Data centers are booming. As companies race to build the infrastructure behind artificial intelligence, communities across the country are sounding alarms about how much water these facilities consume. Some worry the massive complexes will strain water supplies that are already stretched thin.
The debate has quickly turned toward regulatory fixes, such as disclosure mandates, environmental reviews, and limits on how facilities operate. But the problem isn’t how much water data centers use—it’s how water gets allocated among competing demands. And as with any resource-allocation problem, the best answer isn’t mandates. It’s well-functioning markets.
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