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IMF execs float raising crypto mining electricity prices by 85%

A tax on the energy used by crypto miners could cut emissions by 100 million tons a year, equal to Belgium’s emissions, say two IMF executives.

Two executives from the International Monetary Fund (IMF) say increasing the average crypto mining electricity costs globally by as much as 85% through taxes could put a huge dent in carbon emissions. 

A tax of $0.047 per kilowatt hour “would drive the crypto mining industry to curb its emissions in line with global goals,” the IMF Fiscal Affairs Department’s deputy division chief Shafik Hebous and climate policy division economist Nate Vernon-Lin wrote on Aug. 15.

If accounting for miners’ local impact on health, the tax would rise to $0.089 per kilowatt hour, the pair said.

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Will Biden’s plan to tax crypto mining reduce emissions? Critics say no

The tax is intended to reduce greenhouse gas emissions, electricity costs and local environmental pollution, but has not been kindly received by the crypto community.

Cryptocurrency miners based in the United States could soon face a tax equal to 30% of the cost of electricity they use if President Joe Biden’s proposed budget for the fiscal year 2024 is approved by Congress, but the proposal has sparked debate about whether it would actually decrease global emissions and energy prices.

Cryptocurrency mining is a resource-intensive process that attempts to solve increasingly complex equations in order to create new blocks which can then be validated and added to the blockchain.

This process consumes a significant amount of energy, with some estimates placing the global energy consumption of Bitcoin (BTC) mining alone at around 0.59% of the world's energy usage, which is roughly equivalent to the energy usage of Malaysia, according to Worldometer.

Biden’s  Council of Economic Advisors (CEA), argues that the tax — dubbed the Digital Asset Mining Energy (DAME) excise tax — “encourages firms to start taking better account of the harms they impose on society,” adding:

“Estimated to raise $3.5 billion in revenue over 10 years, the primary goal of the DAME tax is to start having cryptominers pay their fair share of the costs imposed on local communities and the environment.”

By imposing a tax on electricity usage crypto miners will have a financial incentive to reduce their energy consumption, and with electricity generation making up such a large proportion of carbon emissions, this should theoretically reduce emissions in the U.S.

This idea is similar to the thinking behind carbon taxes, which are intended to disincentivize emitters by forcing them to pay the full social cost of their emissions after attempting to factor in costs associated with polluting.

Leakage

However, opponents of the tax argue that it will simply drive miners offshore to countries with lower tax rates and less stringent environmental regulations, where they will continue to emit large amounts of carbon dioxide. This situation is known as “carbon leakage,” whereby emissions are simply shifted from one location to another, rather than reduced overall.

As Coin Metrics co-founder Nic Carter points out, these countries may also have a much lower proportion of energy supplied by renewable sources, so emissions may even increase as crypto miners move offshore.

Carter was scathing in his critique of the policy, arguing that it would decrease tax revenue contrary to what the Biden administration suggests, increase carbon emissions, and empower “geopolitical enemies.”

In its blog post, the CEA noted that “the potential for cryptomining to relocate abroad — such as to areas with dirtier energy production — is a concern” but suggested that other countries are also moving to restrict crypto mining, and cited nine countries that already had banned the activity.

Speaking to Cointelegraph, environmental group Greenpeace USA's Bitcoin project lead Joshua Archer warned that regulations or taxes deterring crypto mining will likely be created wherever crypto miners move to, and argued that Bitcoin should eliminate its proof-of-work consensus mechanism.

The climate activism group has been calling for Bitcoin to transition to a proof-of-stake mechanism as part of its ongoing “change the code, not the climate” campaign which began early last year. 

One of the countries referred to by the CEA, China, banned crypto mining in 2021 after citing concerns about its electricity consumption and environmental impact. However, studies on the effect of the ban suggest that activity had simply moved to countries that use far less renewable energy, and actually increased global emissions.

The CEA also argued that crypto miner's electricity usage drives up costs for other consumers, and increases overall reliance on “dirtier sources of electricity.”

While this makes sense according to economic theory, as an increase in demand within a market leads to higher prices, it may overlook some important nuances of the crypto-mining industry and its effect on the electricity market in the U.S.

