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Europe Set to Roll Out Energy Efficiency Labels for Blockchains

The move could prove beneficial for more environmentally-friendly blockchains that use proof-of-stake, such as Ethereum or Solana.

3 min read
Europe is pressing ahead with crypto regulations. Image: Shutterstock

The European Union is set to develop an energy efficiency label for blockchains.

The European Commission has introduced these measures as part of wider plans to control the energy consumption of the ICT sector, including an environmental labeling scheme for data centers, an energy label for computers, and measures to make clearer how much energy telecoms services use. 

“The aim is to make our energy system more efficient and ready for increasing share of renewable energy sources,” said energy commissioner Kadri Simson. “For this, we need more innovative digital solutions and a grid that is much smarter and more interactive than it is today.”

It will provide financial support for research into digital technologies in the energy sector through various public sector-led programs.

It did not specifically mention whether any of this support would make its way to the crypto sector. 

Until now, the European Union could have been said to have taken a fairly permissive attitude to crypto mining, at least compared to regions such as China which have issued outright bans

In March 2022, the European Parliament’s Economics and Monetary Affairs Committee rejected efforts to ban proof-of-work (PoW) crypto mining in the region, removing the offending relevant paragraph in the Markets in Crypto Assets (MiCA) bill before it was voted on.

But this also isn’t the first environmentally focused piece of crypto legislation that the EU is set to put into force. 

The Markets in Crypto Asset Regulation (MiCA), set to come into play at the end of 2023, will force some market participants to make disclosures about their environmental and climate footprint.

Regulators circle around crypto mining

It's not just EU regulators that are paying closer attention to crypto mining, it's an issue that is attracting plenty of attention on the other side of the Atlantic.

Massachusetts Senator Elizabeth Warren and a group of six other U.S. lawmakers addressed a letter to U.S. Senator Pablo Vegas, CEO of the Electric Reliability Council of Texas (ERCOT), highlighting concerns regarding crypto mining in Texas and “the impact these operations may be having on climate change, the stability of the energy grid, and subsidies–ultimately paid for by retail consumers.”

The difference between the energy output of PoW versus proof-of-stake (PoS) consensus mechanisms can be huge.

Post-Ethereum’s transition to a PoS-based system, it now reportedly consumes 99.99% less energy than it did previously, at least according to research from the Crypto Carbon Rating Institute (CCRI), controlled by blockchain firm ConsenSys.

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