Reframing the Narrative on Bitcoin’s Environmental Impact (The Truth)

Originally Posted on CoinGeko

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There has been much discourse on Bitcoin mining’s environmental impact. While some criticism has been directed at the manufacture or disposal phases of Bitcoin mining, the focus has been on its energy-intensive operations and carbon emissions which allegedly undermine global efforts to tackle the climate crisis.

We’ve all seen the sensationalist headlines comparing the energy consumption or emissions of Bitcoin to entire countries or hundreds of thousands of VISA transactions. Recently, a resurgence in Bitcoin energy-related news has occurred following Ethereum’s successful transition to proof-of-stake. However, quick takes suffer from presenter bias and often misleads readers as they fail to dive into the limitations (e.g. assumptions, uncertainties) inherent to any model used to derive estimates of energy consumption, emissions, or other environmental impacts. 

This article presents the narrative that although Bitcoin (like almost everything else) has environmental issues worth addressing, it is comically far from the environmental menace mainstream media paints it out to be. In fact, it may even have a unique and important role in the fight against climate change. It’s imperative that more of us are aware of the facts in order to fend off disproportionate attacks on Bitcoin’s supposed environmental harm, which only delay the necessary actions we need to tackle climate change.  

So, how much electricity does Bitcoin mining consume?

Despite the ostensibly wide discourse on the matter, surprisingly few studies present original methods in estimating Bitcoin electricity usage (see here for a great review by Koomey of previous estimates), with most of these being snapshot estimates of energy consumption at their time of writing. 

There are two well-known and highly cited sources which publish a live index of Bitcoin’s supposed energy consumption:

  1. Cambridge Electricity Consumption Index (CBECI)

The CBECI figures, published by the Cambridge Center of Alternative Finance, are widely considered to be the most credible; at time of writing it estimates a daily power demand of 11.47 GW, which annualizes to 100.51 TWh/yr of electricity.

Briefly put, the CBECI estimates electricity consumption by calculating the energy expenditure based on the efficiency of a basket of profitable hardware that miners are reasonably assumed to be using at any given time to produce total global hashrate. Current data used by Cambridge is collected directly from partner mining pools which cumulatively make up about ~33% of global hashrate. To increase representativeness, Cambridge states on its website that it is open for collaboration with mining operators for data collection.

A few nods towards their credibility include the fact that their website comprehensively documents methodology, assumptions and limitations of the model, and any changes made in their public change log

  1. Digiconomist Bitcoin Energy Consumption Index (BECI)

The other equally, if not more frequently circulated figure is the Bitcoin Energy Consumption Index (BECI) published by Digiconomist (authored by Alex De Vries). At time of writing, the BECI places the network’s electricity consumption at 142.7 TWh/yr. Digiconomist/De Vries is also almost the only cited source for e-waste or ‘per transaction’ energy estimates (more on this later).

The BECI is very frequently cited in both media and even academic publications. However, these publications almost never highlight the number of concerns which have been leveled at this model (see BECI section in Koomey’s review, or a more detailed critique by Bevand here). The BECI model is simple – it derives an estimate by assuming that 60% of revenue is spent on paying for electricity bills. Thus, 60% of the total daily BTC revenue of miners is divided by an assumed average electricity price of 5 cents/KWh in order to estimate total electricity used. This methodology consistently results in a higher estimate than the CBECI. Additionally, changes and exact methodologies used for the BECI are not very well documented, as pointed out by Bevand.

However, while many bitcoiners critique Digiconomist’s less transparent or misleading claims, Bitcoin’s electricity consumption figures as a % of global use (e.g. Cambridge’s 0.44% vs Digiconomist’s 0.60%) are not too far off when using either sources. 

As mentioned, there are also several other snapshot estimates from recent publications, ranging from 38.5 TWh/yr (as of April 2021), 49 or 92 TWh/yr (as of March and July 2021 respectively), to 89TWh/yr (as of Dec 2021). 

TLDR; Bitcoin electricity use estimates can range widely (at time of writing from 38.5 TWh/yr – 204.5 TWh/yr), varying between sources and at different times based on market conditions. For simplicity, we will refer to the CBECI figures for the rest of the article.

