By James Pethokoukis
So we have a big conflict. At least it seems that way. More and more businesses are expressing a commitment to tackling climate change. And more and more businesses seem interested in Bitcoin. The problem here: Mining Bitcoin is highly energy-intensive. As Microsoft cofounder Bill Gates (who has a book out on climate change) told The New York Times “Bitcoin uses more electricity per transaction than any other method known to mankind, and so it’s not a great climate thing.” And thus we are getting lots of headlines like these:
- “Electricity needed to mine bitcoin is more than used by ‘entire countries’” – The Guardian
- “Bitcoin consumes ‘more electricity than Argentina” – BBC
- “Bitcoin’s wild ride renews worries about its massive carbon footprint” – CNBC
I mean, pick your country here. Do these mining operations consume as much as Argentina? Or is it Chile? Or is it the Netherlands? In any event, what are policymakers around the world to do? A recent Joule article by Alex de Vries outlines some options and constraints:
Although Bitcoin might be a decentralized currency, many aspects of the ecosystem surrounding it are not. The competitive Bitcoin market drives miners to take advantage of economies of scale in lowering costs, which also makes it harder for them to operate under the radar. Large-scale miners can easily be targeted with higher electricity rates, moratoria, or, in the most extreme case, confiscation of the equipment used. Moreover, the supply chain of specialized Bitcoin mining devices is concentrated among only a handful of companies. Manufacturers like Bitmain can be burdened with additional taxes like tobacco companies or be limited in their access to chip production. Policymakers can even be more restrictive to certain cryptocurrencies by barring them from centralized digital asset marketplaces. Although the latter has no direct effect on mining, it can influence the value of a digital currency (and thus the associated mining rewards).
Policymakers should, however, be aware that there are also some boundaries to the policy options. Ultimately, any laptop or computer is theoretically capable of participating in cryptocurrency mining, and any location that has access to Internet and electricity might be used to host these devices. Miners could simply move elsewhere under adverse policy decisions, or mining might become more decentralized (and harder to control) when large-scale mining facilities or manufacturers of specialized devices are severely restricted.
Humanity is again proving itself quite clever at coming up with new things to do that require energy. I would imagine that this will keep happening in the future. And some of these activities might even be more broadly useful than Bitcoin mining. Concerns about Bitcoin energy consumption derive from a half-century of government being more focused on energy conservation than energy generation, a focus on scarcity over abundance. Continuing to do so allows, perhaps, avoiding conversation about nuclear energy — as well emerging energy technologies. But this is a societal dead-end unless we successfully limit human creativity and aspiration. This from Alex Trembath of the Breakthrough Institute offers a useful perspective:
We should not oppose emerging technologies and activities merely because they consume a lot of energy. As I wrote a few years ago, “Bitcoin may be a bad idea, but desalination and wastewater treatment, large-scale materials recycling, direct-air carbon capture, vertical farming and aquaculture, and spaceflight have a lot to say for them — and all will come with significant energy demands.” A planet of seven going on nine or ten billion people later this century will require significantly more energy than is produced today, most of it, hopefully, from low-carbon technologies. But it’s not just essential industries and services that deserve a place in a clean energy future. Even energy-intensive sources of frivolity and leisure are not always the climate vices they are made out to be. And framing them as such indicates a mindset and a politics that will be ill-equipped to address climate change and other challenges in the future.