With the policy world’s attention fixed on a major defense gathering elsewhere in Southeast Asia, many missed an important announcement from Manila on May 30 that negotiations on ASEAN’s Digital Economy Framework Agreement (DEFA) had finally concluded. DEFA is the world’s first regional digital economy agreement, setting common rules for cross-border data transfers, e-commerce, cybersecurity, AI and talent mobility, among other areas. With Southeast Asia’s digital economy projected to reach $1 trillion by 2030, DEFA is ASEAN’s bid to write the rules for its digital future.
In recent years, the regional organization has also committed to increasingly ambitious sustainability initiatives. For example, the ASEAN Socio-Cultural Community (ASCC) Blueprint 2025 states that ASEAN “envisions the achievement of a sustainable environment in the face of social changes and economic development,” in areas ranging from wildlife conservation to sustainable cities.
These digitalization and sustainability goals are potentially in tension. Take the example of data centers. Reports show that while they currently consume only 1.5 percent of global energy production, increasingly power-hungry server farms account for an ever greater percentage of electricity consumption every year. In Malaysia, for example, estimates suggest that data centers may account for 30 percent of national power consumption by 2030. Globally, the cooling of these centers also consumes up to 1.5 million liters of water per day, with facilities dedicated to artificial intelligence (AI) training projected to increase yearly global carbon emissions by 1.2 percent by 2030.
ASEAN member states recognize that developing digital infrastructure will be necessary if ASEAN’s digital integration goals are to be successful. In particular, data centers have rapidly become the backbone of Southeast Asia’s digital economy, underpinning everything from e-commerce and cloud services to AI and smart governance.
While only 3 percent of global data center capacity is located in Southeast Asia, the data center market is projected to double in size and become a $11.8 billion industry by 2030. These facts make clear that digital infrastructure investment is both strategically and commercially significant for the region; but questions remain whether the region can build the infrastructure needed for the digital economy while remaining consistent with its sustainability goals.
The environmental impact associated with the rapid expansion of data centers is particularly acute in Southeast Asia for several reasons. First, the region’s hot and humid climate significantly increases cooling requirements, making data centers more energy-intensive than in temperate regions.
Second, most ASEAN member states remain heavily reliant on fossil fuels for power generation, meaning that rising electricity demand from digital infrastructure directly translates into higher emissions. As a result, data center-related emissions in ASEAN are projected to continue rising, particularly where grids remain dominated by coal and gas, as they are in Malaysia, Singapore, the Philippines, and Indonesia. These pressures compound the effects of climate change itself, including more intense heat and increasingly volatile monsoon seasons.
Third, the enabling conditions required for renewable energy integration, including grid capacity, financial infrastructure, and proximity to clean energy sources, remain heavily concentrated in major urban centers and special economic zones, reinforcing data center clustering in already energy-hungry urban areas.
Balancing Digital Expansion and Environmental Sustainability
Over the past decade, ASEAN’s legal and policy documents have increasingly recognized the tension between expanding digital infrastructure and meeting environmental goals.
Indeed, at the most recent meeting of ASEAN digital ministers in January, members adopted the Hanoi Declaration on Digital Cooperation, explicitly calling for a “green digital transformation,” including energy-efficient digital infrastructure, greater use of renewable energy for data centers, AI-enabled network optimization, and the integration of ESG principles into digital policy.
The Hanoi Declaration is likely to accelerate a policy shift already underway, as can be seen in the evolution from ASEAN’s 2020–2025 to 2026–2030 energy cooperation plans.
In the ASEAN Plan of Action for Energy Cooperation (APAEC) 2020-2025 policy plan, digitalization is framed primarily as contributing to “cleaner and more efficient energy” production within the energy sector itself, associated with smart grids, big data, AI, and cloud computing to improve regional energy capacity. This plan treats digitalization as largely complementary to decarbonization objectives, not substantially addressing its potential contribution to environmental issues.
By contrast, the updated APAEC plan for 2026–2030 explicitly recognizes that “the rapid growth of the digital economy is driving a surge in electricity demand and posing new challenges for power load management,” while highlighting the need to ensure that digital infrastructure maintains “sustainable energy consumption.”
Regarding data centers, the ASEAN Digital Ministers’ Meeting in January 2025 approved the creation of an ASEAN Guide on Sustainable Data Centre Development. The Guide, released in early 2026, is centered around the “Digital Infrastructure Trilemma,” which frames the core policy tension facing the region as balancing (1) digital expansion; (2) environmental sustainability; and (3) resilience & resource security. The trilemma neatly repackages what was already recognized in APAEC plan for 2026–2030, namely that rapid data center expansion must be balanced against environmental sustainability goals and the need to safeguard critical resources such as electricity, water, and land.
The Guide identifies the fragmented legal governance regimes across energy, water, ICT, and land use as the biggest obstacle to solving the trilemma and recommends national cross-sector taskforces to align benchmarks and standards across these areas. It also provides recommendations on how ASEAN can adopt global best practices on data center sustainability and integrate them into other ASEAN initiatives.
Translating the Guide’s recommendations into policy outcomes will require further coordination and regulatory development across ASEAN member states. Most ASEAN countries still lack dedicated regulatory frameworks and resources to address the trilemma. The “developmental gap” between ASEAN’s more and less developed countries poses a particularly acute challenge for the regional organization, as the “ASEAN Way” of consensus-based decision-making means that progress on integration may be fractured and slow. Taken together, these factors suggest that while the policy direction is clearer than before, implementation of sustainable digital infrastructure governance across the region remains a significant challenge.
Addressing the Digital Infrastructure Trilemma
As ASEAN moves to DEFA implementation, the challenge is how to design policies that pursue both ASEAN’s digital integration and sustainability goals. While the Hanoi Declaration and the Guide on Sustainable Data Centre Development are important starting points, current ASEAN digital strategic-level policy documents should be revised to make explicit the ways in which sustainability objectives can be pursued in tandem with the digital integration goals of each ASEAN state while recognizing their stage of economic development.
As noted above, the Guide notes how sustainable data center best practices can be implemented across other ASEAN initiatives like the ASEAN Power Grid and ASEAN Green Agenda. Noting the urban clustering issue noted above, such policies could also be integrated into ASEAN urban development and governance, like the ASEAN Working Group on Environmentally Sustainable Cities.
This may take the form of a dedicated “digital-green” chapter that can then be incorporated into regional and national digital strategies to clarify how tools such as data analytics, AI, cloud computing, and smart infrastructure can be used to pursue environmental goals, while also ensuring that sustainability considerations shape the responsible development of these technologies.
Taking on the clarion call of the Hanoi declaration to increase the use of renewable energy for data centers, ASEAN should encourage member states to develop various incentives to encourage the use of renewable energy, such as through tax breaks or reduced tariffs. ASEAN should also prioritize the development of harmonized regional standards to benchmark and guide sustainable data center development across member states. This does not require starting from scratch. Existing international frameworks from the European Union and elsewhere can serve as models, which can then be adapted to local conditions.
ASEAN is well-positioned to be a global leader in both the green and digital revolutions. Whether it succeeds will depend on its ability to transcend traditional governance disciplines and take a more holistic, interdisciplinary approach. Recent law and policy initiatives point in the right direction; the real test now is implementation.
