Bitcoin climate impact greater than gold mining, study shows. Environmental damage of producing cryptocurrency averages 35% of its market value over past five years
Bitcoin’s disproportionate harm to the climate comes from its reliance on a computing process to verify transactions. Bitcoin is less “digital gold” and more “digital beef”, according to a study that suggests the cryptocurrency has a climate impact greater than that of gold mining and on the level of natural gas extraction or rearing cattle for meat. The research from the University of New Mexico, published in the journal Scientific Reports, assessed the climate cost of various commodities as a portion of their overall market cap.
Some, such as coal, cause almost as much damage as the entire value of the market they support, a 95% ratio, according to the analysis. Other commodities, such as pork production, generate huge climate impacts in absolute terms but only because the market is so massive.
Bitcoin, however, lies in between the two. According to the economists, the climate damage of producing the digital currency has averaged 35% of its market value over the past five years, peaking at 82% in 2020. That is comparable to beef, which causes harm equal to 33% of its market, or natural gas, which hits 46%. And it is far in excess of gold, the commodity that the cryptocurrency’s backers most compare it to, which has a climate impact of just 4% of its market value, thanks to its enormous overall value dwarfing the large environmental impact of its extraction.
What is bitcoin and why are so many people looking to buy it?
The digital currency’s disproportionate harm to the climate comes from its reliance on a computing process to verify transactions called “proof-of-work mining”, which requires huge electricity expenditures to participate, rewarding those who carry it out with the chance to win some new bitcoin.
On more than one day of 20 in the period the researchers examined, the climate damage from these “bitcoin miners” exceeded the value of the coins produced, overwhelmingly due to that electricity consumption. Some have argued that renewables could cover this demand but the authors wrote that the climate damage for each dollar of value created was 10 times worse for bitcoin than for wind and solar generation – representing “a set of red flags for any consideration as a sustainable sector”. This week a different study on the climate impacts of bitcoin found the proportion of fossil generation used to power proof of work was far higher than that claimed by advocates.
Cambridge University’s bitcoin electricity consumption index has long tracked the estimated power use of the bitcoin network, but an update launched this month adds a new dataset to the estimates: a “mining map”. This shows the geographical distribution of bitcoin miners.
Combining that data with previous studies on regional differences in electricity generation, the researchers were able to estimate the proportion of generation which is renewable.
“The results show that fossil fuels account for almost two-thirds of the total electricity mix (62.4%) and sustainable energy sources 37.6% (of which 26.3% are renewables and 11.3% nuclear),” wrote Cambridge’s Alexander Neumueller.
“The findings thus noticeably deviate from industry findings that estimate the share of sustainable energy sources in bitcoin’s electricity mix to be 59.5%.”
However, even though the generation mix is still carbon-intensive, the overall emissions of bitcoin have fallen in the past 12 months because of the sharp decline in the value of the cryptocurrency. Prices for bitcoin, and therefore the anticipated payouts to miners, have fallen by two-thirds, sending some out of business and leading others to cut their activities, in the process cutting emissions by about 14% compared with 2021, the researchers estimate. Those emissions are comparable to those of countries such as Nepal or Central African Republic, the Cambridge team says.
Climate groups say a change in coding can reduce bitcoin energy consumption by 99%
A simple switch in the way transactions are verified could reduce bitcoin’s energy-guzzling mining habits. A facility that once was used by the Alcoa coal power plant now provides electricity for the Whinstone US bitcoin mining facility in Rockdale, Texas.
Bitcoin mining already uses as much energy as Sweden, according to some reports, and its booming popularity is revitalizing failing fossil fuel enterprises in the US. But all that could change with a simple switch in the way it is coded, according to a campaign launched on Tuesday.
The campaign, called Change the Code Not the Climate and coordinated by Environmental Working Group, Greenpeace USA and several groups battling bitcoin mining facilities in their communities, is calling on bitcoin to change the way bitcoins are mined in order to tackle its outsized carbon footprint.
The software code that bitcoin uses – known as “proof of work” – requires the use of massive computer arrays to validate and secure transactions. Proof of work is a way of checking that a miner has solved the extremely complex cryptographic puzzles needed to add to the bitcoin ledger.
Rival cryptocurrency ethereum is shifting to another system – “proof of stake” – that it believes will reduce its energy use by 99%. In the proof of stake model, miners pledge their coins to verify transactions; adding inaccurate information leads to penalties.
With the value and use of cryptocurrencies rising, the campaign’s organizers argue bitcoin must follow suit or find another, less energy intensive, method. “This is a big problem. In part because of where the industry stands now but also because of our concerns about its growth,” said Michael Brune, campaign director and former executive director of Sierra Club.
The US now leads the world in cryptocurrency mining after China launched a crackdown on mining and trading last May.
“Coal plants which were dormant or slated to be closed are now being revived and solely dedicated to bitcoin mining. Gas plants, which in many cases were increasingly economically uncompetitive, are also now being dedicated to bitcoin mining. We are seeing this all across the country,” said Brune.
Brune added: “It’s particularly painful to see this in the electric sector because that is precisely the place where the US has made most of its progress in the last decade,” he said. “There’s no way we can reach our climate goals if we are reviving fossil fuel plants.
Some bitcoin miners have recently begun powering their operations using renewable energy from wind and solar. But Brune said while such moves were “clearly well-intentioned”, adding “some boutique wind or solar operations powering a few high- profile mining operations” would not do enough to counter the environmental cost. “Fossil fuel growth is outpacing renewable growth in bitcoin mining and that’s the fundamental challenge,” Brune said.
Without a change to the code, the fundamental problem will remain that bitcoin’s code “incentivizes maximum energy use”, said Chris Larsen, founder and executive chairman of crypto company Ripple and a climate activist. “The minute that there is the opportunity to go to something dirty, which is what you are seeing, that is going to happen.”
One “nightmare scenario”, he said, is that the world does get to a renewable future in China, the US and EU but countries rich in fossil fuel switch to bitcoin mining to keep their operations running.
“Imagine the Saudis sitting on all that oil, which has a cost of about ½ cent per kilowatt hour – no renewable can match that,” Larsen said. “Bitcoin mining could be this endless monetization engine for fossil fuels. That would be a nightmare.”
The campaign is launching with digital advertising in the Wall Street Journal, New York Times, Marketwatch, Politico, Facebook and other publications. Organizers are also taking legal action against proposed mining sites and using their large memberships to push bitcoin’s biggest investors and influencers to call for a code change. “In this world, with all these smart people, there has got to be a better solution,” said Larsen.