A few things to keep in mind  

Energy vs Electricity

While often used interchangeably, ‘energy’ and ‘electricity’ do not mean the same thing and it is often a crucial distinction to make. Globally, as of 2018 the world consumed 115,157 TWh of energy, but only 22, 471 TWh of electricity. Electricity is just one out of three main components of the global energy system, making up about ~20% of total energy consumption, while heating (~50%) and transportation (~30%) make up the rest. 

Sources of energy used for global electricity and energy consumption. Low carbon sources power (nuclear, hydro, wind, solar and other renewables) ~37% of global electricity, but only ~16% of global energy. Source: Our World in Data

For the most part, heating and transportation utilize fossil fuels directly to power (e.g. a steelmaking furnace or an internal combustion engine), making them significantly tougher to decarbonize compared to the electric grid. This is evident in the fact that low carbon energy powers 37% of global electricity, but only 16% of global energy. Circling back to Bitcoin mining, this means that it consumes 0.44% out of the 20% of global energy use (i.e electricity), which fortunately/conveniently, is also the easiest to decarbonize. 

Mining vs transactions

One of the most common factoids often cited by journalists and academics to illustrate Bitcoin’s energy footprint is Digiconomists’ ‘energy per transaction’ metric. However this comparison is misleading. Although mining is how bitcoin transactions are confirmed and recorded onto the chain, the vast majority of energy consumption arises from the competition between miners to successfully mine blocks in a proof-of-work system. Tl;dr everytime a block is added to the chain, it is a race between miners to be the first to solve a mathematical problem and receive some fresh bitcoin as reward, and only the block from the winning miner is recorded on-chain. While critics often declare  that the “work” done by all the other miners was wasted, in reality their continuous efforts play an important role in securing the network against malicious attacks. Hence the majority of the energy expended (measured in hashrate) actually goes towards the security of the chain.

Conversely, the energy required to actually validate transactions is minimal. This is why Ethereum’s energy use post-Merge is estimated to have reduced by >99%. The Bitcoin network’s energy expenditure is not dependent on the number of transactions it processes, and this is especially true when considering that additional scaling solutions such as the Lightning Network exist, which can support an arbitrary number of transactions ‘bundled’ into single transactions on the actual Bitcoin network.

With the distinction between mining and transactions out of the way, it should be pretty clear that Bitcoin electricity use/emissions are not going to increase indefinitely. These were some of the most egregious, widely-circulated headlines during bitcoin’s 2017 bull run:

·        Bitcoin Mining on Track to Consume All of the World’s Energy by 2020 

·        Bitcoin emissions alone could push global warming above 2°C 

These conclusions were drawn erroneously due to extrapolating growth rates at the time into the far(ish) future. In reality it is implausible for Bitcoin mining to continue expanding mining operations indefinitely. The growth in Bitcoin hashrate has slowed over time, as can be seen in the figure above. The main reason for this is the decline in miner profitability over time. This is due to increasing mining difficulty as more miners join the network, as well as the slowing of mining machine / ASIC efficiency gains over time due to limitations in microchip advancements. 

Bitcoin mining today is profitable (in a bull market at least) due to the block rewards that miners receive. However block rewards halve roughly every 4 years until the last bitcoin is mined in the year 2140. But long before that, unless the price of bitcoin goes parabolic, block rewards would diminish to a negligible amount within the next 20 years, when over 99% of bitcoin will have been mined. At this point, transaction fees need to become sufficiently lucrative for miners to continue validating blocks (if they aren’t – well, that’s another rabbithole outside the scope of this article). If not, expect mining activity to naturally fall off as mining profitability significantly decreases. 

Aside from the likelihood that growth in Bitcoin’s energy requirements will not continue indefinitely, an increase in energy consumption does not necessarily worsen climate impact. This is because electricity consumption is not the same as emissions, which brings us to the next point:

What is Bitcoin’s climate impact?

An important distinction to make is between electricity consumption and greenhouse gas (GHG) emissions, which include carbon dioxide, methane, and other trace gasses. When it comes to climate impact, GHG emissions are the important metric to consider, as the use of electricity does not inseparably imply negative climate impact.

