Finance:Environmental effects of Bitcoin

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The environmental effects of Bitcoin are considerable. One such environmental effect is that it worsens climate change.[1] This is because bitcoins are made using electricity partially generated by gas and coal-fired power plants. When burned, coal and natural gas emit greenhouse gases, which heat the Earth and change the climate.[2] (As of 2022), such bitcoin mining is estimated to be responsible for 0.1% of world greenhouse gas emissions.[3] A second environmental effect is the air pollution caused by coal-fired electricity generation, and a third is the e-waste due to the short life expectancy of bitcoin-mining equipment.[1]

Bitcoin is a cryptocurrency made by proof-of-work,[2][4] while some other cryptocurrencies, such as Ethereum, are made by proof-of-stake,[5] which consumes less electricity.[6][7] (As of 2022), the Cambridge Centre for Alternative Finance (CCAF) estimates that Bitcoin consumes around 100 TW⋅h (360 PJ) annually, and says bitcoin mining uses about as much electricity as Egypt.[8][9] But it is difficult to find out how the electricity used for mining was generated, and thus Bitcoin's carbon footprint.[10][11][12][13] One study found that from 2016 to 2021, each US dollar worth of bitcoin mined caused 35 cents worth of climate damage, comparable to the beef industry and the gasoline industry.[14][15][16]

As of 2021, Bitcoin's annual e-waste is estimated to be over 30,000 tonnes, which is comparable to the small IT equipment waste produced by the Netherlands. Creating one bitcoin generates 270 to 380 grams (9.5 to 13.4 oz) of e-waste. The average lifespan of bitcoin-mining devices is estimated to be about 1.3 years.[17][18][19] Unlike most computing hardware, the used application-specific integrated circuits have no alternative use beyond bitcoin mining.[20]

Reducing Bitcoin's environmental effects is difficult; possible remedies include making bitcoin only where or when there is excess clean electricity.[21][22] Some policymakers have called for further restrictions or bans on bitcoin mining.[23][24]

Bitcoin energy consumption

Bitcoin electricity consumption
Electricity consumption of the Bitcoin network since 2016 (annualized) and comparison with the electricity consumption of various countries in 2019. The upper and lower bounds (grey traces) are based on worst-case and best-case scenario assumptions, respectively. The red trace indicates an intermediate best-guess estimate. (data sources: Cambridge Bitcoin Electricity Consumption Index, US Energy Information Administration; for details, see methodology )

(As of 2022), the Cambridge Centre for Alternative Finance (CCAF) estimates that Bitcoin consumes 131 TW⋅h (470 PJ) annually, representing 0.29% of the world's energy production and 0.59% of the world's electricity production, ranking Bitcoin mining between Ukraine and Egypt in terms of electricity consumption.[25][9]

George Kamiya, writing for the International Energy Agency, said that "predictions about Bitcoin consuming the entire world's electricity" were sensational, but that the area "requires careful monitoring and rigorous analysis".[26] One study in 2021 by cryptocurrency investment firm Galaxy Digital claimed that Bitcoin mining used less energy than the banking system, with Galaxy Digital later clarifying that bitcoin mining's energy usage is not correlated with its "transactional volume or throughput" as it is in banking.[27]

Sources of energy

Until 2021, according to the CCAF, much of the mining for Bitcoin was done in China.[28][29] Chinese miners relied on cheap coal power in Xinjiang[30][31] in late autumn, winter and spring, and then migrated to regions with overcapacities in low-cost hydropower, like Sichuan, between May and October. In June 2021 China banned bitcoin mining[32] and the miners moved to other countries.[33] By December 2021, the global computational capacity had mostly recovered to a level before China's crackdown, with more mining being done in the U.S. (35.4%), Kazakhstan (18.1%), and Russia (11%) instead.[34] Coal power plants in Kazakhstan generate most of the country’s electricity and emit lots of local air pollution.[35]

Greenidge Generation, a natural gas coal power plant in Dresden, New York, had originally been built for coal and had shut down in 2011 due to lack of demand. The plant reactivated in 2016 as a natural gas plant but failed to find sufficient demand. It switched entirely to bitcoin mining in 2019. In addition to emitting around 220,000 tonnes of carbon dioxide in 2020, the plant's cooling intake and discharge of heated water into Seneca Lake coincided with a significant decrease in fish and other wildlife populations.[36] In 2022, the plant's air permit request was denied by the New York State Department of Environmental Conservation (DEC).[37][38]

