EU: Cloud and AI Development Act

 

As part of the ‘AI Continent’ initiative, the European Union is introducing a new legislative act aimed at closing the gap in Europe’s cloud and AI infrastructure capacity. This will be achieved through:

• promoting research and innovation to accelerate the ecological transformation of computing infrastructures and data centres used for cloud and AI purposes;
• encouraging private sector investment in sustainable cloud and AI infrastructure, with the goal of tripling the EU’s data processing capacity over the next five to seven years;
• implementing measures to enhance the secure processing capabilities of cloud service providers based within the European Union.

The training, fine-tuning, and operational use of AI models require immense computational power. While the training phase depends on centralized, large-scale computing capacity, more distributed systems—such as cloud and edge computing—are essential for smaller-scale fine-tuning activities and for executing AI models (inference). Data centres form the backbone of this infrastructure, hosting and operating the hardware and systems required. However, the EU currently trails behind the United States and China in terms of the available capacity of its data centres.

The purpose of this initiative is to resolve the unfavourable conditions that prevent the private sector from addressing this capacity gap, while ensuring that the expansion is based on environmentally sustainable solutions. The initiative is therefore designed to tackle the barriers currently limiting the growth of the EU’s data centre capabilities. These include restricted access to critical natural resources such as energy, water, and land, as well as fragmented and slow permitting procedures, which vary significantly across Member States. Constructing new data centres also requires high levels of capital investment, which creates entry barriers for new market participants. This process can also be hindered by challenges in sourcing the necessary technology components and securing sufficient funding.

The rising energy and water demands of data centres further intensify these challenges, especially given the strong geographical concentration of such centres in the north-western region of the EU. Technological advances in data centre equipment and operational methods offer opportunities for significant efficiency gains, yet these innovations remain underutilized. Furthermore, high energy prices in the EU diminish the international competitiveness of the sector. Another critical issue that the initiative addresses is the lack of a robust, EU-based offering of cloud computing services that are large-scale and secure enough to support critical applications requiring high levels of data protection. These applications are found across various sectors of the economy and within public administrations.

The core intention of this initiative is to create favourable conditions that enable the private sector to expand sustainable cloud and edge computing capacity within the European Union, thus closing the current infrastructure gap and enhancing both the EU’s competitiveness and technological sovereignty. The initiative’s objectives are grouped into three main pillars:

1. Foster research and innovation to establish the EU as a leader in resource-efficient data processing infrastructure, software, and services. This includes advancing the sustainability of AI-related data processing across the entire computing spectrum and improving data centre operations in areas such as power management, cooling, integration with energy and water systems, and overall efficiency.
2. Triple the EU’s data centre capacity within the next five to seven years by attracting and facilitating investment in sustainable data centres throughout the EU. This involves addressing hurdles like lengthy permitting procedures and difficulties in accessing essential resources such as energy, land, and capital. Financial support mechanisms may be considered—compliant with applicable State aid rules—for data centres that demonstrate strong commitments to innovation and sustainability.
3. Ensure that narrowly defined, highly critical use cases can be supported using highly secure, EU-based cloud infrastructure. At the same time, the initiative aims to create the necessary conditions for the European cloud industry to develop and provide secure data processing capabilities that meet the unique needs of these critical use cases.

At this point in the policy development process, the European Commission is contemplating the following preliminary policy options:

• Option 0 serves as the baseline scenario. It will take into account the current national and EU-level policies, as well as major technological or social trends, and will be used as a reference point for evaluating other options.
• Option 1 is a non-legislative approach. It would involve the adoption of voluntary measures, such as establishing a network of Member States to monitor national strategies for meeting Digital Decade objectives, or issuing guidelines to facilitate coordination among Member States in the development of cloud strategies, investment decisions, and site selection for new data centres.
• Option 2 is a soft regulatory framework. Under this option, the Commission could introduce binding legislation in the form of a Directive, allowing national governments the flexibility to choose how best to meet their computing infrastructure needs.
• Option 3 represents a regulatory approach. This would involve the adoption of binding rules through a Regulation, establishing a uniform set of measures for all Member States to harmonize their cloud computing policies and to coordinate support for the development of a reliable EU-wide infrastructure ecosystem.
• Option 4 outlines a comprehensive regulatory model. In addition to introducing binding measures to address the EU’s computing capacity gap, this option would involve the creation of an independent agency. The agency would be responsible for ensuring consistent enforcement across Member States and managing joint investments in building and owning a secure, European cloud infrastructure ecosystem.