The proof-of-work cryptocurrency mining community is well aware that its extraordinary energy consumption — and fossil fuel habit — is unattractive when much of the rest of the economy strives to rapidly decarbonize.
In the last year, the industry and its trade organizations have rolled out a series of sustainability claims that are anywhere from outright fiction and greenwashing to no more than hopeful theories, undermined by actual practices.
- Most mining facilities draw power from the grid — meaning their electricity is generated by whatever existing energy is in place in the region, or is contracted by their utility.
- Adding a new large-scale load, like a cryptocurrency mining facility, to the grid generally requires existing fossil generators to increase their output.
- Mining facilities located near wind or solar sites do not have a special claim to energy produced by that energy, but instead drive increased emissions from gas and coal plants.
- There are few mining facilities are actually building new renewable energy to power their operations.
Today, the cryptocurrency mining industry already uses half the electricity of the entire global banking sector (while holding a miniscule fraction of the value), and continues to increase.
In the United States, the industry has shown little indication of slowing its growth when prices are high.
Miners have demonstrated, consistently, from their initial rush to China where coal is a predominant source of electricity to the recent deal between AboutBit and a soon-to-be-retired coal plant in Indiana, that proof-of-work cryptocurrency mining prioritizes the short-term need for large amounts of electricity over longer-term investments in renewable energy.
And unlike other industries where self-imposed, or regulation-based, community standards could result in more sustainable practices, proof-of-work mining is an inherent arms race towards increased energy consumption, until prices no longer support growth.
Regulators and Policymakers Can Take Steps to Reduce the Harm of Cryptocurrency Mining
State, local, and federal policymakers and regulators can help ensure cryptocurrency mining does not undermine climate or health goals, or adversely impact ratepayers.
The massive energy consumption of cryptocurrency mining threatens to undermine decades of progress towards achieving climate goals, and threatens grids, utilities, communities, and ratepayers.
Some jurisdictions have, or are considering, simply banning the practice of mining proof-of-work cryptocurrencies.
Shy of a complete moratorium, there are actions that can be taken by state, local, and federal officials to protect energy systems, communities, and ratepayers.
- Local and state officials can enforce pollution and noise ordinances, ensure that they are not extending economic development dollars on false promises of long-term jobs or revenue, develop careful zoning codes, and — in the cases where municipalities run the electric utility — develop tariffs that protect existing ratepayers.
- Utility regulators can influence or bar problematic power purchase agreements, create protective electricity rates or system benefits charges that ensure speculative mining operations do not leave a trail of stranded assets, critically assess utility plans for energy procurement for cryptocurrency mining facilities, and ensure that mining facilities do not increase electricity or capacity costs for existing customers.
- Utilities can develop electricity rates that protect against stranded assets, ensure that they do not need to expand power capacity to meet cryptocurrency mining load, and charge rates sufficient to fully protect existing ratepayers from the increased marginal cost of production.
- Grid operators can develop comprehensive guidance and rules around the interconnection of high-density loads, study the impact of cryptocurrency mining on congestion, resource adequacy, and wholesale market prices, and create rules that minimize the impact of cryptocurrency mining on other customers.
- Environmental regulators at all levels should consider affirmative regulation to minimize the local health and environment impacts cryptocurrency mining places on local communities.
As an expert in the field of cryptocurrency mining and its environmental implications, I have been closely following the developments and trends within the industry. My extensive knowledge is grounded in both theoretical understanding and practical insights gained through continuous research and engagement with key stakeholders in the cryptocurrency mining community.
The article you provided raises crucial concerns about the environmental impact of proof-of-work cryptocurrency mining and highlights the industry's struggle to align with global efforts to decarbonize. Let's break down the concepts used in the article:
-
Proof-of-Work Cryptocurrency Mining:
- This refers to the consensus mechanism used by certain cryptocurrencies (e.g., Bitcoin) to validate transactions and create new blocks in the blockchain. It involves miners solving complex mathematical puzzles to add new blocks, requiring significant computational power and energy consumption.
-
Energy Consumption and Fossil Fuel Dependency:
- The article emphasizes the substantial energy consumption of cryptocurrency mining, particularly through the proof-of-work mechanism. It also notes the industry's reliance on fossil fuels, contributing to environmental concerns.
-
Sustainability Claims and Greenwashing:
- The cryptocurrency mining industry has been making sustainability claims, but the article suggests that some of these may be exaggerated (greenwashing) or based on hopeful theories rather than concrete practices.
-
Power Sources and Grid Impact:
- Mining facilities typically draw power from the grid, impacting the existing energy infrastructure. The article highlights that adding large-scale cryptocurrency mining operations to the grid may necessitate increased output from fossil fuel generators.
-
Renewable Energy Use:
- The article criticizes the lack of mining facilities actively building new renewable energy sources to power their operations. It argues that facilities near renewable sites do not necessarily use the clean energy produced there, potentially increasing emissions from non-renewable sources.
-
Comparison with Global Banking Sector:
- The article points out that the cryptocurrency mining industry already consumes half the electricity of the global banking sector, despite holding a much smaller value, and is continuing to grow.
-
Short-Term Electricity Needs vs. Long-Term Investments:
- The article argues that proof-of-work mining prioritizes short-term electricity needs over long-term investments in renewable energy. It cites examples of mining operations in regions with high coal dependency.
-
Regulatory and Policy Recommendations:
- The article suggests that regulators and policymakers can play a role in mitigating the environmental impact of cryptocurrency mining. Recommendations include enforcing pollution and noise ordinances, careful zoning codes, and developing tariffs to protect ratepayers.
-
Potential Bans and Moratoriums:
- Some jurisdictions are considering or have implemented outright bans on proof-of-work cryptocurrency mining. The article discusses the possibility of a complete moratorium and alternative actions.
-
Role of Regulators, Policymakers, and Grid Operators:
- The article outlines specific actions that state, local, and federal officials, utility regulators, and grid operators can take to address the challenges posed by cryptocurrency mining. These include enforcing regulations, assessing power purchase agreements, developing protective electricity rates, and minimizing the impact on existing customers.
-
Environmental Regulation:
- The article suggests that environmental regulators should consider affirmative regulation to minimize the local health and environmental impacts of cryptocurrency mining on communities.
In conclusion, the article underscores the urgent need for comprehensive and sustainable solutions to address the environmental concerns associated with proof-of-work cryptocurrency mining, and it provides a roadmap for regulatory and policy actions at various levels.
