Japan has launched a new government-backed programme to develop and test low-carbon technologies for data centres, as the country seeks to curb rising emissions from the rapid expansion of digital infrastructure and generative artificial intelligence (AI).
The country’s environment ministry said on Monday it had opened applications for projects under a new initiative aimed at accelerating the commercialisation and deployment of environmentally friendly technologies for data centres and other digital infrastructure.
The programme, run in cooperation with Japan’s Ministry of Internal Affairs and Communications, will support the development and demonstration of technologies that help reduce carbon dioxide emissions from digital infrastructure.
The environment ministry said the initiative was designed to support the country’s emissions reduction targets for fiscal 2030, 2035 and 2040, as well as its goal of achieving carbon neutrality by 2050.
It added demand for data centres was expected to increase as Japan accelerates digitalisation and the adoption of generative AI.
“Accelerating digitalisation and the use of generative AI is urgently needed to strengthen industrial competitiveness, reduce disaster risks through regional decentralisation, revitalise local economies, address population decline and protect the environment,” the ministry said in a statement.
The programme will fund projects focused on developing and demonstrating environmental technologies that can reduce emissions from digital infrastructure, while also studying market trends and potential use cases to support broader social implementation.
Eligible applicants include private companies, universities and organisations. The application period runs from 11 May to 11 June.
Under the scheme, individual projects can receive up to JPY300 million (US$2 million) annually through commissioned contracts, while subsidy-based projects can receive up to JPY250 million (US$1.6 million), covering up to half of total project costs.
Combined commission-and-subsidy projects can receive up to JPY500 million (US$3.2 million) in total support, and projects are expected to run for up to four fiscal years, from fiscal 2026 through fiscal 2029.
Japan, like many countries, is facing growing pressure to manage the environmental impact of data centres as AI-driven computing demand surges.
The International Energy Agency (IEA) said global electricity demand from data centres rose 17 per cent in 2025, while electricity consumption from AI-focused facilities surged by 50 per cent.
The agency has warned that AI and data centres are becoming a major driver of electricity demand growth, particularly as generative AI models require large numbers of energy-intensive graphics processing units (GPUs), with servers and accelerators accounting for around 60 per cent of electricity demand in modern data centres.
In Japan, demand for AI-ready data centres is expanding rapidly. Market research firm Research and Markets estimated that the Japanese data centre market could grow from US$12.8 billion in 2025 to nearly US$39 billion by 2031, driven by generative AI adoption and hyperscale investment.
Tokyo remains the dominant hub, though regions such as Hokkaido and Kyushu are increasingly attracting projects because of available land and government support.
The rapid expansion has also intensified concerns over electricity use, water consumption and grid strain.
A recent academic study projected that global AI-related data centre electricity demand could more than double by 2030, potentially reaching almost 1 per cent of total global power demand, while concentrated clusters of AI infrastructure could create regional stress on electricity systems.
Policymakers and technology companies are increasingly focusing on liquid cooling, energy optimisation and renewable energy integration to reduce emissions from the sector.
Liquid cooling is gaining traction because traditional air-cooling systems are struggling to handle the heat generated by high-density AI workloads. Industry estimates suggest Japan’s liquid cooling market could grow more than six-fold by 2032.
The IEA has also said that while renewables are expected to meet part of the growing electricity demand from data centres, fossil fuels could still supply more than 40 per cent of additional power demand linked to the sector through 2030 unless clean energy deployment accelerates further.
