Climate Risk to Data Centres is emerging as a critical challenge for India’s digital ambitions. A new global study warns that extreme heat and infrastructure disruptions could threaten planned data centres in some of the country’s fastest-growing technology hubs.

Data centres are becoming an indispensable part of modern economies. They are often promoted as projects that generate employment and boost local economies. Yet, their rapid expansion is increasingly colliding with the realities of rising climate risks.

A new report released by climate risk consultancy XDI warns that some of the world’s fastest-growing destinations for data centre investment are also emerging as climate-risk hotspots. India, one of the fastest-growing digital economies, ranks 11th globally in terms of physical climate risk to planned data centre infrastructure.

Climate Risk to Data Centres Challenges India’s Digital Ambitions

The report, 2026 Global Analysis of Planned Data Centres for Physical Climate Risk and Resilience, assessed 2,595 planned data centres worldwide. It analyzed the risks of direct physical damage from climate hazards, operational disruptions caused by extreme heat, and indirect threats due to failures in supporting infrastructure such as electricity, water supply, telecommunications, and transport.

Climate Risks to Data Centres & The Southern States

While India narrowly misses the top ten in overall physical risk rankings, the findings on heat-related disruptions are more concerning. States including Tamil Nadu, Telangana, and Karnataka have been identified among the top 30 regions worldwide with the highest projected operational disruption risk due to extreme heat for planned data centres.

The warning comes at a time when India is investing heavily in digital infrastructure to support artificial intelligence, cloud computing, and data storage. However, the study suggests that the long-term viability of these investments could depend as much on climate resilience as on technological capability.

Extreme Heat Threatens Operations

According to XDI, South Asia has one of the highest proportions of high-risk planned data centres globally. Facilities in the region are already classified as high risk under low-resilience construction settings, and this risk is projected to increase sharply by the end of the century. Europe is exposed to a 289% increase in average damage risk by 2100, even though it has only 7% of planned data centres at high risk.

“Much of the debate has focused on energy demand and water consumption. But physical climate risk is becoming an increasingly important consideration in its own right” Dr. Karl Mallon, Founder and Head of Science and Technology at XDI.

“The question is no longer simply where the next generation of digital infrastructure gets built, but whether those assets can remain operational, insurable, and economically resilient over their intended life,” he added.

Extreme heat is emerging as one of the biggest operational threats to data centres globally. Facilities depend on large-scale cooling systems to maintain servers and prevent outages. Rising temperatures increase cooling costs, place greater stress on electricity grids, and raise the risk of service interruptions.

The report finds that countries such as India, Brazil, Mexico, Indonesia, and Spain already record some of the highest projected operational disruption risks from heat, with more than 75% of analysed facilities classified as high risk.

A Window to Build Climate Resilience

The report also highlights the importance of indirect risks. A data centre may be designed to withstand extreme weather, but it remains vulnerable if surrounding infrastructure fails. Power outages, water shortages, damaged roads, or disruptions to telecommunications networks can all affect operations.

XDI noted that a separate analysis of data centres in Europe found that productivity losses become ten times higher when these indirect risks are considered alongside direct physical damage. The study, however, emphasises that future risks are not inevitable. Decisions taken during the planning stage, including site selection, engineering standards, and investments in climate resilience, can significantly reduce vulnerability before facilities are built. As global investment pours into AI and digital infrastructure, the report argues that climate resilience must become a central component of planning.

“Future risk is not fixed,” Mallon said. “Unlike existing infrastructure, planned data centres create a window of opportunity. Decisions made today may materially influence future performance, insurability, and operational continuity.” For India, where digital ambitions are expanding rapidly, the report serves as a reminder that the infrastructure powering the future must also be prepared for a warmer and more climate-uncertain world.

A new policy brief released by IPE Global has warned that the ongoing geopolitical instability in West Asia could place nearly 10–12 million Indian livelihoods at risk, particularly in sectors linked to energy, agriculture and migration-dependent economies. But the report also argues that the same crisis could accelerate India’s transition toward a green economy capable of generating nearly 35 million jobs by 2047.

