Bitcoin Mining Carbon Emissions at 'Inconsequential' Levels: CoinShares

By Jeff Benson

It's hard to make the case that Bitcoin mining is, by itself, good for the environment. But newly compiled research from digital asset investment firm CoinShares suggests its impact on carbon emissions is minimal, especially when compared to the global financial system.

CoinShares, which has in recent months sought to reframe the Bitcoin energy debate, estimates that the Bitcoin mining network was responsible for 41 megatons (Mt) of CO2 emissions in 2021—up from 36 Mt the year before. While that sounds like a lot, it's less than 0.08% of global carbon emissions—a number CoinShares calls "inconsequential." Using a 2019 estimate from Galaxy Digital, it pegs emissions for the entire financial system at 130 Mt. The U.S. was responsible for 5,830 Mt of emissions from all sources.

Environmentalists have criticized Bitcoin for its energy expenditures. Every week, it seems, electricity consumption on the network is being compared to that of a different country. The Bitcoin network intentionally requires a lot of energy to run, as Bitcoin "miners" compete to crack cryptographic puzzles and earn BTC; the process helps keep the blockchain secure by distributing the network over many users.

The criticism of Bitcoin has even spread to other cryptocurrencies. NFTs, blockchain-based deeds of ownership tied to assets such as virtual art and digital collectibles, are a recent target. While most NFTs are issued on the Ethereum blockchain, which uses a similar mining process to Bitcoin, others are minted on "proof-of-stake" networks such as Solana, which do not require mining and have much lower energy expenditures.

While CoinShares doesn't address NFTs or crypto more generally, it thinks the fear over Bitcoin is overblown, calling its energy usage "much misunderstood." The firm restates its belief that "Bitcoin is a large net benefit to society" whose environmental cost is small but necessary. 

At any rate, it thinks mining's power consumption will decrease because the network is designed to stop creating BTC over time. Within just a few decades, the energy usage will transition away from minting BTC and toward "market demand for bitcoin transaction settlement through transaction fees offered to miners by consumers." To outside observers, that may seem like the same difference, but removing mining from the equation does allow for a more direct comparison with other financial networks, such as Visa and Stripe.

Moreover, CoinShares theorizes that the energy that is used will get cleaner because "miners are more mobile than traditional industries and can move to locations where cheap renewables are constructed, almost no matter how remote the locations may be." It believes the versatile workforce will embrace wasted flare gas, in particular. This is natural gas that's created as a byproduct of literal mining in oil fields. It's already being touted in Texas as a sustainable way to repurpose gas that might otherwise be burned. By CoinShares' calculations, using it for power can actually reduce greenhouse gas emissions.

Not every jurisdiction is using sustainable methods, however. According to the report, four regions—the country of Kazakhstan, the U.S. states of Montana and Kentucky, and the Canadian province of Alberta—are responsible for 43% of Bitcoin mining carbon emissions but only supply 26% of the network's total power thanks to reliance on coal, oil, and gas.

Other regions, such as Sweden and the provinces of Quebec and Manitoba, punch above their weight, accounting for an estimated 5.2% of Bitcoin's hashrate while producing negligible emissions.

This will change, CoinShares insists. But even if it doesn't, it says, "the emission costs of Bitcoin are dwarfed by its benefits."

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