Renewable energy will not mitigate the environmental cost of cryptocurrencies such as Bitcoin, according to a senior economist with professional services multinational PwC.
Writing in the journal Joule, Netherlands-based blockchain specialist Alex de Vries takes aim at Bitcoin over claims that the currency’s massive energy footprint can be effectively neutralised by powering it using renewable energy.
“Proponents of this digital currency have argued that, even if Bitcoin is using a lot of energy, it’s not that harmful because they claim Bitcoin mining facilities use mostly excess renewable energy,” he says. “I decided to deep dive into this claim.”
The energy cost of Bitcoin and some other cryptocurrencies has been recognised for several years, with the focus becoming more intense in recent times.
“The vast transactional, trust and security advantages of Bitcoin are dwarfed by the intentionally resource-intensive design in its transaction verification process which now threatens the climate we depend upon for survival,” wrote Qatar University law academic John Truby in a journal paper in 2018.
The same year, Max Krause and Thabet Tolaymat from the Oak Ridge Institute for Science and Education, US, crunched the numbers in the journal Nature Sustainability and concluded that mining one dollar’s worth of crypto burned more energy than mining the equivalent value of copper, gold, platinum or rare earth oxides.
In his Joule article de Vries provides his own calculation to characterise a Bitcoin transaction.
“We find that the Bitcoin network, with an electrical energy footprint of 491.4 to 765.4 kilowatt-hours per transaction on average, is relatively much more energy hungry than the traditional financial system,” he writes.
He adds that the costs of using Bitcoin go beyond simply its energy use. The regular introduction of newer, more efficient mining devices, he says, ensures that old ones are discarded.
“The resulting electronic waste generation could equal that of a small country like Luxembourg, with a staggering average footprint of four light bulbs worth of electronic waste per processed Bitcoin transaction,” he writes.{%recommended 6441%}
Because it is never possible to know which Bitcoin devices are operating at any given time, an exact total for the system’s annual energy usage is impossible to calculate. However, de Vries quotes sources that estimate the currency uses as much energy during a full year as countries such as Hungary and Switzerland.
But it is the climate cost of Bitcoin transactions that is perhaps most alarming. Because of the amount of computing grunt required, a single transaction generates a carbon footprint of between 233 and 363 kilograms of carbon-dioxide. A single VISA transaction, by comparison, generates less than half a gram.
Bitcoin mining companies seek out abundant supplies of renewable energy – not because they care about the environment, but because lower per unit energy impacts positively on their profit margins.
For that reason, de Vries reveals, some 48% of the global Bitcoin mining capacity is located in the Sichuan Province of China. This is a region that has an oversupply of hydroelectric-generated electricity, because the larger Chinese distribution network at the moment cannot efficiently absorb the area’s full output.
The Sichuan situation is the source of suggestions that Bitcoin’s energy cost is irrelevant because much of it uses “surplus” hydro power.
de Vries quotes a Chinese report that shows energy-production in the area is 30% higher in the wet season than the dry. During the leaner months, therefore, energy from other sources has to be imported to Sichuan to keep its factories, and crypto mines, working. The source of this energy is coal.
“In the worst-case scenario, it presents an incentive for the construction of new coal-fired power stations to fulfil this purpose,” he writes.
de Vries paints Bitcoin as something of laggard in the broader crypto industry, and shows that some (but not all) of its competitors have moved to alternative methods of currency generation that do not require such massive computing power.
The need for reform, he says, is pressing.
“Given the fundamental challenges in uniting Bitcoin mining with renewable energy, along with the fact that energy use is not the only way in which Bitcoin impacts the environment, we should conclude that renewable energy is not the answer to Bitcoin’s sustainability problem,” he concludes.