‘Beauty of Bitcoin’

Bitcoin miner Marathon Digital Holdings’s CEO Fred Thiel told Cointelegraph that “The beauty of Bitcoin mining is that it naturally incentivizes renewable energy generation.”

Thiel elaborated that “In many cases, green energy sources — such as solar and wind farms — are only feasible if there is consistent demand for that energy when it is produced,” adding:

“While most consumers’ energy needs fluctuate, miners act as consistent base load energy consumers. They help stabilize the grid, making new green energy projects financially feasible.”

According to Thiel, while Bitcoin mining incentivizes the production of renewable energy generation, Bitcoin miners in the U.S. are also drawn to renewable energy sources, as the excess energy they produce which is unable to be returned to the grid is some of the cheapest energy available in the U.S.

Thiel added that if this excess energy was not used by Bitcoin mining firms, it would not be able to be used by consumers and would otherwise be wasted.

Thiel noted that this mutually beneficial relationship between renewable energy producers and Bitcoin miners is contributing to an already ongoing shift towards more sustainable sources of electricity, pointing to the most recent survey by the Bitcoin Mining Council (BMC).

Based on the results of the survey, the BMC estimated that 58.9% of the electricity used in Bitcoin mining throughout the last quarter of 2022 was generated by renewable energy sources, a number that is increasing over time.

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Thiel was also very scathing of the DAME tax, arguing that “it is a shot at a specific industry, not at a specific practice or fuel source,” adding:

“If the Biden Administration really wanted to reduce global emissions, it would target the ways electricity is generated – not arbitrarily target select industries that use it.”

He said that the proposal “is intended to run Bitcoin miners out of business” and “will both raise energy prices for consumers and reduce the feasibility of renewable energy development in the U.S.,” concluding:

"Either the administration is utterly misguided, or this proposed tax is nothing more than a move to hamper this industry for political reasons, because it is not in the interest of the people, the energy grid, or the environment."

The proposal comes amid calls that a lack of regulatory clarity and access to banking services in the U.S. is killing its crypto industry, and if the DAME tax is approved by Congress it may just be one more nail in the coffin.

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C6 Bank’s Climate Tool to Track CO2 Emissions From Customer Transactions Prompts Debate on Future of Banking

C6 Bank’s Climate Tool to Track CO2 Emissions From Customer Transactions Prompts Debate on Future of BankingOn April 13, a C6 Bank customer in Brazil shared screenshots of his online bank account, revealing that the financial institution was tracking CO2 emissions from his purchases and urging him to compensate monetarily. C6 Bank states that the new tool aims to inspire Brazilians to adopt more sustainable behaviors. ‘CBDC Preview’ — Bank Customer […]

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ESG Analyst Daniel Batten Reveals Dynamic Charts Showing Bitcoin’s 52.6% Sustainable Energy Use

ESG Analyst Daniel Batten Reveals Dynamic Charts Showing Bitcoin’s 52.6% Sustainable Energy UseEnvironmental, social, and governance (ESG) analyst Daniel Batten said Tuesday that the computational backbone of the Bitcoin network now uses 52.6% sustainable energy. Batten and onchain analyst Willy Woo created Dynamic Bitcoin ESG Charts to showcase the protocol’s progress. Contrary to Cambridge University Data, Analyst Says Bitcoin Mining Uses 52.6% Sustainable Energy These days, there […]

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Terawulf Energizes First Nuclear-Powered Bitcoin Mining Facility in the US, Plans to Expand Operations

Terawulf Energizes First Nuclear-Powered Bitcoin Mining Facility in the US, Plans to Expand OperationsTerawulf, a bitcoin mining operation, has announced that it has energized the first nuclear-powered bitcoin mining facility in the United States at the company’s Nautilus Facility in Pennsylvania. According to the company, approximately 1 exahash per second (EH/s) or close to 8,000 application-specific integrated circuit (ASIC) bitcoin miners are now online, and another 8,000 mining […]

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Can blockchain help combat climate change?

Blockchain’s transparency and traceability can aid sustainability and reduce carbon emissions for climate change.

