By The Verge | Created at 2024-11-22 14:56:59 | Updated at 2024-11-29 01:55:29
6 days ago
A tentative proposal to tax cryptocurrency mining to raise funds for climate action took off during a United Nations climate conference that’s set to come to a close today.
A levy on energy-hungry crypto mining, at $0.045 per kilowatt-hour (kWh) of electricity used, could generate $5.2 billion in revenue annually, according to a report released last week by the Global Solidarity Levies Task Force, led by Kenya, Barbados, and France.
The Bitcoin network is estimated to use more electricity annually than a majority of the world’s countries do individually. The idea is that a climate tax could reduce emissions by incentivizing mining firms to clean up their operations. And it could provide desperately needed funding to help less affluent nations transition to renewable energy and adapt to the effects of climate change.
“There are swathes of the economy which are largely under-taxed yet polluting the planet.”
“There are swathes of the economy which are largely under-taxed yet polluting the planet. Yet they have huge potential to close the climate finance gap,” the report says.
The task force formed last year to consider potential levies on heavily polluting industries as a way to fund action on climate change. It was initially expected to focus on fossil fuel companies, aviation, and maritime shipping, as well as a levy on financial transactions. A progress report the group released last week broadens that scope to include possible taxes on billionaires, plastic production, and crypto mining.
The report cites research by the International Monetary Fund (IMF) that settles on $0.045 per kWh as the amount needed for a corrective tax to make up for the impact crypto mining has on the climate. That’s based on the consequences of the greenhouse gas emissions causing climate change and exacerbating disasters including storms, droughts, and wildfires. Taking into account other kinds of air pollution from burning fossil fuels, that tax rises to $0.085 per kWh.
“The fundamental idea of the correction is to increase the cost of pollution so that [those emitters] internalize the cost they impose on others,” says Shafik Hebous, lead author of the research that the task force cites and deputy division chief in the IMF’s fiscal affairs department.
Authenticating a single Bitcoin transaction requires as much electricity as a person in Ghana might use over three years or a person in Germany might burn through in three months, according to the IMF. Bitcoin miners operate big data centers filled with specialized hardware that solve puzzles around the clock to validate transactions. They eat up a lot of electricity in the process and earn Bitcoin in return.
The hope is that placing a tax on that electricity consumption could incentivize crypto miners to use more efficient hardware or even persuade the Bitcoin network to turn to a less energy-intensive method for validating transactions, much like Ethereum. By charging more for dirty sources of energy, the levy could also push miners to use more renewable energy.
There aren’t many details yet from the task force about how a global levy on crypto mining would actually work. There are big questions about how the money would be collected and how it would be used. So far, the group’s plan is to present concrete proposals at the spring meetings of the IMF and World Bank in April of next year. From there, they’d have to garner enough support for the levies to push for their implementation during the next major UN climate summit in Brazil in November 2025.
Kazakhstan, a big hub for Bitcoin mining, implemented a tax on crypto miners’ electricity use in 2022 and collected around $7 million from it that year. In the US, where more Bitcoin mining takes place than any other country, the Biden administration has proposed a 30 percent tax on crypto miners’ electricity consumption. President-elect Donald Trump, whose campaign was boosted by prominent crypto investor donors, is unlikely to support a climate levy.
The price of Bitcoin has soared to astonishing heights since Trump’s election, surging on expectations that his administration will be supportive of the industry. A higher price typically incentivizes more mining, which means more energy consumption and greenhouse gas emissions.
The report dropped during climate negotiations at the UN summit in Baku, Azerbaijan, this month that were focused primarily on financing. Delegates from nearly 200 countries were wrangling over how much money wealthy nations, including countries like the US that have caused the most climate change with their greenhouse gas emissions, should contribute in aid to poorer countries most vulnerable to global warming. At the summit, the task force launched a broader Coalition for Solidarity Levies that now includes 17 countries and partner organizations including the African Union and the European Commission.
“There can be no climate justice without fiscal justice, as all countries are facing the same challenge: how to fund the transition while ensuring that those with the greatest means and the highest emissions pay their fair share,” Laurence Tubiana, co-lead of the Global Solidarity Levies Task Force Secretariat and CEO of the European Climate Foundation, said in a press release with the report launch.
