In recent years, the rise of cryptocurrency mining has caused concern for those hoping for a green transition, as the sector increases its electricity use year on year, causing the energy demand in certain regions to rise rapidly. Until now, crypto production has relied mainly on electricity generated from fossil fuels, including using flared gas from operations using carbon capture and storage technologies. We are seeing an acceleration in the rollout of renewable energy projects, but some worry that if the demand for electricity continues to rise, many regions will remain dependent on fossil fuels for their power. And while states are beginning to regulate crypto production, this is a slow process, and many companies remain largely unrestricted.
In Canada, many crypto miners are moving to the region to take advantage of the country’s clean, inexpensive energy supply. The industry has boomed in certain provinces, such as British Columbia (B.C.) and Quebec. In B.C., there are seven crypto-mining projects in operation, with six more sites under development. But the need for huge amounts of electricity to run operations is attracted greater attention.
At present, B.C. has an energy surplus, which has drawn in several crypto companies. Dan Roberts, an Australian cryptocurrency entrepreneur explained, “We can build a whole industry around this. We can go into those regional towns where they've been decimated by the end of the pulp-and-paper mill … rehire local workers, retrain them, and deliver all these benefits back into the community.” So, it’s easy to see why crypto miners have moved to the region, and many locals have welcomed them as they bring jobs and economic growth.
However, the province has just introduced an 18-month moratorium on connecting new crypto-mining sites to the electric grid, causing 21 new projects to grind to a halt. These projects would have used the same amount of power as 570,000 homes. The B.C. Energy Minister, Josie Osborne, believes the moratorium will give the province the time needed to consult with the industry and ensure the region’s energy is being used effectively. Osborne worries that the surplus in B.C. may not be seen forever and that the green electricity in the region should be used in a climate-positive way. She suggests that crypto mining does not help B.C. achieve its climate goals, and ultimately offers fewer job opportunities than many other industries.
And while some crypto miners are using renewable energy in their operations, many are not. Worldwide, there is a rising concern over the greenhouse-gas emissions involved with crypto-mining. According to a University of Cambridge industry tracker, which focuses on Bitcoin, the sector’s carbon emissions are still extremely high. The tracker found that if Bitcoin continues at its current rate of mining, it will release approximately 62 megatons of carbon-dioxide equivalent every year. This is comparable to the total emissions released in Serbia in 2019.
As people become more concerned over the electricity usage of crypto operations, many are calling for greater regulation of the sector, which remains largely unregulated. Officials from the G7 are planning to discuss regulations on the cryptocurrency industry to enhance transparency and consumer protection at the next meeting in Hiroshima, Japan, in May. Cryptocurrency will also be discussed at the upcoming G20 meeting of finance ministers and central bank governors in Washington D.C., in April. At present, there is little coordination over crypto regulations, with some states or regions imposing their own restrictions on mining, but little national or international agreement.
In the EU, some progress has been seen in regulating the sector, with the EU Council presidency and the European Parliament reaching an agreement on the markets in crypto-assets (MiCA) proposal last year. MiCA provides an EU-wide regulation for the quickly evolving sector. The regulatory framework is aimed at protecting investors and preserving financial stability while allowing for innovation and fostering the attractiveness of the crypto-asset sector.
While most action has been taken at the state level in the U.S., such as in New York, this could soon change. In Biden’s most recent budget blueprint for 2024, he proposed a new tax on electricity use for crypto mining. If the budget is approved, this could mean a 30 percent tax on mining operations, to be phased in over three years. This responds to concerns over the environmental impact of the industry.
It is clear that the electricity demands of crypto mining are high, whether the energy comes from fossil fuels or renewable sources. At a time when the world is trying to curb its energy usage and undergo a green transition, this is of high concern to those managing the energy sector. However, to date, there is little international coordination on crypto regulation. But, as some regions come to agreements, such as the EU, as the U.S. looks to introduce a tax on mining, and discussions commence at the international level, it is only a matter of time until the industry faces stricter regulations.
By Felicity Bradstock for Oilprice.com
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