Aquifer Thermal Energy Storage (ATES) systems contribute to reducing fossil energy consumption by providing sustainable space heating and cooling for buildings by seasonal storage of heat. ATES is important for the energy transition in many urban areas in North America, Europe and Asia. Despite the modest current ATES adoption level of about 0.2% of all buildings in the Netherlands, ATES subsurface space use has already grown to congestion levels in many Dutch urban areas. This problem is to a large extent caused by the current planning and permitting approach, which uses too spacious safety margins between wells and a 2D rather than 3D perspective. The current methods for permitting and planning of ATES do not lead to optimal use of available subsurface space, and, therefore, prevent realization of the expected contribution of the reduction of greenhouse gas (GHG) emissions by ATES. Optimal use of subsurface space in dense urban settings can be achieved with a coordinated approach towards the planning and operation of ATES systems, so-called ATES planning. This research identifies and elaborates crucial practical steps to achieve optimal use of subsurface space that are currently missing in the planning method. Analysis from existing ATES plans and exploratory modeling, coupling agent-based and groundwater models were used to demonstrate that minimizing GHG emissions requires progressively stricter regulation with intensifying demand for ATES. The simulations also quantified both the thresholds beyond which such stricter rules are needed as well as the effectiveness of different planning strategies, which can now effectively be used for ATES planning in practice. The results provide scientific insight in how technical choices in ATES well design, location and operation affect optimal use of subsurface space, and what trade-offs exist between the energy efficiency of individual systems and the combined reduction of the GHG emissions from a plan area. The presented ATES planning method following from the obtained insights now fosters practical planning and design rules suitable to ensure optimal and sustainable use of subsurface space – that is, maximizing GHG emission reductions by accommodating as many ATES systems as possible in the available aquifer, while maintaining a high efficiency for the individual ATES systems.