Bitcoin mining has earned a bad rap for consuming cheap electricity in the pursuit of profit. Now bitcoin miners are trying to go green to a certain point.
Companies mining Bitcoin want to power their computers with renewable energy or sign up for data centers that rely on sun or wind. Falling prices for renewables and rising prices for Bitcoin make it possible to still generate profits.
But much of Bitcoin mining is still based on fossil fuels, including coal, which is the cheapest and dirtiest source of energy. “Crypto has a problem with carbon intensity,” said Paolo Natali, director of the Rocky Mountain Institute’s Climate Intelligence program.
This problem led to the creation of the Crypto Climate Accord in April, a voluntary framework calling on cryptocurrency companies to reduce net carbon emissions from electricity to zero by 2030. About 180 companies have registered, said Natali.
The miners say they think about the environment, but they have other incentives to reduce their CO2 emissions: Investors who are increasingly including CO2 emissions in their research urge them to do better.
New York state lawmakers are considering a bill banning the use of fossil fuels to mine Bitcoin and asking miners to document their carbon footprint. The Securities and Exchange Commission is also considering measures to oblige listed companies to disclose climate data.
Many of the most lucrative cryptocurrencies, including Bitcoin, use an energy-intensive process known as proof of work to validate transactions. This requires considerable computing power that consumes a lot of electricity.
The lower the electricity price, the higher the profit. The cheapest sources are sometimes the dirtiest, leading some miners to reopen previously decommissioned coal-fired power plants. In places with abundant renewable resources, mixing green power with coal, natural gas, or other sources can give miners an advantage.
“When you’re mining crypto, you care about electricity bills and you don’t have the luxury of caring so much about the climate,” said Alex de Vries, an economist who created the Bitcoin Energy Consumption Index.
Gryphon Digital Mining joined the Crypto Climate Accord in May and says it has achieved net zero carbon emissions. It did so by commissioning a 21 megawatt hydropower plant and signing up with a digital hosting company that gets more than half of its electricity from renewable sources. It closes the gap by buying emission certificates, just as a passenger can offset CO2 emissions.
“It’s because we wanted to be corporate good stewards of the world,” said Rob Chang, Gryphon’s chief executive.
About 76% of companies mining proof-of-work cryptocurrencies combine green and fossil fuel sources, but less than 40% of the total energy used to mine Bitcoin and other cryptocurrencies comes from a survey of 280 cryptocurrencies renewable sources from the University of Cambridge’s Center for Alternative Finance.
Still, the renewable energy used by crypto miners could force utility companies to generate additional electricity from fossil fuels, Mr de Vries said. Bitcoin miners in El Salvador use green energy from a volcanic region to run its operations. Despite an abundance of renewable resources, the Central American nation imported nearly 20% of the fuel used to generate electricity in 2019, according to the International Trade Administration.
“When you put green energy into the bitcoin miners, you have to increase your fossil fuel imports,” said Mr de Vries. “You’re just pushing the problem out of the way.”
Cryptocurrency mining has increased in the US and Canada after China banned transactions in Bitcoin and the like. According to the Cambridge Center for Alternative Finance, the US and Canada accounted for 45% of global bitcoin mining activity in August, up from 12% in January. Bitcoin mining activity declined 20% during this period after shutting down China-based miners.
Some of the most important companies in the crypto world are now focused on carbon emissions. A spokesman for the publicly traded digital coin exchange Coinbase said the company is now focusing on environmental issues and will announce measures to combat climate change in the coming weeks.
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