Seen as a proportion of the market price, the climate change impacts of mining the digital cryptocurrency Bitcoin are more comparable to the impacts of extracting and refining crude oil than mining gold, according to an analysis published in Scientific reports by researchers at the University of New Mexico.
The authors suggest that rather than being considered akin to “digital gold,” Bitcoin should instead be compared to much more energy-intensive products like beef, natural gas, and crude oil.
“We find no evidence that Bitcoin mining is becoming more sustainable over time,” said UNM Economics Associate Professor Benjamin A. Jones. “Rather, our results suggest the opposite: Bitcoin mining is getting dirtier and more damaging to the climate over time. In short, Bitcoin’s environmental footprint is moving in the wrong direction.”
As of December 2021, Bitcoin had a market capitalization of approximately 960 billion US dollars with a global market share of around 41 percent among cryptocurrencies. Although it is known to be energy intensive, the extent of Bitcoin’s climate damage is unclear.
Jones and colleagues Robert Berrens and Andrew Goodkind present economic estimates of climate damage from Bitcoin mining between January 2016 and December 2021. They report that Bitcoin mining in 2020 used 75.4 terawatt hours of electricity (TWh) – higher electricity consumption than Austria (69, 9 TWh) or Portugal (48.4 TWh) that year.
“Globally, the mining, or production, of Bitcoin uses huge amounts of electricity, mainly from fossil fuels, such as coal and natural gas. This causes huge amounts of air pollution and carbon emissions, which negatively affects our global climate and health,” says Jones. “We are finding more cases between 2016-2021 where Bitcoin is more harmful to the climate than a single Bitcoin is actually worth. Put another way, Bitcoin mining in some cases creates climate damage that exceeds the value of a coin. This is extremely disturbing from a sustainability perspective.”
The authors assessed Bitcoin’s climate damage according to three sustainability criteria: whether the estimated climate damage increases over time; whether the climate damages of Bitcoin exceed the market price; and how climate damage as a proportion of the market price is compared to other sectors and raw materials.
They find that CO2 equivalent emissions from electricity production for Bitcoin mining have increased 126 times from 0.9 tonnes per coin in 2016 to 113 tonnes per coin in 2021. Calculations suggest that each Bitcoin mined in 2021 generated 11,314 US dollars (USD) in climate damage, with total global global damages. damages exceeding USD 12 billion between 2016 and 2021. Damages peaked at 156% of the coin price in May 2020, suggesting that every USD 1 of Bitcoin market value generated led to USD 1.56 in global climate damages that month.
“Across the class of digitally scarce goods, our focus is on those cryptocurrencies that rely on proof-of-work (POW) production techniques, which can be very energy intensive,” said Regents Professor of Economics Robert Berrens. “Within broader efforts to mitigate climate change, the political challenge is to create governance mechanisms for an emerging, decentralized industry, which includes energy-intensive POW cryptocurrencies. We believe that such efforts will be aided by measurable, empirical signals of potentially unsustainable climate damage, in economic terms.”
Finally, the authors compared Bitcoin’s climate damage with damage from other industries and products such as electricity generation from renewable and non-renewable sources, crude oil processing, agricultural meat production and precious metal mining. The climate damage for Bitcoin averaged 35% of its market value between 2016 and 2021. This share for Bitcoin was slightly less than the climate damage as a share of the market value of electricity produced from natural gas (46%) and gasoline produced from crude oil (41%), but more than those for beef production (33%) and gold mining (4%).
The authors conclude that Bitcoin does not meet any of the three key criteria for sustainability against which they assessed it. Absent a voluntary switch away from proof-of-work mining, as was recently done for the cryptocurrency Ether, potential regulation may be necessary to make Bitcoin mining sustainable.