The peer-reviewed study, “Paving a Green Transition: A New Social Contract Amid West Asia Crisis,” released in New Delhi on June 18, outlines 30 policy recommendations aimed at aligning India’s existing climate, agriculture and industrial schemes into a coordinated transition strategy.

According to the report, India already has the institutional architecture needed for a large-scale green transition through programmes such as PM-KUSUM, the National Green Hydrogen Mission, Production Linked Incentive (PLI) schemes, the Carbon Credit Trading Scheme (CCTS), PM-Pranam and RDSS. However, these schemes currently operate in silos, limiting their impact.

“The West Asia crisis has exposed how closely energy security, food security, livelihoods and climate resilience are tied together,” said Ashwajit Singh, Founder and Managing Director of IPE Global. “When 10 to 12 million livelihoods sit at the intersection of SDG 2, SDG 7, SDG 8 and SDG 13, the only meaningful response is convergence.”

India’s energy dependence under scrutiny

The report notes that India imports nearly 85% of its crude oil requirements and continues to depend heavily on imported fertilisers and fossil fuel-linked industrial inputs.

This dependence, researchers argue, leaves the country vulnerable to geopolitical shocks originating in West Asia. Rising fuel prices, supply chain disruptions and inflationary pressures have already begun affecting key sectors.

“The numbers tell a story India cannot afford to ignore,” said Abinash Mohanty, Head of Climate Change and Sustainability Practice at IPE Global and lead author of the study. “With 85 per cent of our crude oil imported, and 10 to 12 million livelihoods exposed to a single geopolitical shock from West Asia, the fragility is real. But so is the opportunity.”

The report estimates that India could mobilise a funding cushion of nearly USD 42–53 billion from existing schemes without requiring substantial new financing. It further projects that a coordinated green transition could contribute to a USD 15 trillion green economy by 2070.

Kerala among states most vulnerable

The study identifies Kerala, Uttar Pradesh and Bihar as among the states most exposed to job losses linked to the West Asia crisis because of their high dependence on Gulf migration and remittances.

Kerala alone could see between 1.5 and 2 million livelihoods at risk, according to the estimates. However, the report projects that the state’s green jobs absorption potential may remain relatively limited at around one million jobs by 2047.

In contrast, states such as Rajasthan and Gujarat — with stronger renewable energy infrastructure and industrial corridors — are expected to generate significantly larger green employment opportunities. Rajasthan alone could create nearly five million green jobs, while Gujarat may generate around 4.5 million.

The report describes this as a “geographic mismatch problem,” where workers most vulnerable to job losses are not necessarily located in regions where new green jobs are emerging. Researchers say this has implications for migration policy, skilling programmes and regional investment planning.

Farmers as energy producers

One of the central recommendations in the study is to reframe PM-KUSUM into a “Farmer-as-Energy-Producer” programme. The proposal aims to enable farmers to generate and sell surplus solar power to distribution companies through decentralised solar infrastructure.

According to the report, this intervention alone could create 15 lakh green jobs, generate 50,000 MW of agri-solar capacity and increase annual farmer incomes by ₹25,000–40,000. It could also reduce nearly 70 million tonnes of carbon dioxide equivalent emissions annually.

The agriculture sector recommendations also include scaling natural farming to 50 million hectares, integrating carbon markets into agriculture and strengthening climate-resilient farming systems through digital platforms and weather-linked advisory services.

Green hydrogen and industrial transition

The report argues that India’s clean energy transition must move beyond renewable energy generation and focus equally on storage, grid infrastructure and industrial demand creation.

It proposes an Emergency Grid Acceleration Programme to support India’s target of 500 GW renewable energy capacity. According to the study, achieving this target could generate 3.4 million jobs and avoid nearly 700 million tonnes of carbon emissions annually.

