“The total Bitcoin carbon footprint exceeds the total greenhouse gas emission reductions of electric vehicles (51.9 Mt CO2 in 2020) as reported by the International Energy Agency’s EV Outlook 2021.” This was noted in a new article titled “The true costs of digital currencies: Exploring impact beyond energy use” released in the science journal One Earth on June 18, 2021. The article is a collaboration between Digiconomist, Ulrich Gallersdörfer, Lena Klaaßen and Christian Stoll and primarily urges “the adoption of a more comprehensive view in assessing the externalities of investments in Bitcoin and other cryptocurrencies.”
Despite the focus on other aspects than the carbon footprint of Bitcoin, the previous is a painful observation for governments around the world that have invested billions in electric vehicles trying to make the roads “greener”. In particular, the article focuses on Tesla’s contribution to Bitcoin’s environmental impact. The electric car company started accepting Bitcoin earlier this year, only to stop doing so 50 days later. Additionally, the company bought around 43,000 Bitcoins (of which it has sold 10%). The article quantifies how the carbon footprint of only holding these Bitcoins negates 4% of Tesla’s annual carbon emission savings. As Elon Musk recently tweeted the company may reconsider accepting Bitcoin transactions in the future, this would further push up the company’s Bitcoin-related emissions to account for.
China banning Bitcoin mining
Musk did note that the Bitcoin network would have to be running on renewable energy for 50% or more before Tesla can accept Bitcoin again. This percentage seems unattainable now that China has banned Bitcoin mining. Bitcoin miners in China previously migrated between the provinces of Sichuan and Yunnan in summer and Xinjiang and Inner Mongolia during the rest of the year. The reason for this was that miners could obtain cheap hydroelectric power during the summer rain season, while taking advantage of an abundance of coal when the rain season ended. Chinese hydroelectric power represented the only major source of renewable energy in the network. Without access to the world’s largest producer of renewable energy in absolute terms, the network will have a tough time securing a full developed country worth of electricity consumption in renewable energy. This is amplified by the fact that the nature of Bitcoin’s power demand and intermittent renewable energy sources have always been a bad match. Bitcoin miners are now relocating from Sichuan to countries like Kazakhstan, which hardly has any renewable energy on its grid at all. If anything, this is making Bitcoin’s carbon footprint worse rather than better. It’s also worth noting that China banning Bitcoin mining during the summer months doesn’t positively impact the network in any way, as the use of hydroelectric power during this period normally wouldn’t add much to the network’s total footprint in the first place.
Meanwhile, as also argued in the new One Earth article, investors shouldn’t forget about the network’s impact beyond the carbon footprint associated with energy use. It is noted the “entire network generates as much electronic waste as a country like Luxembourg does annually, which results in an electronic waste footprint of almost 135 g of equipment (equivalent to the weight of an iPhone 12 mini) per transaction processed on the Bitcoin network.” No amount of renewable energy can ever address this. Similarly, other aspects like grid-stability and the network’s impact on the global semiconductor supply chain shouldn’t be overlooked either. For details on these and others aspects check out the full paper here (free to access up until August 5, 2021).