Summary As proposed, the Cloud and AI Development Act (CADA) expects data centre deployment to fundamentally reshape Europe's digital economy by tripling computing capacity by 2030 and meeting full demand by 2035. The proposal aims to strengthen the cloud and AI ecosystem, attract substantial investment, and enhance the Union's competitiveness and technological autonomy. By creating attractive conditions for sustainable, resource-efficient data centres, CADA seeks to reduce critical dependencies on third-country providers and foster a resilient digital single market.

Detail

The proposed Cloud and AI Development Act (CADA) is designed to address structural bottlenecks in the European Union's digital infrastructure, specifically the shortage of computing capacity and the over-reliance on non-European cloud providers. The economic impact anticipated from this legislative framework is multifaceted, targeting capacity expansion, investment attraction, sustainability, and strategic autonomy.

Strengthening the Cloud and AI Ecosystem

The primary economic objective of CADA is to strengthen the Union's cloud and AI ecosystem by ensuring the conditions necessary for competitiveness and innovation. As outlined in the proposal's explanatory memorandum, the initiative seeks to increase computing capacity and AI developed and deployed in the EU through innovative and sustainable technologies. By establishing a harmonised framework, CADA aims to remove regulatory fragmentation that currently hinders the rapid deployment of data centres, thereby creating a more predictable and attractive environment for investors.

The proposal explicitly targets a significant increase in physical capacity. Specific objective No 1, as detailed in the legislative financial statement, states that by 2030, the EU should at least triple its current data centre capacity, prioritising energy-efficient technologies in new installations. This expansion is not merely about volume; it is about ensuring that by 2035, the computing capacity in the EU meets its needs, thereby supporting the wider deployment and diffusion of AI across the economy. The explanatory memorandum notes that the Union's limited data centre capacity poses a significant threat to its ability to benefit from the digital transformation and adopt AI-driven solutions.

Attracting Investment and Enhancing Competitiveness

CADA recognises that the current landscape is characterised by a pronounced dependence on a limited pool of third-country providers, with the EU market share for EU providers decreasing from 29% in 2017 to 15% in 2022. The economic impact of CADA is therefore partly defined by its goal to reverse this trend. By reducing dependencies, the proposal aims to increase the market share of European cloud computing service providers, thereby retaining economic value within the Union.

To achieve this, CADA introduces mechanisms to facilitate investment. Article 14 of the proposal establishes a mechanism for the Commission to designate "data centre strategic projects." These projects, which contribute significantly to the Union's digital and energy sectors, may benefit from support measures, including access to EU funding programmes and the potential "competitiveness seal." This designation is intended to address market failures and provide clear Union added value, thereby de-risking investments and encouraging private capital to flow into European infrastructure.

Furthermore, the proposal aims to improve the functioning of the internal market by laying down a uniform legal framework. This harmonisation reduces regulatory complexity for investors and data centre operators, lowering administrative burdens and accelerating time-to-market. The proposal sets a specific target for administrative efficiency: by 2030, operators should be able to obtain all permits to build and run a data centre in less than 18 months throughout the EU. This is a direct response to the obstacles hindering rapid deployment, which currently force European enterprises to route critical workloads through foreign hyperscaler infrastructure.

Promoting Resource-Efficient Data Centres

A critical component of CADA's economic strategy is the emphasis on sustainability. The proposal links economic growth with environmental responsibility, aiming to ensure that the expansion of data centre capacity does not come at the expense of the Union's climate goals. Article 10 requires Member States to designate "data centre acceleration zones" where the development, expansion, and modernisation of data centres may be facilitated.

Within these zones, Member States must set sustainability requirements for data centres, using key performance indicators specified in Delegated Regulation (EU) 2024/1364 pursuant to Directive (EU) 2023/1791. The proposal supports research and innovation for data centre technologies incorporating principles of energy and resource efficiency by design. This includes advancing technologies such as innovative cooling, waste heat utilisation, and the integration of clean energy generation. By incentivising resource-efficient data centres, CADA aims to create a competitive advantage for European providers who can offer sustainable services, aligning with the broader EU green transition.

