In a word – no. At least, not based on cryptocurrencies’ dominant operating model. Unlike other businesses/sectors, most crypto companies cannot simply decide to source all of their energy from renewable sources. As there is no centralised system controlling their energy sourcing, miners will secure it from the cheapest possible sources, whatever they may be. We know that China, for example, mines the most Bitcoin of any country by far. While it is investing in renewable energy generation, and has made a commitment to net zero emissions by 2060, almost two-thirds of the electricity it uses today comes from coal.
This will, of course, change as the global energy mix shifts to renewables. But with fossil fuel subsidies, political intransigence and transition challenges, this is not going to happen overnight.
Crypto zealots will argue they can use over-capacity but this is not as neat a solution as one would hope. As the proportion of renewables continues to grow and fossil-fuelled generators reduce, energy storage systems – such as batteries and pumped hydro – will be used to “even out” periods of high demand and low output. There will also be competing demands for surplus renewables such as for the production of green hydrogen or green steel, which should arguably take precedence.
A partial solution to the crypto industry’s carbon challenge is already unfolding in a move from “proof of work” (POW) to “proof of stake” (POS). POW relates to mining crypto, whereas POS avoids mining in favour of “validating”, which means locking up or “staking” crypto as collateral for the right to verify transactions. This does not require the same power-hungry hardware and POS’s environmental impact is anticipated to be a fraction of POW. While such a move is not possible across all cryptocurrencies, it should certainly be the focus of new and emerging offerings.
The real solution needs government support (not just domestically but globally) that applies to all aspects of the economy, not just digital currencies – accounting for environmental externalities. In its simplest terms, this means putting a price on carbon/greenhouse gas (GHG) emissions.
A carbon price gives an economic signal to polluters to decide for themselves whether to discontinue their polluting activity, reduce emissions, or continue polluting and pay for it. It would also give companies much-needed certainty from which they can unleash significant “transition capex”.
Our current economic structure allows these actions to go (financially) unchecked, which is largely – although not entirely – why we are in our current climate mess.
Harvard research from 2020 suggests that $US1 of cryptocurrency coin value could be responsible for US66¢ in health and climate damages, for which the producer pays nothing, thereby loading environmental, social and indeed economic costs into the future.
While it is not a “silver bullet” solution to climate change, and certainly not to irreparable ongoing environmental degradation, we need to put a price on carbon emissions so that polluters cannot pollute for free.
Whether mining cryptocurrencies or fossil fuels, climate damage must come at a price.