Climate economist Nicholas Stern says India should require AI data centre developers to supply their own renewable electricity, arguing that the country's abundant sunshine and cheap solar give it an edge. In an October 19 interview, he also called rich nations' aid cuts "morally reprehensible" and urged reform of multilateral development banks.
<p>As artificial intelligence sets off a scramble for electricity around the world, one of the most influential voices in climate economics has offered India a clear recommendation: make the companies building data centres responsible for supplying their own clean power.</p><p>Nicholas Stern, the British economist whose 2006 review reframed climate change as an economic issue, told Business Standard in an interview published on October 19 that data centre developers should be required to supply their own renewable electricity and avoid harming local communities. India, he said, has "abundant sunshine," and data centres running on solar power and battery storage could support the country's ambitions in AI.</p><p>The comments come as India's data centre industry expands rapidly and as the global AI boom raises urgent questions about where the electricity to power it will come from.</p><h2>AI's energy appetite</h2><p>Stern acknowledged that AI can be a powerful tool for tackling climate change. It can help manage energy and transport systems more efficiently, accelerate the discovery of new materials for batteries and chips, and improve assessments of climate vulnerability.</p><p>But he also highlighted the scale of the energy challenge. AI data centres might account for around 5% of total electricity consumption by the middle of the century, he said. In the short run, however, they can drive a large share of demand growth in particular regions, putting pressure on grids and potentially increasing reliance on fossil fuels if clean supply does not keep pace.</p><p>That pressure is already visible elsewhere. In the United Kingdom, Microsoft recently withdrew from an agreement to use a planned AI data centre in Essex after grid operators reportedly said sufficient power would not be available until the 2030s. In the United States, utilities in several states have warned of capacity constraints as data centre demand surges.</p><img src="/api/files/1792483417209-415afe13bf822682ae971b0a.webp" alt="d148836e-6f1f-499f-af0a-3ef322d02ddc.png"><h2>India's solar advantage</h2><p>Stern argued that India is well placed to meet AI's energy needs cleanly. "Renewables are now the cheapest source of electricity in India," he said, adding that they can also help reduce urban air pollution, one of the country's most serious public health problems.</p><p>India has built one of the world's largest solar and wind sectors over the past decade, and the cost of solar power has fallen sharply. States such as Gujarat, Rajasthan and Karnataka have become major renewable energy hubs. Pairing solar with battery storage, whose costs have also fallen, can provide round-the-clock power for energy-intensive facilities such as data centres.</p><p>India's data centre market is growing fast, driven by cloud computing, AI adoption, digital payments and data localisation rules. Global and domestic operators are investing billions of dollars in facilities around Mumbai, Chennai, Hyderabad and the National Capital Region. Bharti Airtel's data centre arm, Nxtra, raised $1 billion this year in the largest venture deal in India in 2026.</p><p>Requiring developers to bring their own renewable supply, as Stern suggests, would help ensure that this growth does not strain grids or increase coal use. Several Indian states already allow large consumers to procure renewable power directly through open access and captive arrangements.</p><h2>Energy security and oil</h2><p>Stern also addressed India's energy security, an issue made urgent by conflict in the Middle East and disruptions to oil shipping through the Strait of Hormuz. He said India's oil and gas imports amount to about 5% of its gross domestic product.</p><p>In the short term, he recommended holding stocks, building reserves and diversifying supply sources. In the medium term, he said, the focus should be on reducing dependence on oil and gas altogether, through electrification and renewable energy. Nuclear power has a role, he said, but it is slow and costly to build, so it cannot scale fast enough on its own.</p><h2>A sharp critique of rich countries</h2><p>Stern was blunt about the state of international climate finance. Many wealthy countries have cut aid and concessional finance, making it harder for developing countries to fund the energy transition. He described this as "morally reprehensible."</p><p>He argued that multilateral development banks, such as the World Bank and regional development banks, have "unused firepower" and could lend at interest rates of 4% to 5% with modest increases in their capital. Stern was part of a G20 expert group, chaired by N K Singh and Larry Summers, that reviewed reform of multilateral development banks. He said the group's work has shifted the debate, for example towards greater use of guarantees at the World Bank.</p><p>Lower-cost finance is critical for countries such as India, where the high cost of capital can make renewable energy projects more expensive than they need to be, even when the underlying technology is cheap.</p><h2>Critical minerals and carbon borders</h2><p>On critical minerals, Stern said the main problem is not where minerals are found but where they are processed, a stage currently dominated by China. He suggested that three to five more major processing centres around the world could break that concentration, with India as one of them.</p><p>He also defended the European Union's Carbon Border Adjustment Mechanism, which will impose charges on carbon-intensive imports such as steel, cement and aluminium. Stern described it as justified carbon pricing rather than protectionism and consistent with World Trade Organization rules, although he said he has urged EU leaders to limit it to specific sectors and keep it transparent. Indian exporters of steel and aluminium have been concerned about the mechanism's impact on their competitiveness.</p><h2>Who is Nicholas Stern</h2><p>Lord Nicholas Stern is a professor at the London School of Economics and chair of the Grantham Research Institute on Climate Change and the Environment. A former chief economist of the World Bank, he led the landmark Stern Review on the Economics of Climate Change for the UK government in 2006, which argued that the costs of acting on climate change would be far smaller than the costs of inaction. His work has shaped climate policy debates around the world for nearly two decades.</p><h2>What it means for policymakers</h2><p>Stern's recommendations offer a framework for Indian policymakers as they balance rapid growth in digital infrastructure with climate goals. Requiring data centres to secure renewable supply, investing in storage and transmission, and pushing for cheaper international finance could allow India to build its AI economy without locking in higher emissions.</p><p>For India's businesses and investors, the message is that clean energy is no longer just an environmental choice but an economic advantage. In a world where power is becoming the scarcest input for the AI economy, India's sunshine could prove to be one of its most valuable resources.</p>
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