The National Green Hydrogen Mission is also positioned as a major employment driver, with the report estimating 1.5–2 million jobs across the hydrogen value chain.

On the industrial front, the study recommends establishing a National Green Steel Mission to protect India’s export competitiveness amid tightening carbon regulations such as the European Union’s Carbon Border Adjustment Mechanism (CBAM).

Researchers estimate that industrial decarbonisation, EV manufacturing and green supply chains together could generate over 20 million green jobs.

‘Cost of delay is now higher than transition’

The report concludes that India’s challenge is no longer technological but institutional. Most of the necessary policies, financing structures and sectoral schemes already exist, it argues. What remains missing is coordination across sectors and ministries.

“This crisis isn’t asking India to choose between resilience and growth,” Mohanty said. “It’s showing us they were always the same investment.”

The study ultimately frames India’s green transition not merely as a climate obligation, but as a strategic response to energy insecurity, geopolitical instability and long-term economic resilience.

“The cost of delays in action now exceeds the cost of transition,” the report states.

As Japan expands its role as a global gas trader, a new analysis raises questions about whether Asia is importing energy security—or future climate liabilities. Japan US LNG trade generated lifecycle emissions equal to about 17 coal plants in a year, raising concerns about Asia’s growing dependence on imported gas.

The liquefied natural gas (LNG) cargoes that Japan resold across Asia over the past five years generated greenhouse gas emissions equivalent to running about 17 coal-fired power plants for a year, according to a new analysis by Zero Carbon Analytics.

The finding comes at a time when several Asian economies are turning to LNG as a bridge fuel in their energy transition strategies, while governments simultaneously pledge to cut emissions and expand renewable energy.

According to the analysis, Japan resold 16.5 billion kilograms of US-produced LNG to nine Asian countries between 2020 and 2025. Across the fuel’s lifecycle—from extraction and liquefaction in the United States to shipping, regasification and combustion in Asia—those sales generated an estimated 63.5 billion kilograms of carbon dioxide emissions.

The report highlights a little-discussed aspect of Asia’s gas trade: Japan is increasingly acting as a middleman in the global LNG market.

Japan’s US LNG Trade–Japan Now Resells More US LNG Than It Uses

Japan remains one of the world’s largest LNG importers, but its domestic demand for gas has been declining.

The analysis found that between 2021 and 2025, Japan sold 77 percent more US LNG to other countries than it imported for its own domestic consumption.

In 2024, Japan ranked as the world’s second-largest LNG trader. While Europe remained the largest destination for Japanese LNG resales, nearly one-third of those transactions were directed to Asian markets, including South Korea, China, India, Taiwan, Thailand, Singapore, Bangladesh, Pakistan and Malaysia.

Three of Japan’s top ten LNG resale destinations were Asian economies: South Korea, China and India.

The numbers reflect a broader shift in regional energy markets. Countries seeking alternatives to coal have increasingly turned to LNG, often presenting gas as a cleaner transition fuel. Yet critics argue that this framing overlooks emissions generated throughout the fuel supply chain.

The Methane Problem

Natural gas is composed primarily of methane, a greenhouse gas that has far greater warming potential than carbon dioxide in the short term.

According to the International Energy Agency’s 2026 Global Methane Tracker, methane emissions from fossil fuel operations remain near record levels globally.

The Zero Carbon Analytics analysis estimates that roughly 30 percent of total LNG lifecycle emissions arise from methane released during extraction, processing and transportation.

Methane can trap around 80 times more heat than carbon dioxide during the first two decades after it enters the atmosphere, making leakage a critical concern for climate scientists.

The report’s emissions calculations include every stage of the LNG supply chain rather than focusing solely on combustion emissions at power plants.

Energy Security or Fossil Fuel Lock-In?

The findings arrive amid renewed concerns over energy security following instability in the Middle East and uncertainty surrounding global gas supplies.