As of September 2021, according to the New York Times , Bitcoin's use of renewables ranged from 40% to 75%.[2] Experts and government authorities have suggested that the use of renewable energy for mining may limit the availability of clean energy for ordinary uses by the general population.[2][39][40]

Negative effect of mining

Bitcoin carbon emissions

Concerns about Bitcoin's environmental effects relate the network's energy consumption to carbon emissions.[41][42] The difficulty of translating energy consumption into carbon emissions is due to the way bitcoin mining is distributed, making it difficult for researchers to identify miner's location and electricity use. The results of studies into Bitcoin's carbon footprint vary.[10][11][13] Per a study published in Finance Research Letters in 2021, the differences in underlying assumptions and variation in the coverage of time periods and forecast horizons have led to Bitcoin carbon footprint estimates spanning from 1.2–5.2 Mt CO
2 to 130.50 Mt CO
2 per year.[43] According to studies published in Joule and American Chemical Society in 2019, Bitcoin's annual energy consumption results in annual carbon emission ranging from 17[44] to 22.9 MtCO
2 which is comparable to the level of emissions of countries as Jordan and Sri Lanka.[13]

In September 2022, a report in the journal Scientific Reports found that from 2016 to 2021, each US dollar worth of mined bitcoin market value also caused 35 cents worth of climate damage. This is comparable to the beef industry which causes 33 cents per dollar, and the gasoline industry which causes 41 cents per dollar. Compared to gold mining, "Bitcoin's climate damage share is nearly an order of magnitude higher" according to study co-author economist Andrew Goodkind.[14][15][16]

Electronic waste

See also: Electronic waste#Cryptocurrency e-waste and Electronic waste in the United States
The total active mining equipment in the Bitcoin network and the related electronic waste generation, from July 2014 to July 2021.[45]

Bitcoins annual e-waste is estimated to be over 30,000 tonnes as of May 2021, which is comparable to the small IT equipment waste produced by the Netherlands. One bitcoin generates 272 g (9.6 oz) of e-waste per transaction. Due to the consistent increase of the Bitcoin network's hashrate, mining devices are estimated to have an average lifespan of 1.29 years until they become unprofitable and need to be replaced.[17][18] Other estimates assume that a Bitcoin transaction generates about 380 g (13 oz) of e-waste, equivalent of 2.35 iPhones.[19] Unlike most computing hardware the used application-specific integrated circuits have no alternative use beyond bitcoin mining.[20][45][46]

Alternative energy usage

The development of intermittent renewable energy sources, such as wind power and solar power, is challenging because they cause instability in the electrical grid. Several papers concluded that these renewable power stations could use the surplus energy to mine Bitcoin and thereby reduce curtailment, hedge electricity price risk, stabilize the grid, increase the profitability of renewable energy infrastructure, and therefore accelerate transition to sustainable energy and decrease Bitcoin's carbon footprint.[47][48][49][50][51]

The Mechanicville Hydroelectric Plant in New York State[52] and three hydroelectric power plants in San Pedro de Poás, Costa Rica[53] have reactivated to mine cryptocurrency. According to the owners of the Mechanicville plant, the mining prevented the plant from being dismantled.[52]

Responses

A survey[54] on technologies approached cryptocurrencies' technological and environmental issues from many perspectives and noted the plans of using the methods of unconventional computing and grid computing to make Bitcoin both greener and more justified.

