The environmental costs of using cryptocurrency could be drastically reduced by combining crypto-mining with carbon offsets, a new study suggests.
Bitcoin and other digital currencies like Ethereum and Monero are generated and verified by decentralized global networks of computers solving math problems of increasing complexity.
But crypto mining requires massive amounts of computing energy, producing staggering environmental impacts, Singapore’s Centre for Nature-based Climate Solutions found in the study released Tuesday.
“Studies suggest that the total carbon from the Bitcoin network alone could potentially … [s]urpass the total carbon footprint of some of the most populous cities in the world including Beijing, Sao Paulo and New Delhi,” wrote author Aakash Lamba of the National University of Singapore.
While some regions like China’s Sichuan and Canada’s Quebec have been able to use hydropower for energy to drive the currency-creating calculations, hydropower is seasonally erratic, leading to surges in coal burning to power the operations when rivers are low.
Concerns over the power requirements and climate impacts of Bitcoin mining were both partial factors in the Chinese government’s decision to ban the practice last fall, as Equilibrium reported in August.
Some have pushed to reduce the impacts of coin mining by powering it through renewable energy or switching to less energy-intensive methods of computation.
But the study released Tuesday noted it is “very challenging” for more established networks to make that shift, given mining is spread across a wide variety of jurisdictions unbound by any shared regulatory authority that can get them to switch to renewable energy.
That’s why such proposed changes are required “in tandem” with carbon credits, Lamba wrote: they are as automatic and decentralized as the cryptocurrencies themselves.
Carbon credits are designed to help companies counter their carbon emissions. One credit is generated for every ton of carbon dioxide pulled out of the air or kept from being released by industrial, forestry or ocean projects, and these credits can then be sold on carbon markets to cancel out companies’ emissions.
This isn’t the first time carbon markets and cryptocurrency have been linked. In his 2020 bestseller “The Ministry for the Future,” science fiction author Kim Stanley Robinson suggested the creation of digital “carbon coins” that would be paid out to anyone who reliably locks down carbon for the next century in what he called “carbon quantitative easing,” in reference to the massive state stimulus that central banks turned to during the 2008 financial crisis.
This idea comes directly from longstanding attempts to make global economics account for the “social cost of carbon” — the broad social damage caused by burning fossil fuels — and reward people for helping to mitigate it.
But at least for now, cryptocurrency and carbon credits functions entirely outside of the central banks and global compacts such a system would require — leading to a need for more decentralized solutions, Lamba wrote.
One potential solution is Bitcoin Zero, in which the creation of every new crypto “coin” is canceled out by the “sale” of a carbon credit.
But there are various potential issues, including serious accounting problems such as double-counting, where both seller and buyer of carbon credits both “count the emission reduction toward their climate targets, which may lead to net increase in emissions,” Lamba wrote.
Despite these pitfalls, Lamba wrote, a solution must be found, because Bitcoin isn’t going away.
“Investors are unlikely to move away from tokens like Bitcoin given the immense wealth walked away in the network, as well as the fact that it is continued to be the most dominant and highly valued cryptocurrency despite government crackdowns and widespread coverage about its environmental damage,” he wrote.
