Sustainability labelling for European data centres

On 2 July 2026, the European Commission published a revised draft of its Delegated Regulation establishing a mandatory EU-wide sustainability rating scheme and electronic label for data centres (the “Draft 2026 Regulation”). The Draft 2026 Regulation supplements the Energy Efficiency Directive (EED) (Directive (EU) 2023/1791), and forms part of the EU’s data centre energy efficiency package, which also includes the Strategic roadmap for digitalisation and AI in the energy sector and the highly anticipated Cloud and AI Development Act. 

In March 2024, the Commission adopted the Delegated Regulation (EU) 2024/1364 (the “2024 Regulation”), which established the European database on data centres and introduced the initial reporting framework. The European database serves as one of the main data sources on energy consumption of the EU’s data centres. 

The Draft 2026 Regulation amends the 2024 Regulation by introducing the rating and labelling mechanism — akin to the energy efficiency labels already familiar from household appliances — and makes several material changes to an earlier version of the Draft 2026 Regulation published in March this year (see our summary of these changes below). 

For developers, operators, investors and lenders active in the European data centre market, the sustainability label is expected to drive meaningful change. While the 2024 Regulation and Draft 2026 Regulation only include reporting and no minimum performance obligations, the label is expected to be used within the EU for wider purposes such as access to green and sustainable finance, public sector procurement decisions, and sustainability assessments under the forthcoming Cloud and AI Development Act. Given that regulatory compliance and sustainability credentials are also increasingly central to data centre valuations and investment decisions across Europe, it is anticipated that the sustainability label will, over time, serve a broader function beyond disclosure alone.

Scope and and core metrics of the label

The mandatory reporting and labelling obligations of the Draft 2026 Regulation apply to operators of data centres with an installed information technology power demand of at least 500 kW. The latest Draft 2026 Regulation extends its scope of application compared to the Energy Efficiency Directive and 2024 Regulation by also allowing voluntary participation for: (1) data centres with an installed information technology power demand of less than 500 kW; and (2) data centres at design stage or under construction, each by reporting the required KPIs to the European database. Data centres supporting defence and civil protection will be exempt from these obligations. 

Labels are graded on a scale of A to G — with A representing the highest level of sustainability performance and G the lowest — across two core metrics of (i) Power Usage Effectiveness (PUE), and (ii) and Water Usage Effectiveness (WUE). 

Other sustainability indicators shown on the label are the sourcing of the energy, contribution to new energy asset capacity, flexibility for the grid and waste heat reuse readiness. 

The label will be generated automatically by the European database at the end of each annual reporting period, with the first labels required to be issued by 15 August 2027. Labels are valid for one year and will be publicly available. 

Main changes since the March 2026 version

The July 2026 updated Draft 2026 Regulation introduces a number of substantive changes compared to the March 2026 version, across the following areas: 

• Updated methodologies for PUE and WUE calculations. The A-to-G rating scales for both PUE and WUE were already established in the March 2026 draft as follows and remain unchanged: 

  PUE	Total Energy Consumption Data Centre	A (PUE ≤ 1.15) through to G (PUE > 1.90)
  	Total Energy Consumption IT Equipment
  WUE	Total Water Input	A (WUE ≤ 0.10 l/kWh) through to G (WUE > 1.00 l/kWh)
  	Total Energy Consumption IT Equipment

  The PUE and WUE formulas themselves have not been altered but several definitions of the inputs for these formulas have been materially revised as further detailed below.

• Cooling and waste heat reuse considered. Total energy consumption of the data centre explicitly includes all energy sources used for cooling with a potential negative impact on PUE but also allows for a deduction of heat upgrade energy, rewarding data centre operators investing in waste heat reuse as their PUE will improve.
• Rack-level measuring. Total energy consumption of IT equipment must be measured at rack-level and no longer at the power distribution unit (PDU) level and this increased granularity will likely result in improved PUE values.
• Freshwater instead of potable water. In the definitions of the WUE inputs, “potable water input” has been replaced by “freshwater input” aligning with EU’s water regulations and policies. This change broadens the water input that must be counted towards the WUE, since freshwater includes non-potable sources (e.g. river or groundwater), potentially worsening WUE class for operators using such sources for cooling who previously reported only potable water.
• Nuclear recognised as “low-emission”. A new Low-Emission Energy Factor is introduced to include nuclear energy alongside renewables. Whereas the March 2026 draft focused exclusively on renewable energy, the July draft introduces a parallel set of reporting indicators for nuclear energy to be displayed separately on the sustainability label, reflecting the broader EU energy policy direction of recognising nuclear power as part of the low-carbon energy mix.
• GOOs broader geographical scope and two-speed time-matching. The baseline GOO indicator is easier to meet as it needs only to relate to energy production located in a bidding zone interconnected to the data centre’s bidding zone (instead of the same bidding zone), with no time-matching requirement. The new capacity GOO indicator is the more ambitious standard, incorporating time-matching and new asset requirements but it is reported separately on the label rather than being the sole applicable standard.

What’s next? 

The Draft 2026 Regulation is still subject to scrutiny and approval by EU Member States and the European Parliament before it can be formally adopted by the Commission. Following adoption, it will be published in the Official Journal of the European Union and will enter into force 20 days thereafter. The rating scheme is then expected to apply from 15 August 2027, with the first sustainability labels generated at that date. The Commission is required to review and report on the enacted Regulation by 31 December 2028 and every three years thereafter, with the review scope including the possibility of introducing a composite sustainability score, ICT equipment performance indicators, and partial certification or auditing of reported data.

As alluded to above, the sustainability rating is also expressly intended to be used in other EU legislative frameworks, such as sustainability assessments under the forthcoming Cloud and AI Development Act and in the context of the EU Taxonomy Regulation's Climate and Environmental Delegated Acts. 

If you would like to discuss any aspect of the Draft 2026 Regulation, the data centre sustainability label or their implications for your projects or investment strategy, please reach out to the contacts on this post, or to your usual Linklaters contact.