Experts Say Bitcoin Solves the Climate Problem. Here’s How

Key takeaways:

Bitcoin (BTC) has often been criticized for its perceived high usage of power sources that fuel climate change, but emerging data suggests that the top cryptocurrency is a net negative emissions network.

It means that Bitcoin removes more carbon from the atmosphere than it emits, making it environmentally beneficial. Scientists blame greenhouse gases such as carbon dioxide and methane for causing climate change. Most of these gases come from human activities like burning fossil fuels.

According to Daniel Batten, a climate tech investor, Bitcoin “is now the world’s most sustainably powered industry,” with roughly 57% of the energy used to mine Bitcoin coming from renewables like solar and wind. That figure stood at 33% in 2020-2021.

“The primary source of power for Bitcoin [mining] is hydro,” Batten, who is also an environmentalist, told Cryptonews. He added:

“Bitcoin, like eVs [electric vehicles], is net emission reducing because it replaces more emission-intensive gold as a store of value and more emission-intensive banking services as a method of transaction.”

Batten said that using the Lightning Network, a layer built on top of the Bitcoin blockchain to allow for faster and cheaper transactions, “Bitcoin can scale further than Visa for a fraction of the carbon footprint.”

Bitcoin mining uses a lot of electricity—more than many countries. The process creates new coins by solving complex mathematical problems using very powerful computers nonstop.

According to Cambridge University’s Bitcoin Electricity Consumption Index, Bitcoin used 121.13 terawatt-hours of electricity in 2023. That’s more than enough electricity to power the Netherlands, a country of 17 million people, per the International Energy Agency.

‘Screening Out The Noise’

While Cambridge University’s data is criticized for using old datasets that exclude renewables from Bitcoin’s energy mix, critics have often lapped onto such data, using it as canon fodder to discredit the cryptocurrency.

For example, a 2019 study by researchers at the University of Hawaii at Manoa estimated that Bitcoin mining could raise global temperatures above 2°C. The UN has set a target of limiting global temperature increases to 1.5°C.

Another widely-cited report published in 2023 by the United Nations University used data from 2020-2021 to assert that “67% of the electricity consumed for Bitcoin mining was produced from fossil energy sources.”

“Even considering this data, Bitcoin still showed a lower-than-average reliance on fossil fuels, which accounted for around 82% of global energy consumption at that time,” Oleksandr Lutskevych, CEO of crypto exchange CEX.io, told Cryptonews.

Lutskevych also oversaw operations at CEX.io subsidiary GHash.io, the defunct mining pool that briefly controlled 51% of BTC’s computing power in 2014. This situation sparked fears of a 51% attack—a hypothetical situation in which a mining pool could create fake Bitcoins.

In 2018, Dutch data scientist Alex de Vries published a paper that gained widespread mainstream media attention. He argued that Bitcoin’s carbon emissions could be measured per transaction.

As Batten, the climate tech investor, said, de Vries wanted to show that BTC’s energy “usage will totally get out of hand as transaction volumes increase. His theory has since been disproved. Batten told Cryptonewst:

“The ‘per transaction’ metric has now been debunked because Bitcoin energy use does not come from its transactions. Bitcoin can scale to billions of transactions without adding to its energy use or emissions.”

Batten said the portrayal of Bitcoin as an ecological villain has prevented an estimated $65 trillion of institutional capital from being deployed into the industry.

At a recent Bitcoin conference, he said the narrative must change to attract sovereign wealth funds and institutional investors who are concerned about sustainability.

Bitcoin Mining Industry Efficiency Sees Major Lift

Mason Jappa, CEO of U.S.-based Bitcoin miner Blockware Solutions, said a better way to look at Bitcoin’s energy usage versus other networks is to gauge the value being stored in the network, and not transactions processed.

“While Bitcoin miners do process transactions for the network, they also contribute greatly to the overall security of the network, solidifying Bitcoin’s primary use case, which is being a store-of-value,” Jappa told Cryptonews.