Several Asian economies, including Thailand, Vietnam and the Philippines, have expanded LNG imports in recent years to diversify their energy systems. However, the same dependence has exposed them to volatile international fuel prices.

Yu Sun Chin, Asia Regional Researcher at Zero Carbon Analytics, said the growing trade has implications beyond emissions.

“Japan’s growing role as an LNG trader has significant implications for Asia, which is absorbing close to a third of Japan’s excess supplies. Our calculations of the full lifecycle emissions of these LNG resales highlight the risk they pose to a region already vulnerable to extreme weather and other climate impacts. Rather than increasing reliance on gas as a ‘transition fuel’, transitioning to renewables offers Asia a clearer route to a clean and secure energy future.”

The concern is not merely about current emissions. Energy analysts warn that investments in LNG terminals, pipelines and related infrastructure could lock countries into fossil fuel consumption for decades.

Sam Reynolds, LNG and Gas Research Lead for Asia at the Institute for Energy Economics and Financial Analysis (IEEFA), noted that Japanese companies are increasingly looking abroad as domestic demand declines.

“As Japan’s own LNG demand continues to decline, Japanese companies are becoming increasingly active traders of the fuel to other countries. At the same time, public and private financiers in Japan are investing in downstream infrastructure to stimulate demand and secure long-term customers.”

He added that such investments could leave emerging economies dependent on “a volatile, expensive fuel source for decades” while delaying renewable energy deployment.

Asia’s Climate Challenge

Asia is simultaneously one of the world’s fastest-growing energy markets and one of the regions most vulnerable to climate impacts.

From deadly heatwaves in South Asia to flooding in China and stronger tropical cyclones across Southeast Asia, the region is already experiencing the consequences of rising temperatures.

Climate scientists estimate that global emissions must nearly halve within this decade to keep the Paris Agreement’s 1.5°C goal within reach.

Against that backdrop, environmental groups argue that expanding LNG infrastructure risks undermining climate commitments.

Shruti Shukla, Senior Advocate for International Energy at the Natural Resources Defense Council (NRDC), said the region faces a strategic choice.

“Japan has long positioned itself as a regional energy and economic leader in Asia. That leadership should help accelerate a resilient clean energy transition across the region, not deepen dependence on another generation of imported fossil fuels.”

She warned that growing LNG imports expose countries to methane emissions, volatile fuel markets and costly infrastructure that could become obsolete as renewable technologies become cheaper.

The Economic Risks

The debate extends beyond climate concerns.

Researchers increasingly point to the possibility that LNG infrastructure built today may become stranded assets before the end of its expected lifespan.

Nawaphat Junkrajang, senior researcher at Climate Finance Network Thailand, cited research suggesting that nearly half of Thailand’s operating and proposed LNG terminal capacity could become economically unviable under the country’s climate commitments.

“Each additional resale cargo is not energy security. It is one more step into a lock-in the transition will eventually have to unwind,” he said.

Bangladesh faces similar concerns.

Dr Khondaker Golam Moazzem, Research Director at the Centre for Policy Dialogue, said new energy agreements and infrastructure investments could deepen dependence on imported LNG while narrowing opportunities for renewable energy investment.

A Growing Regional Debate

The analysis arrives as governments across Asia reassess their energy pathways.

Supporters of LNG argue that gas provides reliable electricity generation and can complement intermittent renewable sources. Critics counter that falling costs of solar, wind and battery storage are weakening the economic rationale for large-scale LNG expansion.

What is clear from the data is that Japan’s role in regional gas markets is evolving rapidly. The country is no longer simply a major LNG consumer; it has become a significant intermediary connecting US gas producers with Asian buyers.

As Asia balances energy security, affordability and climate goals, that role is likely to attract increasing scrutiny.

For policymakers, the question may no longer be whether LNG emits less carbon than coal at the point of combustion. Instead, it is whether a region racing to build a low-carbon future can afford to lock itself into another generation of fossil fuel infrastructure.