IMF Executives Propose 85% Increase in Electricity Costs for Cryptocurrency Mining
A tax on the energy used by cryptocurrency miners could cut emissions by 100 million tons a year, the equivalent of Belgium’s emissions, according to two IMF executives.
Two IMF executives are proposing an 85% increase in the cost of electricity, despite several reports that more than 50% of the energy used in bitcoin mining is clean (e.g. a report from Cambridge University). Reducing CO₂ emissions “in line with global targets” is the purpose of the proposal for this large cost increase.
The proposal, which also makes strong statements about artificial intelligence, was published on the IMF’s official website blog: “What do cryptoassets and AI have in common? They are both power hungry,” the publication states.
The blog also reports that in 2027, crypto mining may account for 0.7% of global carbon dioxide emissions. Extending the analysis to datacenters (based on IEA estimates), their carbon emissions could reach 450 million tons by 2027, or 1.2 percent of global emissions.
One of the benefits of this proposal would be to increase global and annual government revenue by $5.2 billion, according to the executives. There would also be a reduction in emissions of 100 million tons per year, equivalent to the emissions of a country the size of Belgium.
Proponents (Shafik Hebous and Nate Vernon-Lin) also mention that this tax would increase electricity costs by $0.89 per kilowatt-hour. A tax of $0.047 per kilowatt-hour “would encourage the cryptocurrency mining industry to reduce its emissions in line with global targets,” they wrote in an August 15 article.
It should be noted that this is not the first time that the IMF has mentioned the impact of mining on bitcoin, as in the past it concluded that it could represent 0.7% of global emissions.
The IMF’s Intentions vis-à-vis BTC Rate Hikes
The IMF says it is aligned with the global goal of limiting global warming to 2 degrees. To do so, countries would have to introduce measures in addition to raising the price of carbon to $85 per ton by 2030.
In particular, the tax on electricity could encourage miners and artificial intelligence centers to expand more energy-efficient equipment and reduce consumption, the two executives said.
However, they also acknowledged the need for global coordination, as implementing these measures in one country could encourage miners to relocate to another country “with lower standards.”
The proposal would also encourage artificial intelligence applications to use energy more efficiently. It would also be an incentive for the development of applications with positive social impacts that address environmental damage.
FMI: Bitcoin’s Environmental Footprint
They claimed that a single Bitcoin transaction uses about the same amount of electricity that the average person in Pakistan uses in three years, while the ChatGPT artificial intelligence model needs ten times the amount of energy compared to a Google search.
In this regard, the executives also proposed a tax on energy consumption of artificial intelligence data centers from $0.032 to $0.052 per kilowatt hour. Similarly, to reduce pollution. According to executives, the latter tax could generate up to $18 billion for governments.
To put these figures in perspective, it is worth noting that Amazon’s reported carbon footprint was 71.54 million metric tons of CO₂ and in 2021, compared to 65.4 million metric tons for the BTC mining.
Amid this high energy consumption, smaller bitcoin miners are struggling to maintain profitability after the April halving. Therefore, a large segment of smaller miners could be impacted or forced out of the market by a move of this magnitude.
By Audy Castaneda