While political attention was focused on a major defense gathering elsewhere in Southeast Asia, many missed a major announcement from Manila on May 30 that negotiations on the ASEAN Digital Economy Framework Agreement (DEFA) were finally over. DEFA is the world’s first regional digital economy agreement, establishing common rules for cross-border data transfers, e-commerce, cybersecurity, AI and talent mobility, among other areas. With Southeast Asia’s digital economy expected to reach $1 trillion by 2030, DEFA is ASEAN’s attempt to write the rules for its digital future.
In recent years, the regional organization has also engaged in increasingly ambitious sustainable development initiatives. For example, the ASEAN Socio-Cultural Community (ASCC) Plan 2025 states that ASEAN “envisions the achievement of environmental sustainability in the face of social change 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 although they currently consume only 1.5% of global energy production, increasingly power-hungry server farms account for an ever-higher percentage of electricity consumption each year. In Malaysia, for example, estimates suggest that data centers could account for 30% of national electricity consumption by 2030. Globally, cooling these centers also consumes up to 1.5 million liters of water per day, and facilities dedicated to artificial intelligence (AI) training are expected to increase annual global carbon emissions by 1.2% by 2030.
ASEAN member states recognize that the development of digital infrastructure will be necessary for ASEAN’s digital integration goals to be successful. In particular, data centers have quickly become the backbone of Southeast Asia’s digital economy, underpinning everything from e-commerce and cloud services to AI and smart governance.
With only 3% of global data center capacity located in Southeast Asia, the data center market is expected to double in size and become a $11.8 billion industry by 2030. These facts clearly show that investment in digital infrastructure is both strategically and commercially important for the region; but questions remain about 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 dependent on fossil fuels for electricity generation, meaning that growing demand for electricity from digital infrastructure directly translates into increased emissions. As a result, data center emissions in ASEAN are expected to continue to rise, particularly where networks remain dominated by coal and gas, as is the case in Malaysia, Singapore, the Philippines and Indonesia. These pressures are compounding the effects of climate change itself, including more intense heat and increasingly volatile monsoon seasons.
Third, the favorable conditions required for renewable energy integration, including grid capacity, financial infrastructure, and proximity to clean energy sources, remain highly concentrated in large urban centers and special economic zones, reinforcing the clustering of data centers in already energy-intensive urban areas.
Balancing digital expansion and environmental sustainability
Over the past decade, ASEAN legal and policy documents have increasingly recognized the tension between expanding digital infrastructure and achieving environmental goals.
Indeed, at the last ASEAN Digital Ministers’ Meeting in January, members adopted the Hanoi Declaration on Digital Cooperation, explicitly calling for a “green digital transformation,” including energy-efficient digital infrastructure, increased use of renewable energy for data centers, AI-driven network optimization, and the integration of ESG principles into digital policy.
The Hanoi Declaration is likely to accelerate a policy shift already underway, as demonstrated by the evolution of ASEAN energy cooperation plans for 2020-2025 to 2026-2030.
In the ASEAN Action Plan for Energy Cooperation (APAEC) 2020-2025 policy plan, digitalization is defined primarily as contributing to “cleaner and more efficient energy” production within the energy sector itself, combined with smart grids, big data, AI and cloud computing to improve regional energy capacity. This plan sees digitalization as largely complementary to decarbonization goals, without substantially addressing its potential contribution to environmental problems.
In contrast, APAEC’s updated plan for 2026-2030 explicitly recognizes that “the rapid growth of the digital economy is driving an increase in electricity demand and posing new challenges for electricity load management”, while emphasizing 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 Development of Data Centers. The guide, released in early 2026, centers on the “digital infrastructure trilemma,” which defines the main political tension facing the region: balancing (1) digital expansion; (2) environmental sustainability; and (3) resource resilience and security. The trilemma clearly restates what had already been recognized in the APAEC plan for 2026-2030, namely that the rapid expansion of data centers must be balanced with environmental sustainability goals and the need to safeguard critical resources such as electricity, water and land.
The Guide identifies fragmented legal governance regimes in energy, water, ICT and land use as the greatest obstacle to solving the trilemma and recommends cross-sectoral national working groups to align benchmarks and standards in these areas. It also provides recommendations on how ASEAN can adopt global best practices in 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 this trilemma. The “development gap” between ASEAN’s more and less developed countries poses a particularly acute challenge to the regional organization, as the “ASEAN way” of consensus-based decision-making means that progress on integration can be fragmented and slow. Taken together, these factors suggest that although the policy direction is clearer than before, implementing sustainable governance of digital infrastructure in the region remains a significant challenge.
Addressing the digital infrastructure trilemma
As ASEAN moves towards the implementation of DEFA, the challenge is how to design policies that pursue both ASEAN’s digital integration and sustainability goals. While the Hanoi Declaration and the Guidance on Data Center Sustainability are important starting points, current ASEAN digital strategic policy documents should be revised to make explicit how sustainability goals can be pursued in tandem with each ASEAN state’s digital integration goals while recognizing their stage of economic development.
As noted above, the guide outlines how sustainable data center best practices can be implemented in other ASEAN initiatives such as the ASEAN Power Grid and the ASEAN Green Agenda. Considering the urban clustering problem mentioned above, such policies could also be integrated into ASEAN urban development and governance, such as the ASEAN Task Force on Environmentally Sustainable Cities.
This could take the form of a dedicated chapter on “green digital” which could then be integrated 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 ensuring that sustainability considerations shape the responsible development of these technologies.
Responding to the Hanoi Declaration’s call 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 tax breaks or reduced tariffs. ASEAN should also prioritize the development of harmonized regional standards to compare and guide the sustainable development of data centers across all member states. This does not require starting from scratch. Existing international frameworks within the European Union and elsewhere can serve as models, which can then be adapted to local conditions.
ASEAN is well positioned to become a global leader in the green and digital revolutions. Its success will depend on its ability to transcend traditional governance disciplines and adopt a more holistic and interdisciplinary approach. Recent legislative and policy initiatives are moving in the right direction; the real test now is implementation.