Data Center Compliance in 2025: How Smart Operators Are Staying Ahead

Embracing the Future of Cooling Regulations

Data centers are the backbone of the digital world, but with great power comes great responsibility—especially when it comes to sustainability. In 2025, new regulations across the globe will challenge operators to optimize cooling efficiency, minimize environmental impact, and enhance transparency.

The good news? These regulations aren’t roadblocks—they’re opportunities. Forward-thinking data centers that embrace sustainable cooling strategies will not only ensure compliance but also gain a competitive edge in efficiency, reliability, and cost savings. The industry is already innovating, and liquid cooling is at the center of it all.

Let’s break down what’s happening and how smart operators are using these regulations to future-proof their data centers.

Key Regulations Shaping the Industry

European Union

Europe isn’t messing around. The Energy Efficiency Directive (EED) will require data centers to:

• Publicly report cooling efficiency metrics—centers over 500kW must report PUE, water use, and carbon footprint.
• Divert waste heat to local communities (think: heating hospitals or schools).
• Align with the Corporate Sustainability Reporting Directive (CSRD), which demands granular transparency on environmental impact.

If your cooling system is inefficient—wasting water or failing to repurpose heat—compliance won’t just be a challenge, it will be a missed opportunity. The EU’s goal is to encourage data centers to operate like utilities—accountable, efficient, and integrated into their communities. The Corporate Sustainability Reporting Directive (CSRD) has raised the bar, and it’s just the beginning. These compliance requirements are expanding beyond just EU-based companies to large private organizations, non-EU subsidiaries of EU-based parents, and even supply chain participants. In short, even if you’re operating outside the EU, these policies could still apply to you.

Operators who take a proactive approach—adopting closed-loop liquid cooling and heat recovery strategies—won’t just meet compliance; they’ll be ahead of the curve, driving efficiency, cutting costs, and strengthening their sustainability credentials.

United States

While the Chevron Doctrine—a federal legal principle that shaped environmental regulations—was overturned in 2024, individual states and cities are stepping up with their own targeted policies. Rather than waiting for federal mandates, local governments are taking a proactive approach to balancing data center expansion with sustainability goals.

• Phoenix, Arizona, specifically was the most recent to come down hard on the sheer number of data centers at the tail end of 2024—implementing codified performance standards and other related regulations to limit water usage in the water-stressed state.
• Lawmakers across New York, Oregon, and Virginia are preparing and introducing legislation to increase regulations on data centers to prevent environmental damage and limit energy concerns related to utility companies.
• Additional laws and bills proposed in California and focus groups in Washington aim to improve transparency for data center energy usage and carbon output. California’s CALGreen in particular will significantly burden centers attempting to keep 30kW+ AI racks cool via air.

This is expected to increase across all states bearing the heaviest data center burden, and others as they attempt to attract the businesses associated with data centers while easing public concerns. Liquid-cooling units and design centered around liquid-cooling is going to significantly reduce—if not eliminate—the pressure of these regulations.

APAC

With many APAC countries maintaining the fastest-growing data center markets, many countries like China have taken an incredibly blunt stance in their most recent regulations. In their recent carbon neutrality push, China included aggressive mandates to adopt energy-efficient cooling technologies in mega data hubs including:

• Targets a 20% improvement in data center power usage effectiveness (PUE) by 2025—AKA now.
• Encourages direct-to-chip liquid cooling and renewable-powered infrastructure.
• Requires companies to disclose cooling-related energy consumption.

Singapore’s Green Plan, Malaysia’s Corporate Renewable Energy Supply Scheme (CRESS), Japan’s International Sustainability Standards Board (ISSB), and other plans push for greener data centers as well through regulations, corporate pressure, and even incentives. As the market continues to grow in this region, other countries will continue to follow suit.

2025 Data Center Regulatory Compliance Prep Checklist

Let’s be clear—this isn’t legal advice, but a strategic look at how to prepare for what’s ahead. Proactively aligning your business with regulatory trends now can save time, money, and headaches later.

• Evaluate Your Cooling System Like a Regulator Would: Assume transparency is the new standard. Can your setup achieve PUE <1.3? Does it rely on restricted refrigerants or excessive water? If so, now’s the time to upgrade. Nautilus EcoCore™ CDUs operate with zero water and achieve a PUE as low as 1.1, turning compliance reporting into a seamless process.
• Adopt Closed-Loop Cooling Systems: Waste isn’t just costly—it’s a compliance risk. Closed-loop liquid cooling eliminates water discharge (key for Arizona) and enables waste heat recovery (critical for the EU). Plus, it’s the most efficient way to cool 50kW+ AI racks while maintaining performance.
• Turn Waste Heat Into an Advantage: The EU’s waste heat reuse rules aren’t just a compliance measure—they’re an opportunity. Data centers that partner with district heating networks can turn excess heat into a revenue stream, following the example of companies like Deep Green, which secured a $254 million deal by supplying free heat to municipal sites.
• Track Emerging Metrics: Regulators are already eyeing Water Usage Effectiveness (WUE) and Carbon Usage Effectiveness (CUE) as the next key performance indicators. Get ahead by tracking them now.
• Work With Vendors Who Understand Compliance: Cooling technology isn’t just about hardware—it’s about meeting global mandates efficiently. Nautilus EcoCore™ CDUs are designed to exceed 2025 EU, U.S., and APAC regulations and can be deployed in under nine months, ensuring compliance doesn’t slow down your growth.

Beyond 2025—Liquid Cooling Prepares for the Inevitable

Air cooling is a compliance dead end. As high-density AI workloads push power and water constraints to the brink, liquid cooling isn’t just about compliance—it’s about unlocking next-level performance.

Operators who act now will experience better efficiency, lower costs, and reduced downtime, all while securing a competitive advantage. With permitting, retrofits, and vendor lead times in play, waiting isn’t an option.

Smart operators aren’t just reacting to regulations—they’re leveraging them as a roadmap to success. The future of data center cooling is here, and those who embrace it will lead the way.