“Presently, the BTC market cap is around $1.4 trillion, and miners are helping to secure this. Yes, miners consume high quantities of energy, but all stores of value require energy in order to be defended,” he added.

Jappa noted that Bitcoin’s energy consumption pales in comparison to other economic sectors such as the U.S. bond market, real estate market, gold, or all of the companies in the S&P 500.

For example, Bitcoin’s power consumption is nowhere near that of the legacy banking system. A research report published by cryptographer Michel Khazzaka in 2022 found that the traditional banking sector used 4,981 TWh of electricity per year – 40 times more energy than Bitcoin.

On the other hand, the gold mining sector consumed 265 terawatt-hours of electricity in 2023, according to some reports. That’s more than twice as much as the power used in Bitcoin mining.

Apart from switching to sustainable energy sources, the Bitcoin mining industry’s efficiency is also improving.

According to the Bitcoin Mining Council, over the past four years, the Bitcoin network’s emission intensity—the amount of carbon emissions it releases into the atmosphere per unit of power used—has declined by 50%.

It means that every time someone sends a transaction over the Bitcoin blockchain or uses the asset as a store of value, they are “net emission reducing,” Batten explained.

In addition, Bitcoin’s hash rate – or computational power used to mine and process transactions on a proof-of-work blockchain – has risen fourfold.

Lutskevych, the CEX.io chief executive officer, attributed the improvement “to the increased use of renewable energy and significant advancements in the energy efficiency of mining hardware.”

For example, the energy efficiency of mining hardware like application-specific integrated circuit (ASIC) miners has improved by between 200 to 1,000 times over the last decade, he said. Also, most Bitcoin ASIC miners are reportedly now 100% recyclable.

“Nevertheless, as an old-school proof of work network, Bitcoin remains the most energy-intensive cryptocurrency, which ensures an unprecedented level of security for the network,” Lutskevych said.

Bitcoin as a Net Negative Emissions Network

Speaking at the second Proof-of-Work Summit held in Germany at the end of September, Batten highlighted how BTC is becoming an emissions-negative network, with 21 climate benefits and 19 humanitarian benefits.

He said that as more miners turn to renewables, not only will this reduce Bitcoin’s carbon footprint, but it will also help stabilize power grids by providing demand response capabilities.

One of the most promising areas for Bitcoin mining is landfills, which are a major source of methane (CH4), a potent greenhouse gas. Scientists say that in 20 years, methane gas has a warming effect on the earth 84 times greater than that of carbon dioxide.

Batten said landfill gas, which is often vented directly into the air, is BTC’s “strongest lever to mitigate climate change in the next 25 years”.

He said five companies are mining Bitcoin using power generated from landfill methane gas. Some 29 entities are also using “carbon-negative sources of energy.”

All these efforts have resulted in about 7.5% of Bitcoin emissions being mitigated since 2021.” There’s not an industry in the world who’s come anywhere close to that without [carbon] offsets,” Batten stated.

To reach 100% mitigation, Bitcoin mining operations will need to use gas from at least 35 landfills, he said. The avoided methane gas emissions can also be converted into carbon credits, which the landfill owner can sell for profit on global carbon markets.

Batten added that investing in landfill power generation may be more viable for Bitcoin miners who are looking to cut operational costs. He said firms investing in landfills avoid 45 times more emissions per dollar than a company investing in a solar farm.

The environmental campaigner cited the example of Grid Share, a New Zealand-based AI computing and Bitcoin mining firm that is planning to start extracting BTC using power generated from a landfill in South America.

When fully operational, the facility will avoid the equivalent of 114,000 tons of carbon dioxide emissions (Mtce) per year. That compares with the 36,000 Mtce expected to be such at the world’s biggest carbon-capture plant, dubbed “Mammoth” in Iceland.

“Bitcoin can solve some of the toughest environmental challenges of our time,” Batten noted.

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