Per a 2021 study in Finance Research Letters, "climate-related criticism of Bitcoin is primarily based on the network's absolute carbon emissions, without considering its market value." It argues that the inclusion of Bitcoin in an equity portfolio reduces that portfolio's "aggregate carbon emissions".[43]

Policy to move from proof of work to proof of stake has been compared to policy to move from fossil-fueled to electric cars, with some calling for a ban on PoW.[23]

Bitcoin developers are working on the Lightning Network. The aim is to reduce the energy demand of the network by moving most transactions off the blockchain.[55][better source needed]

References

  1. ↑ 1.0 1.1 Badea, Liana; Mungiu-Pupӑzan, Mariana Claudia (2021). "The Economic and Environmental Impact of Bitcoin". IEEE Access 9: 48091–48104. doi:10.1109/ACCESS.2021.3068636. ISSN 2169-3536. 
  2. ↑ 2.0 2.1 2.2 2.3 Huang, Jon; O'Neill, Claire; Tabuchi, Hiroko (3 September 2021). "Bitcoin Uses More Electricity Than Many Countries. How Is That Possible?". The New York Times. ISSN 0362-4331. https://www.nytimes.com/interactive/2021/09/03/climate/bitcoin-carbon-footprint-electricity.html. 
  3. ↑ "A deep dive into Bitcoin's environmental impact" (in en-GB). 2022-09-27. https://www.jbs.cam.ac.uk/insight/2022/a-deep-dive-into-bitcoins-environmental-impact/. 
  4. ↑ Rudgard, Olivia (24 April 2022). "Environmental charities ditch cryptocurrencies after admitting they damage the planet". The Telegraph. https://www.telegraph.co.uk/news/2022/04/24/environmental-charities-ditch-cryptocurrencies-admitting-damage/. 
  5. ↑ "Proof of Work vs. Proof of Stake: Ethereum's Recent Price Surge Shows Why the Difference Matters" (in en-US). NextAdvisor. 2022-07-29. ISSN 0040-781X. https://time.com/nextadvisor/investing/cryptocurrency/proof-of-work-vs-proof-of-stake/. 
  6. ↑ "Cardano's Ada Wants to Solve Some of Crypto's Biggest Challenges" (in en). Wall Street Journal. 28 September 2021. https://www.wsj.com/video/series/wsj-explains/cardanos-ada-wants-to-solve-some-of-cryptos-biggest-challenges/A0EDF5B1-F656-4674-A55C-D703622E85EE. 
  7. ↑ Katie Martin and Billy Nauman (2021) “Bitcoin’s growing energy problem: It’s a dirty currency”, 20 May, Financial Times. https://www.ft.com/content/1aecb2db-8f61-427c-a413-3b929291c8ac
  8. ↑ "Cambridge Bitcoin Electricity Consumption Index (CBECI)". https://ccaf.io/cbeci/index/comparisons. 
  9. ↑ 9.0 9.1 "How bad is Bitcoin for the environment really?". 12 February 2021. https://www.independent.co.uk/life-style/gadgets-and-tech/bitcoin-environment-mining-energy-cryptocurrency-b1800938.html. "requires nearly as much energy as the entire country of Argentina" 
  10. ↑ 10.0 10.1 Foteinis, Spyros (2018). "Bitcoin's alarming carbon footprint". Nature 554 (7691): 169. doi:10.1038/d41586-018-01625-x. Bibcode: 2018Natur.554..169F. 
  11. ↑ 11.0 11.1 Krause, Max J.; Tolaymat, Thabet (2018). "Quantification of energy and carbon costs for mining cryptocurrencies". Nature Sustainability 1 (11): 711–718. doi:10.1038/s41893-018-0152-7. 
  12. ↑ Mora, Camilo (2018). "Bitcoin emissions alone could push global warming above 2°C". Nature Climate Change 8 (11): 931–933. doi:10.1038/s41558-018-0321-8. Bibcode: 2018NatCC...8..931M. 
  13. ↑ 13.0 13.1 13.2 Stoll, Christian; Klaaßen, Lena; Gallersdörfer, Ulrich (2019). "The Carbon Footprint of Bitcoin". Joule 3 (7): 1647–1661. doi:10.1016/j.joule.2019.05.012. 
  14. ↑ 14.0 14.1 Calma, Justine (29 September 2022). "Bitcoin's climate damage is similar to beef and crude oil, says new study". The Verge. https://www.theverge.com/2022/9/29/23378337/bitcoin-climate-change-damages-crypto-mining. 