Boosting Competitiveness and Autonomy

The overarching economic narrative of CADA is one of strategic autonomy. The explanatory memorandum highlights that computing infrastructures have become strategic resources critical to the Union's economic security, sovereignty, resilience, and competitiveness. The proposal aims to mitigate the risks stemming from the EU's reliance on third countries for cloud computing services, which exposes European users to operational discontinuity and extraterritorial legal risks.

By fostering a homegrown cloud and AI capability, CADA seeks to ensure that European businesses and public administrations can access sufficient compute capacity to meet their needs. This autonomy is expected to drive innovation, as local providers are better positioned to understand and serve the specific needs of the European market. The proposal also supports the development of open cloud computing stacks and AI-optimised servers designed and manufactured in the Union, further strengthening the European semiconductor and data centre supply chains.

What this means for you

For public-sector procurement officers, policy-makers, and investors, CADA introduces several new obligations and opportunities that will shape how digital infrastructure is acquired and managed.

Risk Assessments and Assurance Levels: Member States and Union entities will be required to conduct risk assessments to determine the appropriate "Union assurance level" for their cloud computing services. Article 29 mandates that these assessments identify public sector activities that contribute to the preservation of public order and determine whether they require Union assurance levels 2, 3, or 4. Procurement officers must integrate these risk assessments into their planning processes, ensuring that critical services are procured from providers that meet the necessary sovereignty criteria.

Procurement of Sovereign Services: Article 30 sets out specific procurement rules. Contracting authorities whose activities have been identified as contributing to the preservation of public order must only procure cloud computing services that have been recognised as offering Union assurance levels 2, 3, or 4. For other activities, a minimum of Union assurance level 1 is required. This means procurement specifications will need to explicitly reference these assurance levels and verify that providers are listed in the central repository of recognised services.

Supporting Strategic Projects: Procurement officers and investors should be aware of the designation of data centre strategic projects under Article 14. These projects may offer enhanced sustainability features or contribute to grid stability. When procuring data centre services or colocation facilities, public bodies may prioritise providers involved in these strategic projects, aligning procurement with broader EU objectives of sustainability and technological autonomy.

Open Source and Reuse: The proposal encourages the use of open source solutions to reduce vendor lock-in and strengthen digital autonomy. Article 41 requires Union entities and public sector bodies to encourage the use of open standards and components released under open source licences. Procurement officers should consider open source options when evaluating tenders, ensuring that solutions are interoperable and do not create new dependencies on proprietary technologies.

Common misconceptions

Misconception 1: CADA bans non-EU cloud providers. CADA does not ban non-European providers. Instead, it establishes a sovereignty framework with four assurance levels. Providers from third countries may still be eligible for Union assurance level 3 if the Commission determines that the third country provides sufficient safeguards (Article 18). The focus is on risk management and ensuring that critical public sector activities are supported by services that meet specific autonomy criteria.

Misconception 2: CADA only focuses on large hyperscalers. While large providers are part of the market, CADA explicitly aims to create opportunities for smaller EU-based providers. The proposal includes measures to support the entry of a more diverse set of cloud computing service providers and encourages the use of European added value criteria in procurement (Article 32). This is intended to foster a competitive market where smaller, innovative EU providers can thrive alongside larger incumbents.

Misconception 3: Sustainability requirements are optional. Sustainability is a core component of CADA. Article 11 requires Member States to set sustainability requirements for data centres deployed in acceleration zones, using key performance indicators from existing EU legislation. Ignoring these requirements would not only be non-compliant with national implementations of CADA but would also miss out on the economic benefits of energy-efficient operations, such as lower operational costs and access to green energy incentives.

Misconception 4: CADA replaces the Data Act. CADA complements, rather than replaces, the Data Act. The Data Act focuses on data portability, switching, and interoperability, while CADA focuses on sovereignty, capacity deployment, and the strategic autonomy of the cloud and AI ecosystem. The two instruments work together to create a comprehensive framework for the EU's digital single market.

Official sources

Related

This is general information about a draft EU regulation, not legal advice.