The amount of emissions resulting from electricity use comes down to how that electricity is generated. Electrical grids typically receive power from a number of different sources, which constitutes a grid’s ‘energy mix’. Thus, electricity use could have little to no climate impact if powered by low-carbon sources such as renewables or nuclear energy, rather than by fossil fuels.

So, what energy sources power Bitcoin miners, and how much do they collectively emit? 

Before we get into the numbers, let’s note that comprehensively assessing climate impact involves measuring the different carbon intensities (that is, the amount of carbon dioxide emitted per unit of electricity) of different power generation sources, which proves trickier to quantify than just electricity use. 

For Bitcoin, a few challenges to measuring climate impact include the lack of detailed, fine-scale data on energy mix, emissions, or electricity cost, as well as the general dynamicity of the mining industry (e.g. miner secrecy regarding operations, miner mobility, large mining pools contributed by miners scattered across the globe, etc.).

China Bitcoin mining by province. During the wet season, miners would relocate to the hydropower-rich regions of Sichuan, where excess hydroelectricity, which could otherwise be curtailed, is cheap and abundant. Conversely, during the dry season miners move back to Xinjiang, where electricity is mostly powered by reliable but dirty coal. Source: CCAF 

China’s mining operations are a good example of how miner mobility/secrecy presents a challenge in determining the energy mix powering Bitcoin at any given time. Prior to the official Bitcoin mining ban in China in May 2021, a large share of hashrate originated from miners there which cyclically traveled between different regions in China in order to harness cheap, otherwise-curtailed hydropower during the wet season. Then came the ban, where ostensibly the “great miner migration” ensued, and a bunch of miners moved to the US. 

Evolution of hashrate distribution by country. *There is little evidence of large mining operations in Germany or Ireland that would justify these figures. Their share is likely significantly inflated due to redirected IP addresses via the use of VPN or proxy services. Source: CCAF

Perhaps predictably, hashrate from China quickly blipped back into existence a few months after the ban, and is back on the rise. 

Each one of these developments sparked debate and reintroduced uncertainty with regards to Bitcoin’s climate impact, exemplifying the complexities of estimating emissions of the Bitcoin network. Some asserted that the move to the US was good news for the environment due to the growth of renewables as well as the availability of more transparent energy data. Others like the Digiconomist declared that Bitcoin became even dirtier after (supposedly) exiting China due to the reduction in hydroelectricity use and uptick in coal-powered mining in Kazakhstan.

However, although tricky, there are several workable estimates of the energy mix powering Bitcoin and/or its GHG emissions from multiple parties, some of which are listed in the table below.  

SourceBitcoin GHG emissions / energy mix
Bitcoin Mining Council59.5% low carbon energy mix as of Q2 2022
NYDIG49 MtCO2 as of Mar 2021, or 0.13% of global CO2e* emissions
De Vries65.4 MtCO2 as 0f 2021, or 0.18% of global CO2e emissions; renewable** mix at 41.6% prior to China crackdown, and 25.1% post-crackdown

**Note that this excludes nuclear
Coinshares39 MtCO2 and ~36% low carbon energy mix as of 2021

*Often, the heating-trapping potential of GHGs other than CO2 are measured in carbon dioxide-equivalents (CO2e or CO2-eq), as it is the primary anthropogenic GHG emitted. 

More recently, Cambridge also released their own Bitcoin GHG emissions index. In short, Cambridge calculates Bitcoin’s GHG emissions by using data on geolocational hashrate distribution, estimated electricity use of miners in a particular region, and the most recent electricity mix data of that country. Each type of energy source (e.g. coal or wind-generated electricity) has an emissions factor which can be used to then estimate the aggregated GHG emissions of the network.

At time of writing, Cambridge estimates Bitcoin’s annual GHG emissions at 50.38 Mt CO2e. That amounts to 0.1% of global GHG emissions. Interestingly, it seems that Cambridge is recently reporting a drop in GHG emissions despite Bitcoin hashrate hitting all-time-highs. 

Looking at Cambridge’s estimate on the energy mix powering the Bitcoin network, the drop in GHG emissions from its peak in March 2021 despite an ever-climbing hashrate could perhaps be explained by the overall increase in low carbon energy sources from 34.1% to 37.6%. This included notable changes such as an approximate doubling of ‘other renewables’ and nuclear energy sources. Additionally, while the share of hydropower mining fell slightly after the China mining ban, a reduction in coal use that was largely replaced by natural gas (which is less carbon intensive) was also observed. 

