Bitcoin's energy dilemma: Global impact sparks debate

There are two simultaneous discussions regarding cryptocurrencies. The first pertains to the bull market, which involves long-term price increases driven by promises made by Donald Trump. The second discussion focuses on the increasing electricity consumption by computers used for mining virtual currencies and maintaining the blockchain network.

A single bitcoin transaction consumes as much electricity as the average resident of Ghana or Pakistan uses over three years. The International Energy Agency estimated that in 2022, cryptocurrencies accounted for 0.4 percent (about 110 terawatt-hours – TWh) of global electricity usage, roughly equivalent to the total electricity consumption of the Netherlands. The agency's base scenario for cryptocurrencies projects more than a 40 percent increase in annual electricity demand by 2026 (160 TWh).

The International Energy Agency further estimated that in 2022, cryptocurrencies, data centers, and artificial intelligence (AI) collectively accounted for nearly 2 percent of global electricity consumption (about 460 TWh). By 2026, consumption may rise to as much as 3.5 percent (over 1,000 TWh), comparable to Japan's current electricity usage, the fifth-largest electricity consumer globally.

Despite social and economic benefits, the International Monetary Fund (IMF) sees this as a cause for concern and suggests implementing a tax on electricity consumption by both miners (0.047 dollars per kilowatt-hour or 0.089 dollars, considering the health impacts of pollution) and by data centers (0.032 dollars per kilowatt-hour or 0.052 dollars). According to the IMF, this measure would globally increase budget revenues (by 5.2 and 18 billion dollars annually, respectively), encourage the development of energy-efficient solutions, and reduce greenhouse gas emissions. By 2027, cryptocurrency mines and data centers are expected to account for 1.2 percent (450 million tons) of global emissions.

Russia is the world's second-largest cryptocurrency mining center after the United States. According to themoscowtime.com, the country uses 16 TWh annually for mining, which accounts for about 1.5 percent of its total electricity consumption, according to Russia's energy ministry. To prevent energy shortages, a temporary ban on cryptocurrency mining has been implemented.

Digital mining will be banned in Siberia from December 1 to March 15, 2025, with annual restrictions from November 15 to March 15, 2031, during the heating season. In the North Caucasus and occupied Ukraine (Donetsk, Luhansk, Zaporizhzhia, and Kherson regions), mining will be completely banned from December 2024 to March 2031.

Cryptocurrency mining began in the United States about a decade ago, but this activity expanded rapidly in 2019. The recent surge has primarily been fueled by relocating cryptocurrency mining operations to the U.S. from China after stricter regulations on digital currency mining were imposed in 2021, though reports suggest that mining may still occur in China.

Estimates by the U.S. government agency (Energy Information Administration, or EIA) indicate that the energy consumed annually by cryptocurrency miners could account for up to 2.3 percent of total U.S. consumption. The administration reported that this amount of energy is enough to power over six million homes.

As cryptocurrency mining in the United States has increased, as noted in an EIA report, concerns have grown about the energy-intensive nature of this activity and its impact on the American energy industry. Issues include grid overloads during peak demand periods, potentially higher electricity prices, and the impact on energy-related CO2 emissions.

In 2022 and 2023, several members of Congress alerted the U.S. Secretary of Energy about the need to establish a registry for emissions and energy consumption by cryptocurrency miners. This year, the North American Electric Reliability Corporation (NERC), a non-governmental organization, also highlighted the risks associated with network security and efficiency due to increasing cryptocurrency mining in the U.S. In its analysis, it noted that this growth could significantly impact demand and resource forecasts as well as system operations.

Assessing the electricity consumption of cryptocurrency miners is complex for several reasons. First, mining can be conducted in facilities of varying sizes, from single workstations to massive data centers, making it challenging to identify them among millions of end customers in the United States. Second, identifying and tracking cryptocurrency mining facilities is difficult because these operations tend to relocate in search of cheaper electricity.

To ensure the reliability of the power grid and meet the needs of all Texans, the Public Utility Commission of Texas (PUCT) has launched a mandatory registry for miners. Cryptocurrency mine owners must provide information about their location and electricity demand to the commission annually. This is necessary for PUCT to safeguard energy price stability.