1. Sustainability concerns around Bitcoin mining
Bitcoin mining is scrutinized for its significant energy requirements and resulting environmental impact. The core issue lies in the energy-intensive ‘proof of work’ consensus mechanism, which demands extensive computational resources. The magnitude of energy consumption is such that some large mining operations have their own dedicated power plants. The global energy consumption for Bitcoin mining is estimated at 90-345 TWh per year (mid-range estimate of 156 TWh per year), comparable to the energy usage of entire nations.
This substantial energy expenditure raises questions about global energy supply pressures and carbon emissions. The Cambridge University Bitcoin Electricity Index reported a +20% annual growth rate in carbon emissions from Bitcoin mining from 2019 to 2023.
It is important to note, that the perceived value of Bitcoin heavily influences the interpretation of this energy use. If one views Bitcoin as lacking intrinsic value, every single megawatt dedicated to it would bee seen as “wasting energy”. However, we believe that Bitcoin as an asset class has a significant positive
ESG impact, that goes way beyond energy consumption. This perspective emphasises the necessity of examining Bitcoin’s role and potential benefits in a broader socio-economic and environmental context.
Figure 2: Total Bitcoin greenhouse gas emissions [MtCO2e]
Source: Cambridge Bitcoin Electricity Consumption Index
2. Contextualizing the Problem
Comparison with other Sectors:
The traditional finance and insurance sector, often associated with Cryptocurrency, is an integral part of the global financial system. This sector includes various components like data centers, ATMs, physical branches, and the transportation of physical currency. The cumulative energy impact of these elements contributes significantly to the sector’s overall energy footprint, which amounts to a staggering 4,939 TWh, compared to 156 TWh for Bitcoin mining. Furthermore, contrasting Bitcoin mining to other industries shows how insignificant Bitcoin mining’s power consumption is in comparison.
Figure 3: Energy consumption of Bitcoin mining vs. other industries [TWh]
Source: Cambridge Bitcoin Electricity Consumption Index
Bitcoin Mining’s Energy Sources:
A significant aspect of the discussion is the type of energy sources used in Bitcoin mining. Research indicates that c.40-50% of Bitcoin mining relies on renewable energy sources. This includes hydropower (15%), nuclear (15%), wind (7%), and solar (3%), with other renewable sources contributing 2% of the total energy used in mining. However, a considerable portion, c.62% as of 2022, still comes from non-renewable sources such as gas and coal. Despite this, there is an observable trend among miners towards using more renewable energy sources as they become more affordable and accessible. In fact, major Bitcoin miners are increasingly adopting renewable energy sources. The Bitcoin Mining Council, which comprises 57 of the world’s largest Bitcoin mining companies, representing 43% of the global network, has shown a significant shift towards renewable energy. In 2022, 59% of the energy used by these companies was from renewable sources, indicating a strong movement towards more sustainable mining practices. This trend highlights the industry’s growing commitment to reducing its carbon footprint and enhancing overall sustainability.
Figure 4: Bitcoin electricity consumption by power source [%]
Source: Cambridge Bitcoin Electricity Consumption Index
3. Drivers to Further Enhancing Sustainability of Bitcoin Mining
Increased Adoption of Circularity Use-Cases:
Recycled Heat Usage: Bitcoin mining generates significant heat, which is now being repurposed for a variety of practical applications. This includes climate control, where heat is used for district heating, food security through the maintenance of optimal conditions in aquaculture and greenhouses, and in the industrial sector for processes like Enhanced Oil Recovery and Heat-to-Hydrogen production. In other pilots the heat is used to derive drinking water.
Methane Mitigation and Reduction: Some Bitcoin miners are addressing environmental hazards by capturing methane from sources like landfills and cattle farms, converting the methane to biogas to power their mining operations. This approach not only reduces greenhouse gas emissions but also advances circular economic models.
Excess and Wasted Energy Utilisation: Bitcoin miners are utilising neglected energy reservoirs, especially from renewable energy sources that otherwise would be curtailed and excess natural gas from industrial processes or oil extraction, which would otherwise be flared or released into the atmosphere. This practice aligns profitability with environmental sustainability by minimizing wastage and addressing gas flaring concerns.
Demand Response Programs:
Miners forming a symbiosis with utility companies by providing Demand Side Management flexibility. Miners are adjusting their energy consumption to align with fluctuations in electrical grid supply and demand. This introduces a dynamic and flexible load to the energy ecosystem, contributing to the stability and balance of electrical grids and facilitating the expansion of renewable energy capacity (i.e. through increasing its running hours).
Figure 7: Demand response program
Source: Roland Berger
Increased Mining Hardware Improvement:
The Bitcoin mining sector has seen a 58-fold increase in efficiency over the past eight years due to technological advancements, particularly in the development of energy-efficient mining hardware. This improvement is significantly reducing the overall carbon footprint of mining operations. The industry is also embracing innovative cooling solutions and hardware optimisation techniques, which further reinforce its commitment to sustainable practices.
Figure 8: Improvement in ASIC mining machine efficiency [J/Th]
Source: Bitcoin Mining Council, Roland Berger
4. Social Inclusion of Bitcoin
Bitcoin is one of the most inclusive asset classes on earth as it does not discriminate anyone getting access to value transfer and storage. Not only has this the potential to include the large world population that is currently unbanked, it also provides a viable option of a store of value in regions where national currencies have been devalued at a massive speed (e.g. Argentina, Lebanon). This trait of Bitcoin cannot be underestimated and should also be considered in a fair discussion around energy usage.
5. Conclusion
The sustainability conversation around Bitcoin, often centered on energy consumption, is just a partial view. A comprehensive examination reveals its multifaceted impact with favorable implications across environmental, social, and governance dimensions. Bitcoin not only uses a significant share of energy from renewable sources but also promotes renewable energy infrastructure development and adaptable, efficient energy utilization. In some cases it also incentivizes removing methane from the atmosphere, contributing to a carbon-negative effect. However its potential to advance financial inclusion and provide a discriminatory-free access to value is the strongest argument for its increasing visibility as an ESG asset.