  15. ↑ 15.0 15.1 McGinn, Miyo (29 September 2022). "Bitcoin's steep environmental costs go beyond its hunger for energy". Popular Science. https://www.popsci.com/environment/environmental-costs-bitcoin-crude-oil-beef/. 
  16. ↑ 16.0 16.1 Jones, Benjamin A.; Goodkind, Andrew L.; Berrens, Robert P. (29 September 2022). "Economic estimation of Bitcoin mining's climate damages demonstrates closer resemblance to digital crude than digital gold" (in en). Scientific Reports 12 (1): 14512. doi:10.1038/s41598-022-18686-8. ISSN 2045-2322. PMID 36175441. 
  17. ↑ 17.0 17.1 de Vries, Alex; Stoll, Christian (1 December 2021). "Bitcoin's growing e-waste problem". Resources, Conservation and Recycling 175: 105901. doi:10.1016/j.resconrec.2021.105901. ISSN 0921-3449. https://www.sciencedirect.com/science/article/pii/S0921344921005103. 
  18. ↑ 18.0 18.1 "Bitcoin mining producing tonnes of waste". BBC News. 20 September 2021. https://www.bbc.com/news/technology-58572385. 
  19. ↑ 19.0 19.1 "Bitcoin Electronic Waste Monitor". https://digiconomist.net/bitcoin-electronic-waste-monitor/. 
  20. ↑ 20.0 20.1 "Waste from one bitcoin transaction 'like binning two iPhones'". 17 September 2021. https://www.theguardian.com/technology/2021/sep/17/waste-from-one-bitcoin-transaction-like-binning-two-iphones. 
  21. ↑ AP (2022-04-21). "Going green: How to ditch fossil fuels powering the bitcoin network" (in en). https://www.business-standard.com/article/international/going-green-how-to-ditch-fossil-fuels-powering-the-bitcoin-network-122042100219_1.html. 
  22. ↑ Frost, Rosie (2021-11-03). "Will Bitcoin survive without a shift to renewable energy?" (in en). https://www.euronews.com/green/2021/11/03/could-renewable-energy-help-bitcoin-clean-up-its-carbon-footprint. 
  23. ↑ 23.0 23.1 Gschossmann, Isabella; van der Kraaij, Anton; Benoit, Pierre-Loïc; Rocher., Emmanuel (2022-07-11). "Mining the environment – is climate risk priced into crypto-assets?" (in en). Macroprudential Bulletin (European Central Bank) (18). https://www.ecb.europa.eu/pub/financial-stability/macroprudential-bulletin/html/ecb.mpbu202207_3~d9614ea8e6.en.html. 
  24. ↑ Hiar, Corbin (10 March 2022). "Biden Orders Report on Climate Risk of Cryptocurrencies" (in en). Scientific American. https://www.scientificamerican.com/article/biden-orders-report-on-climate-risk-of-cryptocurrencies/. 
  25. ↑ "Cambridge Bitcoin Electricity Consumption Index (CBECI)" (in en). https://ccaf.io/cbeci/index/comparisons. 
  26. ↑ Kamiya, George. "Commentary: Bitcoin energy use - mined the gap". https://www.iea.org/commentaries/bitcoin-energy-use-mined-the-gap. 
  27. ↑ "Bitcoin mining actually uses less energy than traditional banking, new report claims" (in en). 2021-05-18. https://www.independent.co.uk/life-style/gadgets-and-tech/bitcoin-mining-environment-climate-crypto-b1849211.html. 
  28. ↑ "Bitcoin is literally ruining the earth, claim experts". The Independent. 6 December 2017. https://www.independent.co.uk/life-style/gadgets-and-tech/news/bitcoin-environment-green-energy-power-global-warming-climate-change-a8094661.html. 
  29. ↑ "The Hard Math Behind Bitcoin's Global Warming Problem". WIRED. 15 December 2017. https://www.wired.com/story/bitcoin-global-warming/. 
  30. ↑ Ponciano, Jonathan (18 April 2021). "Crypto Flash Crash Wiped Out $300 Billion In Less Than 24 Hours, Spurring Massive Bitcoin Liquidations". Forbes. https://www.forbes.com/sites/jonathanponciano/2021/04/18/crypto-flash-crash-wiped-out-300-billion-in-less-than-24-hours-spurring-massive-bitcoin-liquidations/. 
