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September 8, 2022

Does Crypto Affect Climate Change?

The White House Office of Science and Technology Policy (OSTP) has issued a report on the environmental and energy effect of cryptocurrency assets in the United States, concluding that crypto contributes significantly to energy consumption and greenhouse gas (GHG) emissions. In response, it suggests monitoring and control.

The study, issued on September 8, was the most recent result of US President Joe Biden’s March executive order (EO) on the creation of digital assets.

The EO tasked the OSTP with investigating the energy usage associated with digital assets, comparing that usage to other energy outlays, researching the use of blockchain technology to support climate protection, and making recommendations to minimize or mitigate the environmental impact of digital assets.

According to the report, crypto assets use around 50 billion kilowatt-hours of energy each year in the United States, accounting for 38% of the worldwide total. Due to a lack of monitoring, precise energy accounting was difficult.

The paper continued the habit of generating imaginative energy use comparisons, stating that crypto assets use somewhat more energy than home computers in the United States, but less than home lights or refrigerators. Furthermore:

“Despite the fact that direct comparisons are difficult, Visa, MasterCard, and American Express combined consumed less than 1% of the electricity that Bitcoin and Ethereum used that same year, despite processing many times the number of on-chain transactions and supporting their broader corporate operations.”

According to the analysis, excessive energy use degrades systems and raises energy costs. The importance of proof-of-work (PoW) staking in crypto asset energy consumption was emphasized, as was the fact that changes in consensus mechanism use and the field’s fast expansion made estimating future energy consumption unfeasible.

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In any scenario, “crypto-asset mining utilizing grid power causes greenhouse gas emissions – unless mining employs sustainable energy,” according to the research. The research also provided blockchain technology application cases for energy distribution and environmental (carbon) markets.

Some solutions for optimizing crypto asset energy consumption were addressed in the paper, such as the utilization of stranded methane, while others, such as reusing collateral crypto mining heat, were not evaluated.

The OSTP report is one of five that must be submitted the same week. In June, the Justice Department issued a study on improving international law enforcement, as requested by the EO, and in July, the Treasury Department issued a report on a framework for international involvement.