Bitcoin mining crackdown led to a 17% rise in carbon emissions, researchers find
Such Bitcoin fans as Tesla’s Elon Musk, Block’s Jack Dorsey, and MicroStrategy’s Michael Saylor are exhorting the industry to embrace green energy. At a conference in June, Musk declared, “It looks like Bitcoin is shifting a lot more to renewables,” and suggested that the green share is “at or most likely above 50%, and there’s a trend towards increasing that number.” Dorsey praised Bitcoin in a tweet last spring as “a key driver of renewable energy’s future,” while Saylor joined Musk in forming the Bitcoin Mining Council, a group of producers dedicated to providing transparency on their energy usage––and whose data shows Bitcoin rapidly shifting toward renewables. The council put Bitcoin’s green share today at 58%, and service provider CoinShares claims 71%.
But according to a report by a team of top international researchers released on Feb. 25, the air pollution from Bitcoin mining is getting not better, but far worse. An article published in Elsevier’s Joule, one of the world’s leading energy journals, notes that the carbon footprint from generating electricity that cranks the codes or “hashes” winning newly released coins grew by 17% from the average in 2020 to the level prevailing in August of last year. Likewise, the share of renewables in the overall energy mining mix dropped from 42% to 25%, also a fall of 17 points. Among the report’s disturbing surprises: Although less coal is being deployed to produce the world’s leading crypto than in 2020, the miners have moved to new locales where the black stuff is far dirtier. Hence, coal’s smaller share is actually generating more CO2 than before.
The shift from China greatly lowered Bitcoin’s use of renewables
The authors are Alex de Vries, an economist whose site, Digiconomist, tracks Bitcoin’s carbon footprint; Lena Klaassen, a Ph.D. student at ETH Zurich; and Ulrich Gallersdörfer and Christian Stoll, researchers at Technical University of Munich and MIT, respectively. They use data from the Cambridge Centre for Alternative Finance at Britain’s Cambridge University. The CCAF provides maps of the nations where Bitcoin is being mined around the globe. It derives those numbers by collecting IP addresses from giant mining “pools” including BTC.com and Foundry USA. From those IP addresses, CCAF establishes the location of the mines that account for 44% of the global Bitcoin hashrate. The authors then match the locations with the mix of coal, natural gas, wind, solar, and nuclear in each nation to establish its carbon footprint. For the authors, the CCAF’s 44% sample size is well dispersed across geographies, and provides an excellent proxy for worldwide production. “It provides a good view of how the electricity mix evolves over time,” de Vries told me in a phone interview.
The downward shift in Bitcoin’s renewable profile began in the spring of 2021, when China started its famed crackdown on mining. Last year, China was hosting around two-thirds of all Bitcoin mining, and surprisingly, a big part of its production was green. Miners from hotspots Inner Mongolia and Xinjiang province would use inexpensive coal in the winter, then truck their computers thousands of miles south to Sichuan and Yunnan to tap even cheaper hydroelectric power from their raging rivers. Hence, clean hydro was powering something like half of China’s gigantic Bitcoin output. Inner Mongolia was the first to impose a ban in March, followed by Sichuan, Yunnan, and several other provinces between May and June. By the end of June, China’s national government had halted all Bitcoin production throughout the world’s most populous country. In the space of a few months, the largest source of renewable-produced Bitcoin had vanished.
As the report details, exiled Chinese producers moved chiefly to three markets that rely heavily on fossil fuels: Kazakhstan, Russia, and the U.S. They cite numbers from last August showing Kazakhstan at one-quarter of the total market, followed by the U.S. at 15% and Russia at 9%. The great relocation triggered a tectonic shift in Bitcoin’s worldwide energy mix from 2020 to the summer of 2021. The share of hydroelectric power shrank by around half from 33% to 17% as Sichuan and Yunnan went off-line. The rise of the U.S. as a new hub helped raise natural gas from a 16% share to around one-third. Since nuclear is still a big contributor to grids across America, its worldwide percentage tripled from 3% to 10%. “Other” renewables––chiefly wind and solar––showed almost no progress, remaining flat at 9%.
The coal conundrum
All told, the contribution of renewables––hydro, solar, and wind––fell sharply from 42% to 25%. But usage of coal also dropped. Keep in mind that although China used a lot of hydropower, it also relied heavily on the rocky fuel. Coal’s portion of the mix declined from 39% to 30%. So you might think that eliminating a large part of that notorious source would mitigate the increase in the carbon footprint from the elimination of hydro in China. That didn’t happen. The reason: Most of the new coal-fired mining happens in Kazakhstan. That nation burns “hard coal,” which has the highest carbon content of any of the world’s varieties. “The carbon intensity of coal in Kazakhstan is a lot dirtier than that of the coal burned in China,” de Vries told me. “Kazakstan’s coal has 50% more carbon intensity than China’s. Kazakhstan also relies on extremely old, inefficient plants. As a result, even though coal usage fell from 39% to 30%, the carbon sent into the atmosphere increased greatly.”
The report finds that Bitcoin mining generated 558 grams of carbon per kilowatt-hour in August of last year, 17% more than the average of 478 grams in 2020. Those are the report’s official figures. But it cautions that Cambridge’s attribution of a combined 3.3% of global output to Germany and Ireland by IP address is most likely closer to zero. Cambridge also questions the numbers. It’s probable, says de Vries, that miners in nations hostile to Bitcoin are pretending to produce in those EU nations. If Germany and Ireland leave the mix, Bitcoin’s emissions would have been not 17%, but 20% higher last summer than in 2020. The report also notes that Bitcoin in August of 2020 was spewing 0.12% of the world’s CO2, greater than Greece’s share.
“The decreasing usage of renewable electricity sources for Bitcoin mining following the crackdown in China highlights the need for stakeholders in the crypto industry to accelerate efforts to decarbonize,” the report concludes. To hear Musk, Dorsey, and the industry’s champions, that campaign is on now the verge of success. This well-researched report says the greening of Bitcoin is one of the financial world’s great myths.
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