Issues

Ethereum, the second largest cryptocurrency, just slashed its electricity use by 99.95%, proving that a code change is technically and politically possible. Ethereum's Merge leaves Bitcoin as the largest cryptocurrency climate polluter. It doesn't have to be this way.

It can be done and has been done. Ethereum has changed its code–reducing its electricity use by 99.95%. On September 15, 2022, Ethereum moved from using the highly energy-intensive Proof of Work (PoW) consensus mechanism to Proof of Stake (PoS), a much more energy-efficient cryptocurrency validation protocol. This move leaves Bitcoin in the dust as one of the largest cryptocurrencies using an outdated protocol contrary to the growing clean energy economy.

With climate change-driven wildfires and floods raging worldwide and destroying lives and livelihoods, many countries and entire sectors of the economy are racing to decarbonize and minimize energy use. Ethereum has cut its energy use by 99%, joining other protocols that also use tiny amounts of energy. Then there’s Bitcoin, whose most prominent and loudest boosters proclaim that it will never change. Bitcoin mining wastes energy by design. It requires millions of specialized computers to perform trillions of computations to solve complex mathematical puzzles to validate transactions. These computers use insatiable amounts of electricity resulting in excessive air and water pollution, electronic waste, noise pollution from the whirring computers working 24-7, and increased electricity rates for utility ratepayers.

Ethereum’s move to a dramatically more energy-efficient consensus mechanism shows that a code change is technically and politically feasible.

A little more than a decade ago, Bitcoin changed the global financial system. But without a serious strategy to address its egregious energy consumption in a rapidly warming world, Bitcoin risks getting left behind. We call on Fidelity, PayPal, Block, BlackRock, and other financial institutions and asset managers to support climate-friendly cryptocurrency protocols that are at least as efficient as Proof of Stake. Support the call for a code change for the people and the planet before it’s too late. It’s time for Bitcoin to cut the excuses and the pollution. 

Many financial institutions, including central banks, money managers, investment firms, and insurance companies, have made climate commitments to reach net zero by 2050 or have Environmental, Social, and Government (ESG) criteria for either their internal operations or their investments. Yet, many continue to invest in fossil fuel projects or companies. According to Reclaim Finance, an analysis of the policies adopted by banks, insurers, and investors showed that no major financial player has adopted measures to end fossil fuel development. More so, many companies like Fidelity, BlackRock, Goldman Sachs, Mastercard, and others offer various Bitcoin products, invest in Bitcoin mining, and provide Bitcoin transactional services, despite its climate-polluting consensus mechanism, to their customers.

More worrisome is that these same firms know about this problem. In 2017, Mastercard stated in its Corporate Sustainability Report that "new research shows that cryptocurrencies like Bitcoin are inherently more energy-intensive than Mastercard's payment network." Yet, Mastercard is rushing to increase its Bitcoin transactional services despite its 2040 "net zero" climate pledge. Fidelity states on its website that "robust sustainability practices can be critical to an investment's long-term success." Yet, Fidelity has also invested in Bitcoin mining, offers Bitcoin products to millions of their 401(k) customers, and has plans to debut a retail crypto trading platform. Goldman Sachs has begun trading bitcoin futures with Galaxy Digital.

BlackRock is deepening its climate problem with its latest Bitcoin loan to Core Scientific, a bitcoin mining company that uses coal power in Kentucky.  This latest loan follows $37.9 million of secured convertible notes to the same company,  a 6.71% stake in Marathon Digital Holdings (MARA), and 6.61% of Riot Blockchain (RIOT). BlackRock also offers Bitcoin investments to institutional investors.

Fidelity, Mastercard, BlackRock, and Goldman Sachs are gearing up their Bitcoin business while dealing with a growing climate risk on their balance sheets. With increased scrutiny from proposed legislation from policymakers coupled with climate action demands from their customers, these investments present reputational and financial risk. It doesn't have to be this way due to the options of accessible, clean, and more efficient cryptocurrency consensus mechanisms that use 99% less energy.

Institutional investors like Fidelity, BlackRock, Goldman Sachs, and Mastercard can align their climate and ESG commitments by leveraging their influence to push for a code change that would make Bitcoin validations reduce energy use and emissions. The financial institutions choosing to profit from Bitcoin can bring their clout and resources to the growing movement calling for a Bitcoin code change and investment in what matters most: a thriving, livable planet.

Join us in telling Mastercard and Fidelity CEOs to join our call for Bitcoin to change its code to use less energy!

Bitcoin and other Proof of Work cryptocurrencies pose risks to our climate, local air, water quality, grid stability, and electricity rates, necessitating government regulation to curb these impacts and demand disclosure of these risks to the public.

