Virginia slaps data centers with big new tax — but no climate rules

Virginia lawmakers just passed a new state budget that puts a $600 million tax on the electricity data centers use — the first tax of its kind in the country. Gov. Abigail Spanberger is expected to sign it before the July 1 deadline. But the budget skips the tougher climate and air-quality rules that some Democrats had pushed for, including limits on the diesel backup generators many data centers run and a requirement that tech companies build their own clean power, like solar or batteries, to cover their energy use.

That matters for Virginia residents because those backup generators emit pollutants such as carbon monoxide and nitrogen oxides, and researchers have found pollution from clusters of data centers in northern Virginia has at times rivaled a nearby gas power plant. One bill this year would have required batteries as the first backup option and capped generator use at 500 hours a year, but only a narrower piece survived: new data centers must now use lower-emission "Tier 4" generators instead of older, dirtier "Tier 2" models. Rules on water use and noise did make it into the budget, though nothing on the generators themselves.

None of this is a program or rebate for homeowners to act on. It's a sign of how your state is — or isn't — regulating the data centers driving up electricity demand nearby. Virginia's utility, Dominion Energy, expects data centers to account for over half its electricity sales by 2035, which is part of why the debate over who pays and who cleans up matters for future bills and air quality. A legislative study panel is due to recommend further data center reforms by the end of the year.