Sustainable Bitcoin Protocol and Crypto Miner Crusoe Energy Pilot a Waste Gas Methodology

The Sustainable Bitcoin Protocol (SBP) has started a pilot with off-gas cryptominer Crusoe Energy to improve a methodology to determine the environmental impact of such operations, it said in a press release on Thursday.

“Using a third-party audit, SBP will verify that Crusoe’s waste gas procurement and technology meet a standard that demonstrably reduces greenhouse gas emissions and is additive to the transition to clean energy,” the press release said. SBP worked with Crusoe and other parties to create a methodology, they told CoinDesk.

SBP is a startup that wants to create a market-based mechanism that motivates bitcoin (BTC) miners to make their operations more sustainable. They work with third parties to audit miners’ operations and, if they meet their standards, clear them for the issuance of Sustainable Bitcoin Certificates (SBC). An on-chain SBC asset is issued for every bitcoin that is sustainably mined and tradable. Investors can buy these to make ESG claims about their bitcoin holdings.

Crusoe and other cryptominers work on oil and natural gas wells where excess gas is released into the atmosphere, or flared. If this happens, it adds carbon dioxide equivalents, and especially methane, to the atmosphere. Crusoe instead sets up power generators that burn the gas, extracting energy and putting it into bitcoin mining.

This process still emits greenhouse gases, but avoids methane emissions, a gas that contributes as much as 80 times more potent than carbon dioxide, and instead uses the gas. Crusoe claims that by 2022 it captured over 4 billion cubic feet of gas, avoiding around 509,000 tons of carbon dioxide equivalents.

Ensuring that this gas would otherwise be flared, adding greenhouse gases, is key to the methodology. SBP wants to “ensure that using this waste gas does not perpetuate the problem,” while “recognizing that oil and gas will be used for many years to come,” said Brad van Voorhees, co-founder and CEO of SBP. “When done responsibly, the use of this exhaust gas is actually the ideal type of energy transition process,” he said.

If the oil and gas producer could find a pipeline that would transport it somewhere else to be sold, they would prefer that from an ESG perspective, Lochmiller said. If the producer can get market price elsewhere, the gas is not wasted, he said.

Unlike other environmental assets such as carbon and renewable energy credits, SBCs are fungible. They do not represent a specific bitcoin that was mined using sustainable practices, but rather ownership of all the climate-friendly tokens that are part of the protocol, van Voorhees explained.

“The SBP has really created a mechanism to make the allegations around how it [mining] process is complete,” to ensure it is thoroughly audited with a third-party mechanism, making the claim “independently tradable from the actual underlying bitcoin commodity,” ensuring that the mined bitcoin remains perfectly fungible, said Chase Lochmiller, Crusoe’s CEO.