Oshkosh, Wis., is considering a one-year moratorium on data centers due to water consumption and land use. This proposal is part of a wider debate as communities cope with the increasing resource demands of the data center boom.

What if data centers used no water at all? A hyperscale facility in Phoenix is estimated to save 138 million gallons annually, using an advanced thermal cooling system.

Instead of pushing for restrictions, lawmakers should foster innovations that reduce water use. Water scarcity should shape how we build data centers, not if they should exist.

In the western United States, there is heightened focus on the data center boom and its water use. Large facilities can use millions of gallons daily for cooling, adding stress to states already facing chronic water shortages.

In Phoenix, water use for data center cooling is projected to increase by 870 percent. Utah Clean Energy estimates that the proposed Stratos hyperscale project could increase annual water demand by 16.6 billion gallons.

The worries over water are already influencing policy. The Tucson (Ariz.) City Council denied annexation and municipal water access for the Project Blue data center, though Pima County later approved the broader project.

In Utah, Bar H. Ranch withdrew its application to transfer water rights to Stratos after receiving thousands of protest letters. These disputes show that water scarcity is becoming a defining factor in the growth of data hubs across the arid West.

However, data centers are a major part of the modern economy. Mass adoption of generative AI has accelerated demand for data infrastructure. It is not a question of whether we should build data centers, but of water management.

Fortunately, many policy tools can manage water without sacrificing the economy. Several states are already using permitting requirements, mandatory water-use reporting and tax incentives to encourage water efficiency.

Policies that offset the costs of adopting efficient cooling systems make developers more likely to invest in less water-intensive equipment. As advanced thermal cooling systems and other net-zero water systems become more widely available, lawmakers should extend similar incentives to popularize their use.

Encouraging firms to embrace water-conserving technologies is a better alternative than imposing moratoriums. Data center growth is estimated to create millions of construction jobs, hundreds of thousands of permanent positions, and billions in tax revenue. Not to mention, Data centers contributed $727 billion to national GDP, underscoring their growing role in the national economy.

Instead of banning facilities, policymakers should reward responsible water stewardship. Water-conscious policies can protect scarce resources and support the digital infrastructure that fuels the modern economy.

Concerns over data center water consumption are valid, but many critics disregard the potential for advancement in water-conserving technology. Closed-loop cooling is becoming more common in data centers; net-zero water cooling, such as thermal cooling, will most likely follow a similar course. Rather than restricting growth, policymakers should promote these emerging technologies through targeted incentives.

Humans have always faced scarcity. Technology has evolved to make resource consumption more efficient. The strain data centers put on the water supply is only the latest chapter in our struggle for subsistence. Prohibiting data centers is not a long-term solution, only a Band-Aid, but fostering the development and use of water-conserving technologies is.

Oshkosh’s proposed law shows how quickly attitudes toward data centers are changing. What was once considered an economic benefit is now seen as an AI-driven drain on resources. However, banning data centers won’t solve the problem. The challenge is to adapt water consumption to accommodate the growing demand of technology.

Peter Clark is an Arizona-based writer. His work has been published by AzCentral, AZ Capitol Times, FEE, AIER, OC Register, Tobacco Reporter & RealClearMarkets. He wrote this for InsideSources.com.