  31. ↑ Murtaugh, Dan (9 February 2021). "The Possible Xinjiang Coal Link in Tesla's Bitcoin Binge" (in en). Bloomberg.com. https://www.bloomberg.com/news/articles/2021-02-09/tesla-s-bitcoin-binge-spells-overtime-for-xinjiang-coal-miners. 
  32. ↑ "Cambridge Bitcoin Electricity Consumption Index (CBECI)" (in en). https://ccaf.io/cbeci/mining_map. 
  33. ↑ Sigalos, MacKenzie (20 July 2021). "Bitcoin mining isn't nearly as bad for the environment as it used to be, new data shows". https://www.cnbc.com/2021/07/20/bitcoin-mining-environmental-impact-new-study.html. 
  34. ↑ Mellor, Sophie (9 December 2021). "Bitcoin miners have returned to the record activity they had before China's crypto crackdown" (in en). Fortune. https://fortune.com/2021/12/09/bitcoin-miners-hashrate-record-activity-china-crypto-crackdown-kazakhstan/. 
  35. ↑ "Kazakhstan 2022 – Analysis" (in en-GB). https://www.iea.org/reports/kazakhstan-2022. 
  36. ↑ Swaminathan, Nikhil (6 May 2021). "This power plant stopped burning fossil fuels. Then Bitcoin came along." (in en-us). Grist. https://grist.org/technology/bitcoin-greenidge-seneca-lake-cryptocurrency/. 
  37. ↑ Knauss, Tim (30 June 2022). "NY denies permit for Bitcoin-mining power plant near Seneca Lake" (in en). Syracuse.com. https://www.syracuse.com/news/2022/06/ny-denies-permit-for-bitcoin-mining-power-plant-near-seneca-lake.html. 
  38. ↑ Morgenson, Gretchen (30 June 2022). "New York state denies air permit to bitcoin mining plant on Seneca Lake" (in en). NBC News. https://www.nbcnews.com/tech/crypto/new-york-state-denies-air-permit-bitcoin-mining-plant-seneca-lake-rcna36232. 
  39. ↑ "Crypto-assets are a threat to the climate transition – energy-intensive mining should be banned". 5 November 2021. https://www.fi.se/en/published/presentations/2021/crypto-assets-are-a-threat-to-the-climate-transition--energy-intensive-mining-should-be-banned/. 
  40. ↑ Szalay, Eva (19 January 2022). "EU should ban energy-intensive mode of crypto mining, regulator says". Financial Times. https://www.ft.com/content/8a29b412-348d-4f73-8af4-1f38e69f28cf. 
  41. ↑ Hern, Alex (17 January 2018). "Bitcoin's energy usage is huge – we can't afford to ignore it". The Guardian. https://www.theguardian.com/technology/2018/jan/17/bitcoin-electricity-usage-huge-climate-cryptocurrency. 
  42. ↑ Ethan, Lou (17 January 2019). "Bitcoin as big oil: the next big environmental fight?". The Guardian. https://www.theguardian.com/commentisfree/2019/jan/17/bitcoin-big-oil-environment-energy. 
  43. ↑ 43.0 43.1 Baur, Dirk G.; Oll, Josua (2021-11-20). "Bitcoin investments and climate change: A financial and carbon intensity perspective" (in en). Finance Research Letters 47: 102575. doi:10.1016/j.frl.2021.102575. ISSN 1544-6123. https://www.sciencedirect.com/science/article/pii/S1544612321005262. 
  44. ↑ Köhler, Susanne; Pizzol, Massimo (20 November 2019). "Life Cycle Assessment of Bitcoin Mining". Environmental Science & Technology 53 (23): 13598–13606. doi:10.1021/acs.est.9b05687. PMID 31746188. Bibcode: 2019EnST...5313598K. 
  45. ↑ 45.0 45.1 de Vries, Alex; Stoll, Christian (December 2021). "Bitcoin's growing e-waste problem". Resources, Conservation and Recycling 175: 105901. doi:10.1016/j.resconrec.2021.105901. 
  46. ↑ "Bitcoin mining producing tonnes of waste". BBC News. 20 September 2021. https://www.bbc.com/news/technology-58572385. 
