What the Bitcoin industry needs to learn from forestry

In the late 1990’s, when I was working in an environmental economics think tank, I had the opportunity to talk one – on – one with the CEO of one of the world’s largest wood processing and paper companies. I was on his management team’s corporate retreat to talk to them in general about ways they can earn more by seeing the world through a sustainability lens. But he would not talk to me about it.

“Greenpeace should pay me to grow trees, we grow more trees than they could ever dream of,” he growled at me, instead of saying hello. I began to explain that Greenpeace probably cared about how the trees were grown … and in the middle of the sentence he turned and stepped away.

To understand some of the context, keep in mind that 30 years ago, timber and paper boycotts were common, as not only Greenpeace but other environmental groups tried to highlight what they considered unsustainable forestry practices (“clearing” etc.) in the industry. These disruptions affected one forest product company at a time, and were meaningful.

But also, when I had the consistent conversation, the forestry industry and some future-oriented environmental organizations had already taken steps to address the concerns in a collaborative way, by establishing the Forest Stewardship Council (FSC).

FSC was at the time a revolutionary concept: a voluntary set of standards for forestry practices, matched by a chain storage process, where FSC-certified products could bear the trademarked logo that testifies to their “greenery”. Large distributors such as Home Depot and wholesalers of paper products were then able to link their purchasing practices to this branding, which then created a good cycle where the forestry industry was further encouraged to voluntarily adopt these standards and practices. The FSC has since inspired other similar efforts such as the Marine Stewardship Council to serve the seafood industry.

Although these voluntary industry standard works do not directly prohibit unsustainable activities, they provide a strong incentive for industry participants to adopt more sustainable methods. And as a result, they have also helped both forestry and the seafood industry to gain more acceptance and be less of a target for the environmental protection environment. And more importantly, they have also been of great benefit to the environment along the way.

The bitcoin industry is now in a somewhat similar situation: under attack for environmental reasons. But also with a clear way forward, if they can self-organize effectively and establish some strong standards.

As most readers will know, bitcoin is energy intensive. As my friend John Belizaire from Soluna Computing points out, this is by design (it is a crucial basis for the security attributes of the cryptocurrency), and it will therefore not be easy to change. But nonetheless, with such high energy consumption and increasing, this means that the industry is under attack.

These are not just rhetorical attacks. In the state of New York, a new law set limits on what bitcoin miners can do, and the state also recently denied a renewal of the permit for a coal-fired power plant that was kept alive to operate bitcoin mining. Although a little milder, the EU also makes more demands on bitcoin miners with climate change in mind.

However, the increased requirements and restrictions for bitcoin mining in some regions will not close bitcoin as a “thing”. BitcoinBTC
is not going to be banned worldwide just because some environmentalists want it. Major tech players are firmly behind the cryptocurrency. Both large Wall Street banks and pension funds are investing heavily in the future of bitcoin. Bitcoin miners have been somewhat started up from China, but are busy moving to places like Texas. Bitcoin prices can be wildly volatile, but the already established economic role of cryptocurrency (and with it, its energy-intensive “proof of work” methodology) does not disappear, whether you like it or not.

But the attacks and the political reactions will not disappear either. In fact, they are going to increase. And the bitcoin mining industry is going to need a more efficient answer than what they have already tried: to argue that bitcoin mining is inherently good for the planet BECAUSE it uses a lot of electricity. After all, some claim, most of the new electricity production is now renewable. So therefore, more demand for electricity means more renewable power project development, and thus the planet saved!

With this same logic, we should all leave our refrigerator doors open at all times, while turning on all our lights and all other power-consuming equipment we can put on full blast. Leave the hair dryer on all day, every day. … For the planet. Right.

However, there are specific practices that bitcoin miners can do to make a more convincing argument for climate benefits through their activities. Doing mining activities powered by 100% renewable energy, in a controllable way, would be a good first step. Even better would be to focus on the use of otherwise limited renewable capacity as a primary power source for mining (full disclosure: my company recently partnered with Soluna to do just that on a number of projects). In fact, it would directly encourage new renewable power projects with specific, large developers.

But while the industry has established a Bitcoin Mining Council (BMC) to help promote their sustainability message, so far it has not taken any really bold action (other than defending the industry loudly, of course). The industry should instead borrow from FSC and MSC manuals, and start establishing voluntary but reliable standards and a certification program for “green bitcoin”.

Such a standard must include the establishment of standards around what a “green bitcoin” actually is, and it will be disputed. Not many miners yet focus on the use of otherwise limited renewable energy, for example, or even direct power purchase agreements with specific renewable projects. There are benefits to additional online-level services via bitcoin mining (or more simply, turning off mining activities on demand) that are also potentially useful in encouraging the development of renewable energy in stressed networks such as Texas. With this complex set of factors, it would be useless for BMC and other industry advocates to try to determine what a “green bitcoin” is all on its own, it would never achieve the necessary credibility. No, just as with the FSC and MSC, any new “green bitcoin” standard must be made in active collaboration with key environmental groups. But as these examples show, even though it can be painful at the time, the results can be very powerful.

So once these standards have been negotiated and accepted, the practice must also be completely revisable and transparent. Entire cabin industries have been created around the certification and chain storage practices behind FSC’s and MSC’s successes. But such environmental certification is now easy within the possibilities of other similar certification processes. In short, if a bitcoin miner does the things necessary to achieve the “green bitcoin” standards that have been established, it will not be difficult or costly for them to prove it and get a certification.

Chain-of-customer for an item designed to be traded anonymously would be more difficult, but this is less of an issue for the FIRST buyer of the resulting green bitcoin. And this is where it will really help to establish a brand standard – because the technology giants, pension fund managers and large banks that buy bitcoin for the balance sheet and / or customers may be pressured to declare that they will only buy certified “green” bitcoin directly from miners who meet this established standard. This will lead them to want to develop direct purchase agreements with such certified green miners, and in particular any otherwise limited consumption of renewable energy, as part of their own ESG and net-zero climate emissions efforts. And it would then strongly encourage even more miners to adopt the standard. As a side benefit, these standards and revisable practices will also inevitably lead to higher social and governance standards, not just environmental ones.

This is what the bitcoin mining industry needs to embrace and shift towards. At least the bigger, credible miners and their immediate customers in the technology and finance industry. Although it would never capture the entire industry, it would begin to actually lay some verifiable evidence behind the rhetoric of BMC and others who currently do not win over anyone in the environmental movement. And it would help prevent or at least dull the effects of the looming climate bitcoin crash in major economies such as North America and Europe.

I know that the bitcoin industry tends to want to look ahead, and reject lessons from the past, and we therefore hear no mention at all so far of the relevant lessons from three decades of success from forestry and the seafood industry.

But it’s time for a Green Bitcoin Stewardship Council, as a partnership between BMC and major environmental groups. It is the only clear way forward for a profitable industry … and for our planet.