Wells Gibson Friday Blog – 9 April 2021
Bitcoin energy consumption and carbon emissions
Carbon emissions from Bitcoin mining activity in China are likely to exceed the energy consumption levels of Italy and Saudi Arabia.
That’s the conclusion of a new study by Chinese Academy of Sciences researchers, published in the latest edition of the Nature Communications journal, warning that rapid growth in Chinese Bitcoin mining energy use requires urgent action.
Mining for Bitcoin involves computers solving complex mathematical equations and requires signiﬁcant energy consumption. As a result of this need for substantial computing power to ‘mine’ Bitcoin, the operations are based in parts of the world where electricity is cheaper. Parts of China that rely on burning coal to generate cheaper electricity have attracted Bitcoin miners, with the study concluding that more than three-quarters of global Bitcoin operations last year took place in China.
If no action is taken, the electricity consumption required to mine Bitcoin in China will reach its peak in 2024, at a total of 297 Twh. The study said:
“This exceeds the total energy consumption level of Italy and Saudi Arabia and ranks 12th among all countries in 2016. Correspondingly, the carbon emission flows of the bitcoin operation would peak at 130.5 metric tons per year in 2024. Internationally, this emission output surpasses the total greenhouse gas emission output of the Czech Republic and Qatar in 2016.”
The Chinese government announced action on Bitcoin mining operations last month, designed to cut back on the amount of electricity used and carbon emissions generated in the region.
In Inner Mongolia, where 8% of global Bitcoin mining takes place, all existing cryptocurrency mining operations will be forced to close, and new operations prevented from opening.
Bitcoin mining in Inner Mongolia is especially problematic because its electricity supply relies exclusively on burning coal and other fossil fuels. China has pledged to reach net-zero carbon emissions by 2060.
In response to the crackdown by the Chinese government, Nasdaq-listed cryptocurrency miner Bitmain has announced plans to relocate its operations to areas that generate electricity from renewable sources.
While Bitcoin is criticized for its energy consumption and negative impact on the environment, a study last year from the University of Cambridge found that more than three-quarters of cryptocurrency mining operations use renewable energy sources.
The reliance on renewable energy for Bitcoin mining rose from 60% in 2018 to 76%
in 2020, according to the Global Cryptoasset Benchmarking Study.
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Please note that the sale of bitcoin is not a regulated activity, and therefore Wells Gibson cannot provide advice or assistance on bitcoin or any other cryptoasset activities. All bitcoin prices sourced at Morningstar. Prices can rise and fall, often dramatically. If you buy bitcoin, you could get back less than your original stake, and could lose everything you invested.