With rising temperatures, melting ice caps and more frequent and intense extreme weather events, the effects of climate change are becoming more and more obvious. There is an urgent need to prevent climate change, and numerous technologies and methods are being investigated to do so. Blockchain technology is one of these possibilities, and it has the potential to be very effective in the fight against climate change.

At its core, blockchain is a decentralized ledger that can securely and transparently record transactions and store data. This technology has already been used in a variety of applications, from cryptocurrency to supply chain management. However, its potential applications in combating climate change are still being explored.

Here are a few ways in which blockchain can help combat climate change.

Creation and management of carbon credits

The creation and administration of carbon credits is one way that blockchain technology can help fight climate change. A tradable permit called a “carbon credit” permits the holder to emit a certain amount of greenhouse gases, such as carbon dioxide. To reduce their emissions, businesses and organizations can buy carbon credits, which can be traded on a market.

The management of carbon credits may become more transparent and effective with the use of blockchain. All carbon credit transactions can be tracked in real-time and documented using a decentralized ledger. By doing so, fraud can be avoided, and the intended use of carbon credits can be guaranteed.

The management of carbon credits may become more transparent and effective with the use of blockchain. All carbon credit transactions can be tracked in real-time and documented using a decentralized ledger. By doing so, fraud can be avoided, and the intended use of carbon credits can be guaranteed.

Promote renewable energy sources

By establishing a decentralized energy infrastructure, blockchain technology can also encourage the adoption of renewable energy sources. Without the aid of a centralized organization or utility company, people and companies can buy and sell renewable energy directly from and to one another using a decentralized energy grid. This can support the adoption of renewable energy sources, such as solar and wind power, and lessen dependency on fossil fuels.

Related: Bitcoin miners as energy buyers, explained

Supply chain management

Supply chain management is another area where blockchain technology is being used to tackle climate change. Businesses can find opportunities to lower their carbon footprint and make more sustainable decisions by utilizing blockchain to track the carbon footprint of products and materials across the supply chain. By promoting sustainable production and consumption practices, greenhouse gas emissions can be significantly reduced.

Monitoring and reporting carbon emissions

The monitoring and reporting of carbon emissions from numerous sources, such as businesses, vehicles and structures, can also be done using blockchain technology. Governments and organizations can more precisely measure and report on their emissions and monitor progress toward their emission reduction targets by utilizing a decentralized ledger to track emissions.

Related: Carbon market gets a much-needed boost from blockchain technology — Web3 exec

Challenges to implementing blockchain to reduce carbon emissions

Using blockchain technology to address climate change is not without its difficulties and restrictions. The requirement for standardization and compatibility is one obstacle. Blockchain needs a uniform set of rules and protocols that all stakeholders can agree upon in order to manage carbon credits and track emissions effectively.

The scalability of blockchain technology presents another difficulty. Many blockchain networks currently only have a modest amount of capacity and can only process a small number of transactions. If blockchain is widely utilized to manage carbon credits or track emissions, this might become a bottleneck.

Last but not least, there are issues with the energy usage of blockchain technology. Some of the environmental advantages of adopting blockchain to fight climate change may be outweighed by the energy consumption necessary for blockchain transactions.

The road ahead

Although blockchain technology is still in its infancy in terms of adoption and development, its prospective uses in halting climate change are promising. Blockchain can hasten the shift to a low-carbon economy by enhancing transparency, efficiency and accountability in regulating carbon emissions and encouraging sustainable practices.

Yet in order for blockchain to be successful in addressing climate change, there are also difficulties and constraints that must be overcome. Ultimately, a combination of technologies and solutions will be required to address the complex and urgent challenge of climate change.

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Dogecoin (DOGE) Becomes Third-Fastest Crypto at Decreasing Carbon Emissions, Slashing CO2 by 25% in 2022: Report

Dogecoin (DOGE) Becomes Third-Fastest Crypto at Decreasing Carbon Emissions, Slashing CO2 by 25% in 2022: Report

New data reveals that meme token Dogecoin (DOGE) is one of the fastest crypto assets at decreasing carbon emissions. According to a new report by foreign exchange data aggregator Forexsuggest, Dogecoin is the third-fastest digital asset at lowering its carbon footprint as it slashed its emissions by 25% in 2022. “Dogecoin has seen a 25% […]

The post Dogecoin (DOGE) Becomes Third-Fastest Crypto at Decreasing Carbon Emissions, Slashing CO2 by 25% in 2022: Report appeared first on The Daily Hodl.

