Is Bitcoin’s energy use an environmental disaster
“With an electricity consumption of entire nations, and the international community’s much stronger commitment to intensify decarbonisation efforts to tackle climate change, at first glance Bitcoin seems to jeopardise those efforts.”
Energy costs crisis
A separate University of New Mexico study published on September 30 estimated bitcoin mining used more energy than Austria in 2020, as the European country rushes through emergency measures to help citizens afford heating.
The US study led by associate professor of economics Ben Jones estimated bitcoin used 75.4 terawatt hours per year in 2020, which is higher than Austria at 69.9 terawatt hours per year.
According to the peer-reviewed US research, every bitcoin mined under the proof-of-work method created 113 tonnes of carbon emissions in 2021, versus less than one tonne per coin in 2016. The polluting spillover surged in tandem with the amount of electricity the computer networks used to mine coins over the period.
Bitcoin is power-hungry as it uses a proof-of-work consensus mechanism to verify transactions for miners to earn bitcoin.
In September, rival network Ethereum switched from the proof-of-work to proof-of-stake verification method, in a move that reportedly reduced the network’s energy consumption by around 99 per cent.
In 2022, the European Parliament Committee on Economic and Monetary affairs considered banning crypto assets using proof-of-work in its flagship Markets in Crypto-Assets Regulation on the basis that it was incompatible with the carbon emission reduction targets in the Paris Agreement. However, it reversed its position, reportedly under lobbying from market players.
Bitcoin’s supporters have consistently denounced Ethereum’s conversion as crypto apostasy because proof-of-stake reduces the decentralised, apolitical nature of digital asset networks.
Other major global regulators are less advanced in digital asset regulation and have generally chosen not to address the proof-of-stake versus proof-of-work debate.
In April 2021, when the digital coin traded at record prices above $US63,000 ($97,300), Afterpay owner Square (now Block) and Cathie Wood-run investment manager Ark Invest published a white paper titled Bitcoin is key to an abundant, clean energy future.
The paper argued bitcoin mining presented an opportunity to accelerate the global energy transition to renewables as a complementary technology for clean energy production and storage.
Elective vehicle maker Tesla bought bitcoin in early 2021 as the price surged and markets came to believe it was on the brink of widespread institutional adoption.
However, in August 2022 Tesla revealed it had sold around 75 per cent of its bitcoin holdings for $US936 million at a significant loss. Founder Elon Musk said the decision was made for liquidity management.
The Cambridge research – backed by major governments, investment banks, payments giants, and multilateral development organisations such as the IMF and World Bank – estimated the bitcoin’s largest single source of electricity came from coal at 36.6 per cent in January 2022.
According to the research, hydropower was the largest sustainable energy source with a 14.9 per cent share. Overall, it said fossil fuels accounted for 62.4 per cent of the total electricity mix and sustainable energy sources 37.6 per cent, comprised of 26.3 per cent renewables and 11.3 per cent nuclear.
The study noted its findings contradicted July 2022 industry findings from the Bitcoin Mining Council, which estimated the share of sustainable energy sources in Bitcoin’s electricity mix was 59.5 per cent.
