Bitcoin fans are sticking to the narrative that the signature cryptocurrency, widely criticized for its gigantic carbon footprint, will go green in a big way. But a newly issued proposal from the government of Sweden signals how hard it could to match that story with reality. The government’s argument: Bitcoin mining isn’t just bad for the climate, it’s bad for worldwide efforts to convert the global energy system to renewables.
Belief in green Bitcoin, of course, has adherents in business’s highest ranks. In July, Cathie Wood, chief of Ark Invest, asserted that “there’s nothing better than Bitcoin for ESG,” adding that “Bitcoin will probably become part of the utility ecosystems, and will proliferate renewables faster than would otherwise be the case.” Jack Dorsey, CEO of Square, tweeted in April that “Bitcoin incentivizes green energy.” “True,” responded Elon Musk. A month later, the EV pioneer rocked the crypto world by halting Tesla’s months-old practice of accepting Bitcoin in payment or its cars until non-fossil fuels powered at least half of all Bitcoin mining. In July, Musk expressed confidence that crypto was trending rapidly towards renewables, making it “likely” that production would soon reach the 50% bogey where Tesla would “resume accepting Bitcoin.”
The Bitcoin champs’ position seems to make sense: Right now, Bitcoin mining emits as much CO2 as Ireland or Greece, but a historic shift from minting coins using natural gas and coal to wind, solar, and hydro would banish that hobgoblin. Certainly, the higher its price soars, the more pollution it will spew sans an ecological awakening.
But the recent Swedish statement signals that the countries where miners seek green energy may not want them. Sweden argues that Bitcoin production deploying renewable sources isn’t environmentally friendly at all. It devours electricity that’s sorely needed to wean bigger industries from fossil fuels, potentially forcing host nations to import dirty energy from abroad, making their emissions far worse.
Put simply, after getting booted from China, and curbed in nations where they resettled for hogging so much juice that homes and businesses go dark, the miners may face a tough time finding places to provide the renewables they seek.
Sweden: Even green mining should be banned
On November 5, the directors general of the Sweden’s Financial Supervisory Authority and Environmental Protection Agency issued a scalding joint statement on Bitcoin. They view little benefit in cryptocurrencies that could remotely compensate for their environmental drawbacks. “The social benefits of crypto-assets are questionable,” they write, since they’re “commonly used for criminal purposes such as money-laundering, terrorism financing, and ransomware payments.” In their view, hatching this financial wrecking ball is a disaster in itself that unleashes “emissions equal to 100 million round trip flights between Sweden and Thailand.”
The Swedish authors note that indeed, miners are seeking places to produce using clean energy to counter backlash from investors and regulators. Sweden, one of the world’s greenest economies, is an increasingly attractive choice. “Between April and August of this year,” says their paper, “electricity consumption for Bitcoin in Sweden increased by several hundred percent.” By their estimate, the industry now absorbs 1 terawatt-hour a year. “That is equal to the electricity of 200,000 Swedish households,” the report contends.
The directors general state that possible solutions include heavily taxing Bitcoin production, and informational campaigns informing regulators and utilities of its dangers. But they reject both approaches as too weak. “Neither of these options are likely to address the environmental harm we see from this mining method today,” they write. “The emissions need to stop here and now.” So the authors are calling on the European Union to ban all “energy-intensive mining,” a prohibition that would shut down all existing facilities in the 27-nation bloc. They also recommend that Sweden stop approving any new mining facilities. The regulators are apparently counting on a sweeping EU action to shutter the plants already operating within Sweden’s border.
Today, Europe accounts for a modest share of global Bitcoin output. Cambridge University estimates that Germany and Ireland are the two largest producers, accounting for around 11% of the worldwide total combined. But as the Swedish report highlights, miners are locating in Nordic nations because most of their energy is green and it’s typically cheap. By the estimate of Dutch economist Alex de Vries, whose site Digiconomist tracks Bitcoin’s carbon emissions, Sweden now accounts about 1.2% of the cryptocurrencies’ total energy consumption, and miners are also migrating to Norway, whose raging rivers generate ample supplies of hydro.
Mining crypto vs. meeting climate goals
Sweden could prove a key test case. It powers three-quarter of its electricity via clean sources; the largest contributor is nuclear at around 27%. But one-fourth still flows from coal and natural gas. Environmental groups and political parties are lobbying to decommission the nation’s nuclear facilities. The hydro plants in northern Sweden produce ample power, but can’t ship it economically to the heavily populated areas in the south. Hence, Sweden faces periodic shortages, forcing it to import electricity generated by fossil fuels from Poland, Germany, and Lithuania.
The regulators’ report maintains that to meet the goals of the Paris accords, Sweden must undergo the huge transformation of shifting its heavy steel and heavy battery manufacturing, as well as its transportation sector, to non-fossil fuels. For that reason among others, green energy is too scarce to be squandered on Bitcoin. “If we were to allow extensive mining of cryptocurrencies in Sweden, there is a risk that the renewable energy available to us would be insufficient to cover the required the required climate transition we need to make,” they declare. De Vries says that Bitcoin mining could cause shortages in Sweden that trigger blackouts. That would force the government to bridge the gap by importing more gas- and coal-fueled electricity from abroad, further distancing the nation from its climate goals.
Indeed, that’s happening now in nations where miners are relocating from China, and in areas where newcomers setting up shop to profit from soaring crypto prices. Miners have overloaded the grids in Kazakhstan and Iran, prompting both nations to limit the power the industry can use. The most popular destinations today are such oil-rich U.S. states as Texas and Kentucky. So far, their authorities are welcoming Bitcoin, as mining often revives old plants and creates jobs. But the heavy mining poses the same threat there as in Kazakhstan and now Sweden, grabbing scarce power that may be needed to light homes and run plants, no matter how it’s generated.
It’s hard to predict whether the EU will support Sweden’s dramatic call to arms. But the two regulators make a strong argument. Europe will need far more green energy than it now produces to fulfill its towering ambitions on climate. Any renewable energy Bitcoin uses is energy that homes and businesses can’t use. If Sweden’s right, Wood, Dorsey, and Musk are wrong. Mining more Bitcoin with wind, solar and hydro would slow the world’s progress to a green future.
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