  47. ↑ Fridgen, Gilbert; Körner, Marc-Fabian; Walters, Steffen; Weibelzahl, Martin (9 March 2021). "Not All Doom and Gloom: How Energy-Intensive and Temporally Flexible Data Center Applications May Actually Promote Renewable Energy Sources". Business & Information Systems Engineering 63 (3): 243–256. doi:10.1007/s12599-021-00686-z. ISSN 2363-7005. "To gain applicable knowledge, this paper evaluates the developed model by means of two use-cases with real-world data, namely AWS computing instances for training Machine Learning algorithms and Bitcoin mining as relevant DC applications. The results illustrate that for both cases the NPV of the IES compared to a stand-alone RES-plant increases, which may lead to a promotion of RES-plants.". 
  48. ↑ Mona E. Dajani (2021) “Green Bitcoin Does Not Have to Be an Oxymoron”, Bloomberg Law, https://news.bloomberglaw.com/environment-and-energy/green-bitcoin-does-not-have-to-be-an-oxymoron
  49. ↑ Moffit, Tim (2021-06-01). "Beyond Boom and Bust: An emerging clean energy economy in Wyoming" (in en). UC San Diego: Climate Science and Policy. https://escholarship.org/uc/item/0zp872rt. "Currently, projects are under development, but the issue of overgenerated wind continues to exist. By harnessing the overgenerated wind for Bitcoin mining, Wyoming has the opportunity to redistribute the global hashrate, incentivize Bitcoin miners to move their operations to Wyoming, and stimulate job growth as a result.". 
  50. ↑ Eid, Bilal; Islam, Md Rabiul; Shah, Rakibuzzaman; Nahid, Abdullah-Al; Kouzani, Abbas Z.; Mahmud, M. A. Parvez (2021-11-01). "Enhanced Profitability of Photovoltaic Plants By Utilizing Cryptocurrency-Based Mining Load". IEEE Transactions on Applied Superconductivity 31 (8): 1–5. doi:10.1109/TASC.2021.3096503. ISSN 1558-2515. Bibcode: 2021ITAS...3196503E. https://ieeexplore.ieee.org/document/9483629. "The grid connected photovoltaic (PV) power plants (PVPPs) are booming nowadays. The main problem facing the PV power plants deployment is the intermittency which leads to instability of the grid. [...] This paper investigating the usage of a customized load - cryptocurrency mining rig - to create an added value for the owner of the plant and increase the ROI of the project. [...] The developed strategy is able to keep the profitability as high as possible during the fluctuation of the mining network.". 
  51. ↑ Bastian-Pinto, Carlos L.; Araujo, Felipe V. de S.; Brandão, Luiz E.; Gomes, Leonardo L. (2021-03-01). "Hedging renewable energy investments with Bitcoin mining" (in en). Renewable and Sustainable Energy Reviews 138: 110520. doi:10.1016/j.rser.2020.110520. ISSN 1364-0321. https://www.sciencedirect.com/science/article/pii/S1364032120308054. "Windfarms can hedge electricity price risk by investing in Bitcoin mining. [...] These findings, which can also be applied to other renewable energy sources, may be of interest to both the energy generator as well as the system regulator as it creates an incentive for early investment in sustainable and renewable energy sources.". 
  52. ↑ 52.0 52.1 Moore, Kathleen (8 July 2021). "Mechanicville hydro plant gets new life". https://www.timesunion.com/news/article/Mechanicville-hydro-plant-gets-new-life-16299115.php. 
  53. ↑ Murillo, Alvaro (12 January 2022). "Costa Rica hydro plant gets new lease on life from crypto mining". https://www.reuters.com/technology/costa-rica-hydro-plant-gets-new-lease-life-crypto-mining-2022-01-11/. 
  54. ↑ Heinonen, Henri T.; Semenov, Alexander; Veijalainen, Jari; Hamalainen, Timo (2022). "A Survey on Technologies Which Make Bitcoin Greener or More Justified". IEEE Access 10: 74792–74814. doi:10.1109/ACCESS.2022.3190891. 
  55. ↑ "Cryptocurrency mining and renewable energy: Friend or foe?". 25 May 2021. https://www.smart-energy.com/renewable-energy/cryptocurrency-mining-and-renewable-energy-friend-or-foe/. 

Further reading




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