Inner Mongolia is under pressure from the Chinese government to reduce its energy use, and the province has responded by cracking down on high-energy activities. It’s curtailing new steel and methanol production and big data centers, and it’s banning cryptocurrency mining.
That’s notable because Inner Mongolia is a huge hub for crypto mining, which requires a tremendous amount of electricity, as supercomputers run millions of calculations to generate new coins. I spoke with Jennifer Pak, Marketplace’s China correspondent. She said the environmental effects of cryptocurrency mining were, in some ways, an economic trade-off. The following is an edited transcript of our conversation.
Jennifer Pak: You have to understand that a lot of the places where cryptocurrency mining is happening are poor places. And so a lot of those local governments want to attract these types of industries, like cryptocurrency mining, because it’s generating economic growth for them. And China is the biggest manufacturer of cryptocurrency mining equipment and [provider of] labor. These are the attractive features of China. And I don’t think that just by one region in China trying to crack down on this would mean that China would no longer be a major player. It still will be.
Molly Wood: How will this crackdown potentially affect carbon emissions in that region, in Inner Mongolia?
Pak: If it goes according to plan, it’s going to go down. But Inner Mongolia actually has a lot of other renewable energies as well. It’s just that cryptocurrency mining sucks up a lot of electricity. But certainly China has committed itself to going carbon neutral by 2060. And you can be sure that there will be a lot of pressure coming from the central leadership on these various places to get itself in line.
Wood: You know, all countries will have to reduce emissions to keep climate change on track for the goals in the Paris Agreement. Big Tech, in general, from Bitcoin mining to these big, power-intensive data centers, could be more of a target in the future, right? Are there lessons we can take away from this move?
Pak: Definitely, they’re going to be the target. There are other regions, as I mentioned, where China also has cryptocurrency mining bases. So in places like Sichuan and Yunnan, they have rich hydropower. So it’s not always derived from coal. But it is possible that could come from renewable energies. I guess it really comes down to the consumer, the demand, because if you talk about the future of cryptocurrency mining, it really just comes down to the profitability. So it’s likely that you will just keep shifting to wherever it’s most profitable. That kind of mirrors what’s happened to labor-intensive industries, like shoe manufacturing, any other dirty industries that are undesirable. It usually just ends up shifting to other places where the enforcement is rather lax, if you will, because they need the money for development. And that’s basically what the story is here: Inner Mongolia needed the money.
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The amount of power a cryptocurrency network is using is commonly referred to as a hash rate. Inner Mongolia accounts for about 8% of the global Bitcoin mining hash rate.
The University of Cambridge has set up a Bitcoin electricity consumption index that attempts to quantify how much electricity cryptocurrency mining actually consumes. Best guess is a little over a half of a percent of the world’s energy usage, which is a lot. But the site also notes that renewable energy from water, solar, wind or biofuels could power all the world’s mining many times over, so it doesn’t have to be dirty. And let’s be honest, it’s not like our global network of real money — printed on dead trees, trucked around, shipped back and forth or stored as trillions of electronic records in big data centers — is without guilt either.
As for those data centers, researchers at Northwestern University estimate that in 2018, data centers probably accounted for a full 1% of the world’s electricity usage, which is a lot. But that was only a 6% increase since 2010. And if you consider the growth in cloud computing and overall internet, that’s almost nothing. So while they use a lot of energy, they may also be getting way more efficient over time, both in how they consume energy and in the actual software — using and storing data more efficiently.