With increasing numbers of cryptocurrency investors and consumers, national, state, and utility regulators can implement a range of rules, laws, and incentives to clean up Bitcoin's climate and local impacts to determine the best approach for each jurisdiction. The key question for policymakers and regulators is how to maximize cryptocurrency's potential benefits while significantly reducing its environmental and social impacts.

Some countries like China and Kosovo have banned Bitcoin mining due to its excessive electricity use. As a result, Bitcoin mining companies in the U.S. and Kazakhstan have had explosive growth due to abundant and cheap energy sources that mainly depend on coal and other fossil fuels. From August 2019 to January 2022, the United States' share of global mining increased from four percent to nearly 38 percent. And new research from the Cambridge Centre for Alternative Finance shows that Chinese bitcoin mining activity has returned illegally, showing that banning miners is a short-term intervention. 

With this rapid increase, national and state regulatory agencies grapple with understanding the scale of the issue and their regulatory jurisdiction and gaps. For example, there is no national or state reporting requirement or compilation of the Bitcoin mining locations and no federal regulations governing cryptomining impacts such as pollution or excessive energy consumption. 

Policymakers and the public need more comprehensive and verified information about where operations are located, how much energy they consume, and the energy sources. There needs to be more data about the associated air and noise pollution, water contaminants, e-waste, and GHG emissions. Fortunately, the European Union (E.U.) and the United States government are starting to take action. In July 2022, with the Markets in Crypto-Assets (MiCA) law, the European Parliament and E.U. states agreed to regulate cryptocurrencies, including a requirement that companies selling tokens on the continent disclose their environmental impact. The law will also require cryptocurrency companies to reveal precisely how much energy cryptoassets consume and the amount of GHG emissions created from the validation processes. This move was the first significant regulation to provide transparency to crypto mining's climate impact.

In August 2022, Sens. Debbie Stabenow (D-Mich.), John Boozman (R-Ark.), Cory Booker (D-N.J.), and John Thune (R-S.D.) also introduced legislation that included a disclosure provision to increase transparency about how much and what type of power is used by energy-intensive digital assets like bitcoin.

In November 2022, Senator Ed Markey (D-Mass.) and U.S. Representative Jared Huffman (D-Calif.) introduced The Crypto-Asset Environmental Transparency Act that would:

• require cryptocurrency mining operations consuming more than five megawatts of power to report GHG emissions under the Clean Air Act.
• require the Environmental Protection Agency to lead a detailed interagency study of the environmental impacts of crypto-asset mining in the U.S.
• amend the Energy Independence and Security Act of 2007 to include cryptocurrency mining facilities in the definition of data center buildings.

U.S. states can also curtail Bitcoin mining impacts. In November 2022, N.Y. state placed a two-year pause on cryptocurrency mining, becoming the first state to do so. The law enacts a moratorium on new and renewed air permits to operate fossil fuel power plants that provide electricity for cryptocurrency mining. It also requires New York's Department of Environmental Conservation to study the environmental impacts of cryptocurrency mining.

State and local utility regulators can provide ratepayer protection from cryptocurrency mining companies, including those that oversee municipal utilities and rural electric cooperative board members, public utility commissions, energy regulators, and regional energy system market monitors. The Earthjustice and Sierra Club report, THE ENERGY BOMB

How Proof-of-Work Cryptocurrency Mining Worsens the Climate Crisis and Harms Communities Now outlines several actions that regulators, electric utilities, and grid operators can take:

• Refrain from approving power purchase agreements with cryptocurrency mining operations unless those utilities demonstrate the deal will not adversely impact other ratepayers, including by raising rates or increasing costs. State regulators and lawmakers should work with municipal and cooperative utilities to do the same.
• Ensure that cryptocurrency miners are not given discounted rates and instead allocate costs and adopt rates that protect existing consumers from higher wholesale prices, cost shifting, and stranded assets.
• Assess utility plans to increase or maintain obsolete capacity (such as old fossil generators) in response to cryptocurrency mining operations, and ensure that existing ratepayers are held harmless. 
• Consider Systems Benefit Charges (SBCs) or on-bill surcharges to cryptocurrency mining operations to fund mitigation measures and protect ratepayers against stranded asset costs.
• Review the impact of cryptocurrency mining operations on regional resource adequacy and the cost to serve customers.
• Establish and require best management practices for high-density load energy users, such as energy efficiency requirements and power density limits.
• Utilities should develop rate structures for cryptocurrency miners that ensure those operations pay their fair share of infrastructure upgrades at the time of interconnection.
• Independent system operators can develop guidance for the interconnection of high-density electricity users, including emergency response rules that prioritize the integrity of grid operations and treat cryptocurrency mining as a highly interruptible, "flexible" load.