“We find no evidence that Bitcoin mining is becoming more sustainable over time,” say the researchers.
The dirty little secret about the digital cryptocurrency Bitcoin’s impact on the environment could be far more expensive than we ever imagined.
According to a new analysis published in Scientific Reports by scientists from the University of New Mexico, the effects of mining the digital currency Bitcoin on climate change are more like the effects of extracting and refining crude oil than mining gold.
The authors say that instead of being compared to “digital gold,” Bitcoin should be compared to things that take a lot more energy to make, like beef, natural gas, and crude oil.
UNM Economics Associate Professor Benjamin A. Jones says that they “find no evidence that Bitcoin mining is becoming more sustainable over time.”
“Rather,” according to the author, their findings “suggest the opposite: Bitcoin mining is becoming dirtier and more damaging to the climate over time. In short, Bitcoin’s environmental footprint is moving in the wrong direction.”
Bitcoin had a market cap of about 960 billion US dollars in December 2021 and held about 41% of the worldwide cryptocurrency market. Even though it is known that Bitcoin uses a lot of energy, it is not clear how much damage it does to the environment.
Jones and his colleagues Robert Berrens and Andrew Goodkind estimate how much damage Bitcoin mining will do to the climate between January 2016 and December 2021 from an economic point of view. They say that in 2020, Bitcoin mining used 75.4 terawatt hours (TWh) of electricity, which was more than Austria (69.9 TWh) or Portugal (48.4 TWh).
“Globally, the mining, or production, of Bitcoin is using tremendous amounts of electricity, mostly from fossil fuels, such as coal and natural gas. This is causing huge amounts of air pollution and carbon emissions, which is negatively impacting our global climate and our health,” adds Jones. “We find several instances between 2016-2021 where Bitcoin is more damaging to the climate than a single Bitcoin is actually worth. Put differently, Bitcoin mining, in some instances, creates climate damages in excess of a coin’s value. This is extremely troubling from a sustainability perspective.”
The authors rated Bitcoin’s climate damages based on three criteria: whether the estimated climate damages are getting worse over time, whether the climate damages of Bitcoin are more than the market price, and how the climate damages as a share of the market price compare to other sectors and commodities.
They found that the CO2 equivalent emissions from making electricity for Bitcoin mining have gone from 0.9 tonnes per coin in 2016 to 113 tonnes per coin in 2021, which is a 126-fold increase. According to calculations, each Bitcoin produced in 2021 caused 11,314 USD in climate damages, totaling more than 12 USD in damages globally between 2016 and 2021. In May 2020, damages reached at 156% of the coin price, indicating that for every $1 in Bitcoin market value created that month, $1.56 in climate damages were also generated.
“Across the class of digitally scarce goods, our focus is on those cryptocurrencies that rely on proof-of-work (POW) production techniques, which can be highly energy intensive,” Regents Professor of Economics Robert Berrens points out. “Within broader efforts to mitigate climate change, the policy challenge is creating governance mechanisms for an emergent, decentralized industry, which includes energy-intensive POW cryptocurrencies. We believe that such efforts would be aided by measurable, empirical signals concerning potentially unsustainable climate damages, in monetary terms.”
Finally, the authors compared the climatic damages caused by Bitcoin to those caused by other industries and goods, including the production of power from renewable and non-renewable sources, the processing of crude oil, the production of agricultural meat, and the mining of precious metals. Between 2016 and 2021, Bitcoin suffered average climate damages of 35% of its market value. This percentage for Bitcoin was higher than that of beef production (33%) and gold mining (4%), but it was slightly lower than the climate damages as a percentage of the market value of electricity generated by natural gas (46%) and gasoline generated by crude oil (41%).
The authors come to the conclusion that Bitcoin does not meet any of the three main criteria for sustainability that they looked at. If proof-of-work mining is not switched off voluntarily, as it recently was for the cryptocurrency Ether, then possible regulation may be needed to make Bitcoin mining sustainable.
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