Paper explores economic estimation of Bitcoin mining’s climate damages

Mining of cryptocurrencies involves highly energy-intensive activities. While proponents argue that innovations like these add value to society, particularly in developing countries, critics question whether the benefits outweigh the high energy use of these new technologies and the social cost associated with increased carbon emissions.

A new paper published in Nature magazine provides economic estimates of the energy-related climate damage of Bitcoin (BTC) mining and explores criteria for indicating when this practice might become unsustainable. Using a global estimate of the location of BTC miners and the local electrical matrix, and regional coefficients of CO2 emission by generation type, the study concluded that there was an increase from 0.9 to 113 tonnes (t) CO2 per coin mined from 2016 to 2021. Considering that most cryptocurrency mining is powered by non-renewable sources, BTC climate damages increased during this period. The total global climate damage from all BTC mined between 2016 and 2021 is estimated at US$12 billion.

The paper presents three conclusions covering the period 2016-2021: (i) as the mining industry matured, climate damage from each BTC mined increased; (ii) in certain periods, BTC climate damages exceeded the price of each coin created; (iii) on average, each US$1 of BTC market value created was responsible for US$0.35 in global climate damage, which resembles the share of market price linked to beef production and crude oil burned.

The authors suggest that, in a hypothetical scenario where the share of renewable electricity sources for 2016-2021 was approximately 88.4%, the associated climate damages per coin mined would have dropped significantly.