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Massachusetts Senator Forwards Bill Aimed at Forcing Crypto Miners to Report Greenhouse Gas Emissions

Massachusetts Senator Forwards Bill Aimed at Forcing Crypto Miners to Report Greenhouse Gas EmissionsOn Dec. 8, 2022, three Democratic politicians from Massachusetts, Oregon, and California revealed legislation aimed at combatting “energy-intensive” cryptocurrency mining operations. The bill introduced by senator Ed Markey (D-MA) alleges that crypto mining “strains the grid” and the industry “undermines U.S. climate goals.” 3 U.S. Bureaucrats Believe Crypto Miners Need to Report Carbon Emissions and […]

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Greenpeace: Bitcoin Is ‘Falling Behind’ in the Battle Against Climate Change

Greenpeace: Bitcoin Is ‘Falling Behind’ in the Battle Against Climate ChangeGreenpeace, the international, environment-conscious non-governmental organization (NGO), has criticized the lack of action that Bitcoin-related groups have adopted in the battle against climate change. Rolf Skar, of Greenpeace USA, stated that Bitcoin was “falling behind” on this issue, explaining that most Bitcoin-linked groups fail to even acknowledge the ostensible problem. Greenpeace Blasts Bitcoin’s Lack of […]

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BTC energy use jumps 41% in 12 months, increasing regulatory risks

Despite the European Union rejecting a proposal banning crypto mining earlier this year, more regulations could soon be implemented to mitigate the environmental impacts of crypto mining.

Bitcoin (BTC) has seen a 41% increase in energy consumption Year-on-Year (YoY) despite dramatic improvements in energy efficiency and a more diverse and sustainable energy mix — but there are concerns the rise could see regulators clamp down on mining. 

The data comes from a Q3 2022 report by the Bitcoin Mining Council (BMC) which represents 51 of the world's largest Bitcoin mining companies.

The report found Bitcoin mining to consume 0.16% of global energy production, slightly less than the energy consumed by computer games according to the BMC — and an amount it considered to be “an inconsequential amount of global energy.”

Bitcoin mining also emitted 0.10% of the world’s carbon emissions which the BMC deemed to be “negligible.”

The increase in Bitcoin energy consumption comes as the network’s hashrate increased 8.34% in Q3 2022 and 73% YoY, despite fewer blocks being produced and downward price pressure.

Blockchain data analytics firm Glassnode is of the view that the “hashrate rise is due to more efficient mining hardware coming online and/or miners with superior balance sheets having a larger share of the hash power network.”

While the report also claimed Bitcoin mining efficiency to have increased 23% YOY and 5,814% over the last eight years, further increases in overall energy consumption may draw the ire of regulators examining the issue.

Pressure is ramping up on Bitcoin miners from environmentalists who claim its power consumption is harmful to the environment. Greenpeace is currently running the “change the code not the climate’ campaign to encourage the Bitcoin network to move to proof of stake, however the official account has only amassed 1100 followers so far.

On Oct. 18, the European Union (EU) released documentation outlining an action plan to implement the European Green Deal and the REPowerEU Plan — with both planning to keep a close eye on crypto mining activities and their environmental effects.

The European Blockchain Observatory and Forum (EUBOG) also suggested the EU adopts mitigation measures to lessen the adverse impacts on the climate caused by the digital asset sector.

This suggestion has already been put into effect to some degree, with the EU asking for its member states “to implement targeted and proportionate measures to lower the electricity consumption of crypto-asset miners” to combat the severe cut in the energy supplied from Russia.

Related: Researchers allege Bitcoin’s climate impact closer to ‘digital crude’ than gold

The push for tighter regulation comes despite the EU rejecting a proposal in March that would have enforced a total ban on crypto mining.

As for the United States, regulatory movements appear to be a step behind its EU counterpart.

In September the White House Science Office published a 46-page document that looked into the climate and energy implications of crypto-assets, however, mixed conclusions were reached and no significant plan is in the works yet.

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