TLDR; There is a considerable range of estimates on Bitcoin’s energy mix and its carbon emissions due to the dynamicity of the Bitcoin mining industry. Taking Cambridge’s  figures, Bitcoin’s low carbon energy mix and GHG emissions stand at 37.6% and 50.4 Mt CO2e at time of writing. This translates to ~0.1% of global GHG emissions. 

A short aside to address Bitcoin e-waste FUD concerns 

Another large criticism of Bitcoin mining is allegedly the huge amounts of e-waste it produces. The most pessimistic estimate on annual Bitcoin e-waste sits at 30.7 kilotonnes as of May 2021 according to the frequently cited study by De Vries and Stoll, a figure often compared to the annual e-waste produced by the Netherlands. 30,700,000 kg of e-waste is a lot. But to put that into context, that is 0.05% of the estimated 57.4 million tonnes of e-waste produced globally in 2021 alone (the Great Wall of China is estimated to weigh ~50 million tonnes, just fyi).

However, it is very likely that this figure is an overestimate, as the study assumes an average ASIC lifespan of 1.5 years, after which miners are assumed to be landfilled – these study parameters and assumptions, while perhaps usable as an upper bound on ASIC waste, are largely ungrounded in reality. ASIC miners can be used for 3-5 years, as even older machines which may not always be profitable are not immediately junked. Nonce analyses have empirically shown older miner models come back online when bitcoin price is sufficiently high, or when electricity costs are low. Currently on secondary markets, even Antminer s9’s, which are >5 years old, command some secondary value. ASIC miners are fairly simple machines, comprising the ASIC chips themselves which is where the hashing magic happens, wires, as well as aluminum bits used to disperse heat, which is the main component by weight. ASICs do not have screens nor batteries, and don’t contain any additional components that proper e-waste recycling facilities don’t already handle. 

To be clear, e-waste is a huge problem which presents serious environmental and social issues, and is the world’s fastest growing waste stream. Recycling rates for e-waste is also low in most parts of the world, despite the high potential value in its recovery. However, this is an issue which predates Bitcoin by several decades, and by no means is abolishing mining going to put a dent on the global e-waste problem due to its relatively insignificant contribution. With society on track to become more digitally interconnected than ever, this is a problem far larger than Bitcoin and must be systematically addressed whether or not crypto continues to exist. 

How else does/can Bitcoin impact the environment?

Amidst the negative scrutiny on Bitcoin’s energy use, there have been suggestions and efforts made to mitigate its negative environmental externalities e.g. by only mining with low-carbon energy, restricting and regulating mining operations, etc. However, the mining industry actually has the potential to go beyond simply minimizing harm, and instead act as an ally in the fight against climate change. 

This is enabled by some of the characteristics mining uniquely possesses –  it has a high demand load that has plug-and-play features, is mobile, and interruptible. It doesn’t care where and when the energy is available, just that it is and is cheap (along with a decent internet connection). Its product – bitcoin – is a highly liquid digital asset requiring no additional and extensive storage, transmission, or production infrastructure to produce some desired end-product in order to sell. This makes Bitcoin mining one of the most deployable and market-ready solutions to make use of stranded energy such as methane leaks from oil wells and landfills, remote geothermal energy, curtailed electricity, etc. 

Due to the aforementioned characteristics of Bitcoin mining, there are two significant ways in which it can help reduce global emissions and warming: 1) helping the transition to renewable/low-carbon energies, and 2) methane capture. Bitcoin mining is well suited to help in these situations in ways that few, if any, other use cases are. 

Let’s dive in.

Road to renewables

Variable renewable energy (VRE) capacity such as from solar or wind is on the rise globally, and with that their well-documented plummeting costs. However, to achieve a high or complete penetration of VRE, future grids require that generation capacity is sufficient to support periods of peak demand, e.g. in the evenings when people get home from work and turn on devices, or on the coldest days of winter when everyone needs to blast the heater. 

