Writing about bitcoin and climate change these days is similar to writing about religion or politics — it’s almost impossible to find a safe middle ground.
Environmentalists and others are sounding the alarm about the already-high and rapidly-growing electricity consumption involved in the mining and transaction processing of bitcoin and other cryptocurrencies. They see the trend lines and argue that cryptocurrencies could end up undermining all of the hard work of climate change mitigation across the rest of the global economy, leading to environmental disaster.
Cryptocurrency proponents argue that by driving up electricity consumption, these mining and transaction activities encourage more adoption of renewables. They cite statistics from industry surveys suggesting that a lot of bitcoin miners already use renewable energy. And anyway, they argue, even if bitcoin does use a lot of electricity it’s worth it — by replacing also-wasteful traditional banking, and encouraging less consumption.
If you want to immerse yourself into the details of both arguments, here’s a white paper with a comprehensive take on the anti-cryptocurrency arguments, and here’s a great tweet thread with links to lots of the pro-cryptocurrency arguments.
Both sides of the argument engage in the kind of heightened rhetoric one would expect given how passionate everyone on all sides are about the topic. Add into that the anonymous and decentralized nature of cryptocurrency activity, and it makes it difficult to get real data other than anecdotes and self-reported surveys. As a result, investors may find it difficult to parse through the rhetoric to get to actionable takeaways.
What both sides get wrong, of course, is that they each argue their points as if the genie can go back into the bottle. As if they want or fear (as the case may be) that the end result might be shutting down cryptocurrencies. That is not going to happen at this point.
As this article today from the New York Times
So who’s right?
Unfortunately, looking more deeply at the arguments on both sides, the arguments for bitcoin being inherently good for the environment don’t hold water. These arguments essentially rest on three crucial assumptions:
- That bitcoin miners will migrate toward the cheapest form of electricity;
- That the cheapest form of electricity is increasingly renewables; and
- That the rate of retirement of older fossil fuel power generators will be the same regardless.
These last two assumptions are not true.
Yes, while in many parts of the world renewables are now the cheapest form of new power generation, existing power generation stations are often cheaper still. They only have to sell power at their marginal fuel and operating costs to breakeven, versus any new capacity of any type, which will require significant capital expenditures.
And when bitcoin miners are drawing power from their local grid, because those grids…