It was also sharply critical of data centre proposals that include onsite gas generation, including a NSW Cloud Carrier project involving a 700-megawatt power plant, and questions the "critical infrastructure" status given "(artificial intelligence) is being used for abuse, war and other human rights violations".
Australia has become the second-biggest destination for data centre investments worldwide as tech companies rush to meet demand for AI tools.
Questions have been levelled at the sizeable energy and water usage needed for the computing power.
While governments have been broadly welcoming of the business investment, concerns have not gone entirely unheeded, with state and federal energy ministers - Queensland excluded - in favour of 100 per cent renewable energy offsets for new data centre proposals.
Energy Minister Chris Bowen said data centres could be a "net plus" for the energy system, if done right, while confirming regulatory options were under consideration.
"The best one to look at most urgently is a rule change through the Australian Energy Market Commission to say, 'If you want a data centre in Australia, great, we welcome the investment. But you'll bring your own renewable energy and you'll be flexible and you'll help us manage the grid'," he told reporters on Tuesday.
Lobby group Data Centre Australia said operators and their customers offset 70 per cent of their energy use through long-term power purchase agreements with renewable projects, large generation certificates and on-site solar.
"Data centre operators and their customers have net zero by 2030 targets and so are committed to meeting 100 per cent renewable energy offset targets," chief executive Belinda Dennett said.
"But we need to see more viable renewable energy projects available to these long term contracts, some of which are held up in their own approval processes."
The environmental group's report, led by independent climate analyst Ketan Joshi, suggests claims operators are already building new clean energy to cover their demand sustainably as unsubstantiated.
Renewable energy credits are unlikely to be amounting to true additional energy supply, the report said.
Even the use of power purchasing agreements - long-term contracts with buyers to sell energy upon completion - was questionable as solar and wind projects scrutinised were often close to finalisation and unlikely reliant on the data centre involvement to go ahead.
Mr Joshi said the findings challenged the notion data centres were actually accelerating the clean energy transition and helping meet net zero goals.
"Unless the data centre industry builds no new fossil fuels and far more new renewables than new demand, we end up worse off," he said.
"Currently data centres increase coal and gas output and delay shutdowns, while plugging polluting gas into data centres does the damage directly instead."
Greenpeace Australia Pacific head of climate and energy Joe Rafalowicz welcomed signals from ministers to regulate the industry but warned the nation had been caught unprepared for the "feverish pace" of the data centre rollout.
"Greenpeace is calling for a moratorium on new data centre approvals and construction until we have clearly defined, enforceable regulations and standards in place to govern this industry," he said.
