by Michael Bullock

Green Gotcha: Carbon Trading and the Looming IT Tax

Jul 20, 2009 4 mins
Data Center

If you don't understand one huge variable in data center relocation planning, it will cost you.

(Codes: 69aqybhcmp  8357kqrgdt) I’m going to stay away from the global warming and climate change debate; it looks (for now) like that train has left the station. Instead, I’d like to focus on the potential tax exposure created by “Cap and Trade” as it relates to the data center.

Last week I wrote about the Five Myths of Data Center Optimization, or Power Usage Effectiveness (PUE). However, a concept that is not a myth is that power distribution and cooling expenses act as a multiplier to the total cost to operate a data center.  In other words, a data center operating at a 2.0 PUE level is generally wasting 1/3 more of the electricity it purchases to support IT operations than one operating at a more efficient PUE of 1.3. If you can buy power cheaply enough, it may seem like the penalty created by that 2.0 PUE rating is inconsequential. Trust me, it’s not.

If you look more closely, you’ll see that cheap electricity does not necessarily translate to a reduced carbon footprint. In fact, some electricity that’s cheap by today’s standards may increase substantially in total expense to you in the near future as Cap-and-Trade takes full effect. So, in the long run, making data center site selections based on today’s lowest cost of electricity may not be a wise strategy.

For example, the CO2 produced by nuclear and hydro-electric sources is minimal when compared to coal and petroleum-based plants, which are expected to produce 2.1 and 1.9 pounds of carbon dioxide gas respectively per kWh of electricity. Over time, as taxes work their way through the value chain and increase prices, you can expect the cost of electricity to reflect these differing methods of generation and their consequent emissions more accurately.

According to the EPA, the average emission rate of CO2 per kWh across all US regions is about 1.4 pounds.   NY, CA, the Pacific Northwest and New England are all on the good side at about 0.9; the South averages around 1.5 and the Rockies come in at just over 2.0.  And in the absence of some complicated, yet-to-be-defined measurement and auditing system, it seems logical that the federal government will use the EPA’s sub-region map for determining Cap and Trade allocations.

Here are two examples based on regional PUEs and local power grids:

• A data center in New England leveraging free cooling can achieve a sustainable PUE of about 1.3.  At about .9 pounds of CO2, this facility generates about 1.17 pounds of CO2 per kWh.

• A data center in Texas with constant cooling demands will have a hefty PUE of about 2.0.  Producing about 1.4 pounds of CO2 (per kWh), this facility will contribute 2.8 pounds of CO2 per kWh – for an increased carbon impact 140% above the New England example. 

If you’re wondering just what impact this increased carbon footprint will have on global warming, join the club. There’s only one thing on which we can all probably agree – this increased carbon footprint will most assuredly be taxed. Bet on it. I don’t know about you, but avoiding an increased tax exposure of around 140% sounds like a pretty good idea to me.

By now you might be trying to figure out how cogeneration and alternative energy can help. Put down your pencil.  Of the fossil fuel alternatives (eco-unfriendly, but reliable), natural gas is best at about 10 pounds per kWh (with diesel generators topping out over 22 pounds per kWh). Clearly, solar and wind power generation are carbon friendly, and may help your organization one of these days, but right now (and for the foreseeable future) they don’t scale to the magnitude and constant power demands required by corporate data centers.

I wish I could tell you how this will all play out in terms of specific tax impact, but your guess is as good as mine.  In the meantime, the best advice is to focus on the stuff you can control. Optimize your PUE and don’t rush into a new facility without first taking a close look at your potential carbon exposure.

Listen carefully. Are those (carbon) footsteps you’re hearing? Or the tax man’s?

As always, I welcome your comments, tips, insights and topic suggestions.  You can reach me at

Michael Bullock is the founder and CEO of Transitional Data Services (TDS), a Boston, MA-based consulting firm focusing on green data centers, data center consolidation / relocation, enterprise applications and technical operations.  Prior to founding TDS, Bullock held executive leadership positions at Student Advantage, CMGI and Renaissance Worldwide.