On July 14, 2026, New York Governor Kathy Hochul signed Executive Order 62, placing a moratorium on data centers and making New York the first state to do so. The order applies to data centers using 50 megawatts (MW) or more. Naturally, many have concerns for ripples throughout the energy markets and data economy.
The executive action was the chosen alternative to the stricter Responsible Data Center Development Act (RDCDA), which the state legislature passed a few weeks earlier by 44-16 in the Senate and 102-39 in the Assembly. Due to the conflicting executive order, the bill is expected to receive a within-the-year veto. The main difference is that the legislative bill applies to data centers that use 20 MW or more as opposed to 50 MW, expanding its scope. So, now that New York has responded to this political pressure and placed a moratorium on data centers, pausing all discretionary environmental approvals not at the local scale, what’s next for the Empire State? What about the rest of the country?
The larger policy question is not simply whether states should permit data centers, but under what conditions they should do so. Critically, the RDCDA supplied guidelines to separate electric and water rate classes, reestablishing pricing for each respective industry for large data centers. Specifically, this policy applies to data centers with a peak demand of 20 MW, but, critically, this does not leave small data centers outside of regulation; centers that reach a peak demand of 5 MW would still bear significant restrictions, including required to use renewable energy and forcing developers to use domestically produced iron and steel.
Contrastingly, the executive order has a thinner framework, only pausing environmental approvals for projects consuming greater than 50 MW. Explicitly, the order does not apply to permission from local governments, given in various forms (e.g., licenses, permits, approvals). Otherwise, environmental approvals, involving inspection relating to water, air, and storm regulation, are subject to the order. The order is set to last until the Department of Public Service completes a Generic Environmental Impact Statement, with a mandatory conference and white paper due on December 31, 2026, concerning the electricity distribution behind data center infrastructure throughout New York.
As for the rest of the country, other states are also taking action. For example, Virginia, the largest hub in the country for data centers, has begun implementing targeted pricing through the Data Center Consumption Tax. The legislation is set to implement a tax at $0.011 per kilowatt-hour (kWh) for data centers until June 30 2028, and require them to limit water use through the use of closed-loop cooling systems and stormwater reuse. Similarly, California is also attempting to limit data centers by taxing those that have high levels of emissions. Together, these approaches suggest that states are moving toward a broader regulatory framework rather than a single national model.
Lastly, the looming question: what’s next for America with a seemingly joint effort to limit data center proliferation? Energy companies have posted statistical analyses that suggest they support a pause; PJM, for example, has written that ratepayers are paying $9.3 billion more annually due to data centers’ electricity demand. Despite particular backlash against moratoria, which list job opportunities and energy investment as central reasons to affirm data center construction, other companies are eager to see the precedent that New York sets as the inaugural moratorium, especially given that New York is not a top market for hyperscale data center development.
The challenge is therefore to distinguish between stopping data center development and managing it responsibly. Data centers can bring investment, construction activity, and tax revenue – on top of the obvious data value created, but the direct community benefits become less persuasive if utilities and communities must absorb the costs of new generation, transmission, and water systems. The success of a moratorium should ultimately be judged not by the number of projects it stops, but by whether it is serving the best interests of the communities and possibly allowing viable and fair projects to proceed while establishing and refining a matrix for how to evaluate good projects to streamline development in the future.
At the end of the day, the Generic Environmental Impact Statement is the next landmark decision that will significantly impact the future of data center regulation. If the assessment yields a pro-construction stance, possible benefits combined with environmental regulation may finally update New York’s long-standing insufficient energy grid. Until then, the moratoria will not only pause data center construction itself. Rather, it will also pause the limbo that the country is in over the infrastructure debate that plagues A.I. development.
Written by Will McNairy, Public Policy Intern
The Alliance for Innovation and Infrastructure (Aii) is an independent, national research and educational organization. An innovative think tank, Aii explores the intersection of economics, law, and public policy in the areas of climate, damage prevention, energy, infrastructure, innovation, technology, and transportation.