Europe is moving towards regulatory actions on crypto’s environmental impact, energy use

by · October 19, 2022

The European Union (EU) released a package of documents on 18 October related to an action plan for the implementation of the European Green Deal and the REPowerEU plan, both of which aim to save energy by digitizing the energy sector. The European energy planners have crypto miners in their sights along with countless other energy users.

The REPowerEU plan was announced in May as a response to the Russian invasion of Ukraine, which has had a profound impact on European energy supplies. The Russian crisis was an opportunity to “spoil the clean transition”, the European Commission said. “Control of the energy consumption of the ICT sector” is an important part of the plan and includes blockchains among the objects of attention as a subset of data centers.

The “Commission Staff Working Document” notes that Europe accounts for about 10% of the world’s crypto mining, with Germany and Ireland leading the continent and Sweden experiencing a large increase in activity after mining was banned in China. The document assumes that the European Securities and Markets Authority prepares technical standards for the cryptomining industry.

The authors of the document cited an undated document written by the European Blockchain Observatory and Forum (EUBOF) think tank, which included “potential policy options that may be justified to mitigate negative impacts on the climate of technologies used in the crypto-asset market.” This document will be crucial to a report on the environmental impact of cryptoassets due in 2025. If steps are taken on the EUBOF recommendations, they noted:

“This would be a first worldwide effort to reduce the attractiveness of bitcoin investment and dampen the price of bitcoin.”

The paper also stated that investors need better information about the energy use of cryptocurrencies and, echoing the EUBOF document, that the EU should take the lead in creating international standards for blockchain tokens.

Related: Scientists Claim Bitcoin’s Climate Impact Is Closer to ‘Digital Crude Oil’ Than Gold

The “Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions” said that energy use for crypto mining has doubled in the past two years. It noted that the proposed Markets in Crypto Assets (MiCA) legislation would require crypto asset market participants to make environmental disclosures.

Meanwhile, due to the tight energy situation this winter due to upheavals in Russian energy supply, the European Commission, the executive branch of the EU, is calling on member states “to implement targeted and proportionate measures to lower the electricity consumption of crypto-miners [… and] also in a longer perspective, to end tax breaks and other fiscal measures in favor of crypto miners.” Norway is already considering eliminating crypto miners’ tax breaks.

Speaking in Washington recently, Mairead McGuinness – Commissioner for Financial Stability, Financial Services and the Capital Markets Union – said that Europe attaches great importance to energy and environmental issues related to crypto. The administration of US President Joe Biden has also looked at crypto’s environmental impact.