As we expand VRE capacity, oversupply during periods of low or moderate demand will inevitably become larger and more frequent. This already occurs even today. However, the nature of electrical grids requires that production be precisely matched with demand at all times in order to avoid blackouts or brownouts. This means that when supply outstrips demand, VRE power providers will have to deliberately reduce output below what could otherwise be produced at maximum generation capacity, an exercise known as curtailment. 

Curtailment is a particularly common issue with VRE due to the cyclical mismatch between demand and energy supply (e.g. when the sun shines brightest/wind blows hardest may often not be when users need it most). While energy curtailment is likely to evolve into a non-issue (or even become a staple feature of modern grids) when economies of scale are achieved, at least in the short term it is still considered a lost financial opportunity for VRE providers. Aside from oversupply, curtailment may also be necessary in cases where sufficient transmission infrastructure has not been built out to accommodate a new VRE power plant. In both these situations, Bitcoin mining can provide security via subsidizing or incentivizing continued operation or expansion.

Integrating high levels of VRE would surely require additional capacity buildout, but it can also be complemented by adjusting the demand side of the equation, which typically involves a voluntary reduction in electricity demand during periods of peak load in return for some form of financial incentive. This is known as demand response (DR), and can be a useful tool to maintain the financial viability and stability of grids with high VRE penetration.  For instance, time-based pricing could nudge consumers to shift electricity use away from peak periods, or larger commercial users of electricity could respond more directly to the grid’s needs and be paid in exchange. A recent example of the latter would be in August when Bitcoin mines in Texas collectively shed over 1% of total grid capacity for use by other consumers amidst a heat wave.

Large, flexible users of electricity reduce the need for peaker plants, which are fossil fuel powered generators that power up during times of peak demand to provide additional capacity. Instead of powering up peaker plants, DR participants can temporarily power down instead, reducing the demand and freeing up additional capacity on the grid. Bitcoin mining is a good candidate for DR programs as it offers a highly flexible and interruptible electricity demand. Mines can be rapidly powered up or down in seconds, and can be depended upon to shed demand at any time of the day as they preferably run 24/7.

That said, while there have been an explosion of smaller, mostly private Bitcoin mining companies which focus on utilizing renewable or curtailed energy, currently the largest miners require access to large and reliable sources of electricity, and most still tap into the grid which comprises electricity generated from a variety of renewable and non renewable sources. While mining is interruptible, it is uncertain if companies which run only on intermittent curtailed energy can remain financially viable, though there is evidence to suggest that they may be able to. In any case, as RE penetration increases, miner’s roles as flexible, energy-intensive sponges should become increasingly relevant to absorb increasingly curtailed energy as well as participate in DR. 


Methane capture

Perhaps the most compelling case for Bitcoin to be a climate ally is in its potential to capture and utilize methane, a less abundant, but more potent GHG which has a short-term warming potential of over 80x compared to carbon dioxide. Methane has contributed to around 30% of warming to date. Thus, while CO2 rightly gets most of the attention when it comes to climate action, we cannot ignore complementary actions to mitigate methane emissions. 

Methane capture and utilization involves capturing and combusting methane emissions, turning it into less potent carbon dioxide and water. Compared to simply mining with renewable energy and producing zero emissions, methane-powered mining would effectively result in negative emissions, that is a net reduction in carbon emissions.

The largest sources of human-emitted methane comes from the energy (~40%, with most coming from fossil fuels) and agriculture sector (~40%), as well as waste (~20%). Certain pathways to limiting methane, such as from the fossil fuel industry, are clearer and are possible using existing technologies. However, due to a variety of reasons such as economic constraints or lack of regulation and political will, these solutions have hardly been implemented. 

Instead, currently a large share of methane emissions associated with fossil fuel extraction is flared or burned, or to a lesser extent vented, which is even worse as it means releasing them directly into the atmosphere. Recently, a study even showed that flaring efficiency is much worse than previously thought. This presents a massive waste of resources, as this gas in theory could be harnessed to produce electricity for the grid, or captured for use elsewhere. However, the problem lies in the additional storage and pipelines that would require, making it prohibitively expensive. According to Cambridge, if captured, flared gas globally could power the Bitcoin network close to 7 times over. 

