Artificial intelligence (AI) infrastructure, particularly data centres, is increasingly recognized as a critical component for Canada’s economic and strategic future. These facilities underpin AI development and its integration into sectors such as healthcare, national defense, scientific research, and software development. However, new data centres have sparked opposition across the country, prompting debate about how Canada should balance the benefits of domestic AI infrastructure with its local costs.

AI and the underlying computational resources are becoming essential inputs for innovation and productivity. For instance, AI-driven tools have improved health risk detection in hospitals and accelerated complex problem-solving in research. Yet, Canada currently relies heavily on foreign-owned data centres and overseas AI services, leaving it exposed to risks tied to geopolitical decisions. The Trump administration’s recent restrictions on access to Anthropic’s advanced AI models underscored the strategic vulnerability of depending on foreign-controlled AI resources.

Experts argue that Canada must secure more reliable domestic access to computing power and develop stronger capabilities in managing data centre operations. Unlike traditional manufacturing, where capital location aligns closely with production, data centres deliver economic advantages primarily through local innovation spillovers and control over critical infrastructure. Maintaining sovereignty over AI technology is viewed as vital to national interest, especially as such technologies become embedded in essential public services.

Despite the recognized strategic importance, the construction of new data centres has faced resistance from local communities. Concerns include increased electricity costs, noise pollution, and minimal long-term job creation relative to other major projects. Furthermore, economic benefits are often diffused nationally rather than concentrated locally, creating a classic externality problem: communities bear the environmental and financial costs, while broader advantages may be intangible or accrue elsewhere.

Public polling shows widespread support across Canada for developing domestic AI infrastructure, yet significant opposition arises when projects are proposed near residential areas. Experts suggest that addressing this “not in my backyard” sentiment requires policy adjustments that ensure direct benefits for host communities alongside national gains.

Recommendations include implementing federal incentives that prioritize Canadian ownership or partnerships to maximize innovation and data control benefits. Governments should also require data centres to manage their own power supply or fund equivalent new energy capacity to prevent local electricity rate increases tied to their operations. This "bring-your-own-power" approach, though not a complete solution, could mitigate community opposition by reducing local financial burdens.

Fiscal arrangements are another focal point. To prevent costly competition among municipalities offering tax breaks to attract data centres, subsidies should be coordinated at the federal level. This ensures local governments retain property tax revenues and potentially receive additional transfers to improve public services—helping communities better absorb the impacts of hosting large infrastructure.

Canada also faces challenges in addressing multinational tax avoidance related to the profits generated by data centres. While some provinces, such as Alberta, have imposed levies on computer hardware, these measures face criticism for being inefficient or overly narrow. More sophisticated international tax frameworks may be necessary to fairly distribute revenues among jurisdictions hosting these digital assets.

The current resistance to data centres is seen as a natural reaction to the uneven distribution of costs and benefits. Rather than halting development, policy experts emphasize designing a more equitable framework that aligns incentives for investors, governments, and local communities. Such an approach is critical if Canada seeks to maintain its technological competitiveness and safeguard national control over AI infrastructure in an increasingly contested global landscape.