software, applications, storage and infrastructure etc which are delivered as services on demand may very well appeal to data centre users as the cost structure may very well reduce the data centre user’s exposure to the carbon tax through better efficiencies in processing.  

It is highly speculative at this point in time, however I believe that this tax will have far reaching currently unrealised consequences for all Australians. I also doubt the data centre industry and its users have yet even begun to fully appreciate the changes the tax will have on their future strategic and tactical planning over the next 10 to 20 years. 

Just when you think that as a data centre user life couldn’t get any better with all of the innovative changes that have occurred in the last 6 years, the industry seems to have the Sword of Damocles hanging over it, not a great place to be sitting.

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Comment by DCPNet Admin on June 27, 2011 at 21:37

Excellent informative article.   Thanks for taking the time to write and upload it.  Will aim to promote this in a newsletter I aim to send out to the network hopefully later this week.


BTW: Congratulations on The Frame Group being appointed to the Australian Federal Government Panel of Data Centre Migration Service Providers.

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