According to published in Scientific Reports Provided by researchers at the University of New Mexico.
The authors suggest that Bitcoin should not be viewed as akin to “digital gold,” but rather compared to energy-intensive products such as beef, natural gas, and crude oil.
“We found no evidence that bitcoin mining will become more sustainable over time,” said Benjamin A. Jones, associate professor of economics at UNM. “Instead, our results show the opposite: Bitcoin mining has become dirtier and more climate-damaging over time. In short, Bitcoin’s environmental footprint is heading towards the wrong direction of development.”
In December 2021, Bitcoin’s market capitalization is about $960 billion, and it has about 41% of the global market share among cryptocurrencies. While notoriously energy-intensive, the extent to which Bitcoin is doing climate damage is unclear.
Jones and colleagues Robert Berrens and Andrew Goodkind provide an economic estimate of climate damage from bitcoin mining between January 2016 and December 2021. They reported that Bitcoin mining used 75.4 terawatt-hours (TWh) of electricity in 2020, more than the electricity usage of Austria (69.9 TWh) or Portugal (48.4 TWh).
“Globally, Bitcoin mining or production is using a lot of electricity, mostly from fossil fuels like coal and natural gas. This results in a lot of air pollution and carbon emissions, which is negative for our global climate and our health impact,” Jones said. “We found that between 2016 and 2021, Bitcoin was more climate-damaging than the actual value of a single bitcoin. In other words, in some cases, bitcoin mining caused more climate damage than the coin was worth. From a sustainability standpoint, it’s very disturbing.”
The authors assess Bitcoin’s climate damage based on three sustainability criteria: whether the estimated climate damage has increased over time; whether the climate damage or bitcoin exceeds the market price; and the climate damage compared to other industries and commodities What is the share of the market price?
they found CO2 Equivalent emissions from Bitcoin mining power generation increased from 0.9 tons per coin in 2016 to 113 tons per coin in 2021, a 126-fold increase. Calculations show that each Bitcoin mined in 2021 generates $11,314 (USD) in climate damage, for a global total of more than $12 billion between 2016 and 2021. Losses peaked at 156% of the coin’s price in May 2020, suggesting that for every $1 in market cap generated in the Bitcoin market, it resulted in $1.56 in global climate losses that month.
“Across the entire category of digitally scarce commodities, our focus is on cryptocurrencies that rely on proof-of-work (POW) production technologies that can be highly energy-intensive,” said Robert Berrens, Regents professor of economics. “In broader efforts to mitigate climate change, the policy challenge is to create governance mechanisms for burgeoning decentralized industries, including energy-intensive POW cryptocurrencies. We believe that these efforts will lead to accountability for potentially unsustainable climate damage. The help of measured empirical signals, in monetary terms.”
Finally, the authors compare Bitcoin climate damage to damage to other industries and products, such as renewable and non-renewable energy power generation, crude oil processing, agricultural meat production, and precious metal mining. Between 2016 and 2021, Bitcoin’s climate losses averaged 35% of its market cap. This share of Bitcoin is slightly lower than climate losses accounting for natural gas power generation (46%) and crude oil production of gasoline (41%), but higher than beef production (33%) and gold mining (4%).
The authors concluded that Bitcoin did not meet any of the three key sustainability criteria they assessed. Without a voluntary abandonment of proof-of-work mining, as has been done recently with the cryptocurrency Ether, potential regulation may be needed to make Bitcoin mining sustainable.