The U.S. Climate Politics Almanac: The Data Center Backlash

Since Trump’s return to power, a major factor keeping the economy out of recession has been the growth of an enormous AI debt bubble, with tech giants deploying huge sums of capital to support a hyperscale data center buildout that has not yet shown it can be remotely profitable. In inflating this bubble, AI developers have made outlandish claims about the transformative potential of the technology, with Open AI CEO Sam Altman declaring that AI will unlock “astounding triumphs—fixing the climate, establishing a space colony, and the discovery of all physics.”

At the moment, AI is a long way from fixing the climate, as new industrial gas turbines are fired up and coal-fired power plants brought out of retirement to support data center demands. Projections suggest that data center energy consumption could double or even triple by 2028, comprising more than 12% of all U.S. electricity use within just a couple years. The deteriorating financial mechanics behind AI also make it far more likely to deliver economic calamity than broadly shared prosperity. Regardless of how exactly the economic fallout from the AI buildout manifests itself, it seems likely that utility rates will continue to climb, with a high risk of ratepayers footing the bill for “stranded assets” from data centers that either aren’t built or don’t get fully utilized. 

Economists are puzzled as to why a series of better-than-expected jobs reports have done nothing to bring consumer sentiment up from its record lows. There are many theories about why. One plausible explanation is that AI’s prominence in the economy explains a lot about why the “vibes” are off. Voters seem to grasp that AI is about ceding power over their future to a highly untrustworthy “wealth inequality machine.” 

On a related note, new polling shows strong opposition to data centers. A distinctly transpartisan coalition has emerged to organize against data center development in many different communities throughout the U.S. This post will explore the electoral and policy implications of what has become a dominant issue in the 2026 elections. The threat of data centers has provided new vibrancy to our endangered and moribund democracy, with highly active residents packing town halls and council meetings from Tucson, Ariz. to Box Elder County, Utah and Ames, Iowa.

Ballot initiatives, local elections, and popular mobilization

A strong pattern has emerged of hyperscale data centers causing popular revolt at the ballot box. After the city council of Festus, Mo. voted in favor of a $6 billion hyperscale proposal, voters promptly kicked out all four incumbents on the ballot in an April election. On the same day in April, voters in the Milwaukee suburb of Port Washington, Wisc. showed their irritation with a massive $15 billion hyperscale facility by overwhelmingly approving a ballot measure to restrict future hyperscale projects from receiving tax-increment financing. 

In May, supervisors in Meridian, Mich. voted to put a six-month pause on data center proposals. Meanwhile, in the Grand Rapids suburb of Lowell Township, township board members refused to adopt a data center moratorium, with the majority of the council opting to court a $1 billion proposal from Microsoft instead. Now, recall petitions are circulating against the board members who voted against a moratorium, with the chair of the effort accusing Lowell board members of “representing Microsoft more than the people who elected them.”

In June, 88% of voters in Monterey Park, Calif. voted to permanently ban data centers within city limits.

Policy shifts

Ever since the calendar turned to this national election year, politicians have been reading the tea leaves. There has been a major shift in the legislative and rhetorical posture on data centers.

In her state of the state address in January, Arizona governor Katie Hobbs called for the elimination of a Data Center Tax Exemption that she herself voted for as a legislator. The state budget that ultimately passed included a three-year freeze on data center tax incentives. More governors are following Hobbs’ lead in pausing data center giveaways, including Ohio governor Mike DeWine, a Republican, and Massachusetts governor Maura Healey, a Democrat. Republican Utah governor Spencer Cox is an “Energy Superbaundance” data center booster, but even he has called for stronger standards following mass protests against the behemoth Stratos project, which would nearly double Utah’s carbon pollution.

New Jersey state senator Joseph Cryan told Heatmap that voters are “outraged over the amount of money [data center computing giant] Coreweave got,” when it absorbed half of the $500 million in the Next New Jersey tax credit program. Next New Jersey was created only two years ago, but that outrage at Coreweave prompted the General Assembly to send a repeal of the program to governor Mikie Sherrill’s desk. Legislators also sent bills to Sherrill to strengthen water and energy reporting and to create a large load tariff for electricity-hungry hyperscalers. Assuming Sherrill signs the latter bill, New Jersey will become the eighth state to legislatively mandate a separate category for data center utility customers— an increasingly common way for utility regulators to ensure that ratepayers are protected from data center load growth. 

In Illinois, governor JB Pritzker has paused data center incentives, following through on a high-profile announcement that he initially made while unveiling a data center regulatory overhaul called the POWER Act. That bill would include the strongest data center guardrails of any state to date, including strict clean energy requirements, a large load tariff, and numerous other consumer and cost-shifting protections. Although the POWER Act didn’t pass during the spring session, the legislature may act on it later this fall. 

Pritzker is not the only 2028 presidential aspirant strengthening his position on data centers. Pennsylvania governor Josh Shapiro is now calling for stronger grid standards, following reporting that his strategy for going “all in on AI” seemingly involved special access to fast-track permitting for Amazon.

California governor Gavin Newsom stands out as an exception, continuing to tout data centers as “critical digital infrastructure.” On Silicon Valley’s home turf, lobbyists have outlined their strategy for defending data centers as essentially replicating BP’s playbook when it coined the term ‘carbon footprint.’ Hyperscale data centers are 100 times larger and consume vastly greater resources than many existing data centers and server farms, yet tech lobbyists claim that opposition to them is hypocritical from anyone who uses a smartphone.

In New Mexico, legislators from Doña Ana County insisted that governor Michelle Lujan Grisham allow a vote on the Microgrid Oversight Act before considering her final attempt to codify climate targets she had established during her first year in office. The Microgrid Oversight Act would have clarified that New Mexico’s utility regulator had power over Project Jupiter, a hyperscaler that would pollute more than New Mexico’s two largest cities combined. The Senate passed the Microgrid Oversight Act, while voting down the governor’s climate target bill (in the end, neither bill became law before the end of New Mexico’s short 2026 session).

The strong likelihood that utility ratepayers and state and local governments will be left with the bill when the bubble pops is causing many public officials to conclude that a pause is warranted. In June, New York became the second state to pass a data center moratorium. Instead of signing it, governor Kathy Hochul issued a weaker moratorium on hyperscale data centers by executive order.  Seattle became the latest big city to put a pause on data center development when its city council unanimously supported a one-year moratorium. 

The smaller city of San Marcos, Texas has effectively banned data centers as well. Elsewhere in Texas, El Paso has not gone so far as a ban, but has approved a strong set of restrictions on regulatory exemptions and incentives. The restrictions will probably slow hyperscale development around El Paso, although a project by Meta is still moving forward. Even far-right Texas governor Greg Abbott is calling for stronger regulatory oversight over grid pressures, cost increases, and tax giveaways to data centers, following the revelation that Texas is losing over $1 billion annually from data center tax incentives. 

In addition to Texas, three other states are losing out on over $1 billion annually from data center giveaways. One of them is Virginia, home to "data center alley.” Virginia’s status as a data center haven became a major sticking point in state budget negotiations this summer. Although budget negotiators from the Virginia Senate reportedly wanted to eliminate data center tax credits through 2035, governor Abigail Spanberger and House negotiators did not want to go that far. They agreed instead to a new fee on data center electricity consumption, which will be capped at $600 million annually. The budget language also includes direction to develop regulations around noise and water usage monitoring. 

In our next post, we’ll cover how the popular backlash against the data center boom is reshaping 2026 electoral politics, from state legislatures to Congressional and gubernatorial races all across the country.