Canada’s crypto boom and the energy concerns it raises
In recent years, the rise of cryptocurrency mining has caused concern for those hoping for a green transition, as the sector increases its electricity use year on year, causing energy demand in certain regions to rise rapidly. Until now, crypto production has relied mainly on electricity generated from fossil fuels, including the use of flared gas from operations that use carbon capture and storage technologies. We are seeing an acceleration in the roll-out of renewable energy projects, but some worry that if demand for electricity continues to rise, many regions will remain dependent on fossil fuels for their power. And while states are beginning to regulate crypto production, this is a slow process, and many companies remain largely unrestricted.
In Canada, many crypto miners are moving to the region to take advantage of the country’s clean, affordable energy supply. The industry has boomed in certain provinces, such as British Columbia (BC) and Quebec. In BC, there are seven crypto mining projects in operation, with another six sites under development. But the need for huge amounts of electricity to run the operation is getting more attention.
Currently, BC has an energy surplus, which has drawn in several crypto companies. Dan Roberts, an Australian cryptocurrency entrepreneur explained: “We can build a whole industry around this. We can go into the regional towns where they’ve been decimated by the end of the pulp and paper mills … rehire local workers, retrain them and returning all these benefits to society.” So it’s easy to see why crypto miners have moved to the region and many locals have welcomed them as they bring jobs and economic growth.
However, the province has just imposed an 18-month moratorium on connecting new crypto-mining facilities to the electrical grid, bringing 21 new projects to a halt. These projects would have used the same amount of electricity as 570,000 homes. BC Energy Minister Josie Osborne believes the moratorium will give the province the time needed to consult with industry and ensure the region’s energy is used efficiently. Osborne worries that the surplus in BC may not be seen forever and that the green power in the region should be used in a climate-positive way. She suggests that crypto mining does not help BC meet its climate goals, and ultimately provides fewer job opportunities than many other industries.
And while some crypto miners use renewable energy in their operations, many do not. All over the world, there is a growing concern about the greenhouse gas emissions involved in crypto mining. According to an industry tracker from the University of Cambridge, which focuses on Bitcoin, the sector’s carbon emissions are still extremely high. The tracker found that if Bitcoin continues its current mining activity, it will release approximately 62 megatons of carbon dioxide equivalents each year. This is comparable to the total emissions released in Serbia in 2019.
As people become more concerned about electricity use for crypto operations, many are calling for greater regulation of the sector, which remains largely unregulated. G7 officials plan to discuss regulations on the cryptocurrency industry to improve transparency and consumer protection at their next meeting in Hiroshima, Japan, in May. Cryptocurrency will also be discussed at the upcoming G20 meeting of finance ministers and central bank governors in Washington DC, in April. Currently, there is little coordination over crypto regulations, with some states or regions imposing their own restrictions on mining, but little national or international agreement.
In the EU, some progress has been seen in the regulation of the sector, and the EU Council Presidency and the European Parliament reached an agreement on proposals for markets for crypto-assets (MiCA) last year. MiCA provides EU-wide regulation for the rapidly developing sector. The regulatory framework is aimed at protecting investors and preserving financial stability, while allowing for innovation and promoting the attractiveness of the crypto-asset sector.
While most measures have been taken at the state level in the US, such as in New York, this may soon change. In Biden’s latest budget plan for 2024, he proposed a new tax on electricity use for crypto mining. If the budget is adopted, this could mean a tax of 30 per cent on mining, which will be phased in over three years. This responds to concerns over the environmental impact of the industry.
It is clear that the electricity requirements of cryptomining are high, whether the energy comes from fossil fuels or renewable sources. At a time when the world is trying to curb energy use and undergo a green transition, this is of great concern to those who manage the energy sector. But to date there is little international coordination of crypto regulation. But as some regions reach agreements, such as the EU, as the US looks set to introduce a tax on mining, and discussions start at the international level, it is only a matter of time before the industry faces stricter regulations.
By Felicity Bradstock for Oilprice.com
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