In recent years and months, Bitcoin mining has shown that it can tip the scales in favor of methane abatement initiatives. As mentioned above, due to Bitcoin mining’s unique characteristics as an energy-buyer, it is arguably the most ready-to-market solution in tackling methane emissions. Evidence to this is the natural mushrooming of small Bitcoin mining operations, such as those by Crusoe EnergyArthurminingJAI energyGigaNakamotorImperium Digital, and more which tap into methane emissions from oil well sites. Vespene Energy, and NodalPower have also recently sprung up, companies mining bitcoin using methane emissions from landfills. Miners such as Scilling and Biomining have even begun to tap into emissions from the agricultural sector.

Nevertheless, initiatives to harness methane from oil & gas sites have received backlash from critics who claim that these only serve to provide additional revenue to the fossil fuel industry, though it is unlikely that this revenue is able to meaningfully move the needle of fossil fuel profits. Ideally in the not-too-far future society may finally transition completely away from fossil fuels or the need for landfilling. Thus while tapping into methane leakage and emissions from O&G operations or landfills may not be utopic long-term solutions, potent methane is being emitted now, and the climate does not have time to wait.  

Taking quick action in mitigating methane emissions can thus be the easiest, cheapest, and most effective way to slow the trajectory of warming – buying us the crucial time we need to figure out the more intractable problems of transitioning away from fossil fuels completely.

Closing thoughts

In discussions condemning Bitcoin’s environmental impact, it seems that the inextricable belief that is being conveyed is that the Bitcoin network does not provide the utility to justify its “enormous energy use”. You do not really see the same degree in volume and kind of discussions around the morality of energy consumed by humanity’s other collective cultural ‘indulgences’, such as Christmas lights or computer games. And we haven’t even touched on the role banks have played in funding fossil fuel expansion, or how inflationary monetary regimes have encouraged environment-wrecking overconsumption.

Underlying this entire discussion on energy use is the question of whether it is wrong for miners to tap into the grid and utilize electricity, regardless of generation source, as with everyone else. As global energy demand overall continues to climb, to police energy use down to the level of restricting specific applications such as crypto mining seems to be a novel form of discrimination. If it’s climate impact we all worry about, policy and legislation should be targeted at incentivising the reduction in GHG emissions across all sectors, rather than restricting only one of many end-users of electricity.

Being able to critically view mainstream media reporting of Bitcoin’s environmental impacts is important not just for its own sake. While making up only a tiny fraction of the global total, Bitcoin’s use of fossil fuel energy and resulting GHG emissions are by no means inherently necessary. The wholly disproportionate focus placed on Bitcoin and other cryptocurrencies’ energy use / carbon emissions feels uncannily similar to when Big Oil misled and diverted blame away from themselves and instead towards individuals via multi-billion dollar campaigns, leading to many precious years of climate action wasted. 

There are environmental issues related to Bitcoin mining which, although small relative to global totals, warrant effort to address. The Bitcoin mining industry should do everything it can to mitigate negative externalities, such as by plugging in to low-carbon power, and incorporating circular lifecycles for its ASIC miners. We even see the beginnings of going beyond just ‘do-no-harm’, where Bitcoin mining can even create positive impacts, such as aiding our transition to renewables, or even more excitingly, creating negative emissions from methane capture and utilization. 

Even if you think that environmentally-conscious Bitcoin miners are an impossible paradox (they aren’t), there is also mounting public pressure and ESG investing mandates that miners have to contend with, on top of the well documented plummeting cost of low-carbon energy. All this means that altruism aside, it may simply just make economic sense to “go green”. Public scrutiny coupled with falling costs of renewables, on top of budding opportunities to serve as grid resources or tap into cheap, stranded energy are strong tailwinds for mining’s decarbonization which should not be underestimated.

Inevitably, Bitcoin will almost certainly continue to receive backlash from skeptics for its energy footprint. Even though concerns are mostly overblown and initiatives to align mining with climate goals are already underway, we in the community should not be complacent as we continue to build towards a global, permissionless money system for all.

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Dale Calvert

Dale Calvert is a serial entreprenuer. He started his first business at age 14, a direct mail business out of his parents home. Dale has always believed that wealth is created in front of a trend. This business philosophy lead him into the cryptocurrency space in 2017, He made the decision in 2022, that the cryptocurrency space is where he will be spending the majority of his time.

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