Cryptocurrency mining's staggering energy toll sparks global debate
Bitcoin is currently priced at almost $100,000 CAD, with annual electricity consumption for mining this cryptocurrency reaching 176 terawatt-hours (TWh). The issue is impacting the United States and Russia as well.
There are two main discussions surrounding cryptocurrencies. The first relates to the bull market, characterized by long-term price increases influenced by Donald Trump's promises. The second centers on the increasing electricity usage by computers for mining virtual currencies and maintaining the blockchain network.
A single bitcoin transaction uses as much electricity as the average person in Ghana or Pakistan does in three years. The International Energy Agency estimated that in 2022, cryptocurrencies accounted for 0.4% (approximately 110 terawatt-hours – TWh) of global electricity use, akin to the total electricity consumption in the Netherlands. The agency's base scenario for cryptocurrencies anticipates more than a 40% increase in annual electricity demand by 2026 (160 TWh).
Tax on energy use
The International Energy Agency further estimated that in 2022, cryptocurrencies, data centers, and artificial intelligence (AI) collectively accounted for nearly 2% of global electricity consumption (about 460 TWh). By 2026, this consumption could rise to as much as 3.5% (over 1,000 TWh), equivalent to Japan's current electricity usage, which is the fifth-largest electricity consumer globally.
Despite the social and economic benefits, the International Monetary Fund (IMF) considers this a concern and suggests implementing a tax on electricity consumption for both miners ($0.047 CAD per kilowatt-hour or $0.089 CAD, considering the health impacts of pollution) and data centers ($0.032 CAD per kilowatt-hour or $0.052 CAD). This measure is expected to increase global budget revenues (by $5.2 billion CAD and $18 billion CAD annually, respectively), encourage the development of energy-efficient solutions, and reduce greenhouse gas emissions. By 2027, cryptocurrency mines and data centers are expected by the IMF to contribute 1.2% (450 million tonnes) of global emissions.
Russia says "no" to miners
Russia is the world's second-largest cryptocurrency mining center after the United States. According to themoscowtime.com, the country uses 16 TWh annually for mining, which constitutes about 1.5% of its total electricity consumption, according to Russia's energy ministry. To prevent energy shortages, a temporary ban on cryptocurrency mining has been implemented.
Digital mining will be banned in Siberia from December 1 to March 15, 2025, and will have annual restrictions from November 15 to March 15, 2031, during the heating season. In the North Caucasus and occupied regions of Ukraine (Donetsk, Luhansk, Zaporizhzhia, and Kherson), mining will be completely banned from December 2024 to March 2031.
Although cryptocurrency mining started in the United States about a decade ago, this activity began to expand rapidly in 2019. The recent surge is largely due to the relocation of cryptocurrency mining operations to the U.S. from China following stricter regulations on digital currency mining in 2021, though reports suggest that mining may still occur in the country.
The United States has a problem
Estimates by the U.S. government agency (Energy Information Administration, or EIA) indicate that the energy consumed annually by cryptocurrency miners could represent up to 2.3% of total U.S. consumption. The administration stated that this amount of energy is enough to power over six million homes.
As cryptocurrency mining in the United States has increased—with reports in an EIA communication—so have concerns regarding the energy-intensive nature of this activity and its impact on the American energy industry. Concerns include grid overloads during peak demand periods, potentially higher electricity prices, and the impact on energy-related CO2 emissions.
In 2022 and 2023, several members of Congress alerted the U.S. Secretary of Energy about the need to establish a registry of emissions and energy consumption by cryptocurrency miners. This year, the North American Electric Reliability Corporation (NERC), a non-governmental organization, also highlighted the risks associated with network security and efficiency due to increasing cryptocurrency mining in the U.S. In its analysis, it stated that this growth could significantly impact demand, resource forecasts, and system operations.
Assessing the electricity consumption of cryptocurrency miners is challenging for several reasons. Firstly, mining varies in scale from single workstations to massive data centres, making it difficult to identify them among millions of end customers in the United States. Secondly, identifying and tracking cryptocurrency mining facilities is challenging due to their tendency to relocate in search of cheaper electricity.
To ensure the reliability of the power grid and meet the needs of all Texans, the Public Utility Commission of Texas (PUCT) has launched a mandatory registry for miners. Cryptocurrency mine owners are required to provide information about their location and electricity demand to the commission each year to safeguard energy price stability.
