A newly announced “Crypto Climate AgreementAims to obliterate the legacy of climate pollution from cryptocurrencies. That is quite a challenge given the enormous amounts of energy that the most popular cryptocurrencies – bitcoin and Ethereum – consume. The loose goals outlined in the plan so far face potentially insurmountable challenges.
The “deal” is led by the private sector – not governments – and outlines some preliminary objectives. It aims to switch all blockchains to renewable energy by 2030 or earlier. It sets a 2040 target for the crypto industry to achieve “net zero” emissions, which would mean reducing pollution and developing strategies that could suck the industry’s historic carbon dioxide emissions out of the atmosphere.
Finally, and perhaps most realistically, it wants to develop an open-source accounting standard that can be used to consistently measure the emissions generated by the crypto industry. They also want to develop software that can track how much renewable energy a blockchain uses.
If achieved, those goals would solve a very real problem. Bitcoin alone has about the same CO2 footprint annually like Hong Kong, while Ethereum’s annual carbon emissions rival Lithuania. Their climate pollution is on the rise, even as scientists’ research warns that global emissions must be reduced nearly in half of this decade to avoid the worst effects of climate change.
The accord is backed by a number of influential names in climate action and the crypto industry – including cryptocurrency firm Ripple, blockchain technology conglomerate Consensys, billionaire climate crisis scientist Tom Steyer and the United Nations-appointed.climate champions
While addressing the environmental damage caused by the crypto industry can be a worthy challenge, critics say the broad goals are unlikely to result in meaningful change.
“Some things simply cannot be solved,” says economist Alex de Vries.
Unfortunately for the Crypto Climate Accord, bitcoin is the biggest player in the game, and it is likely to cause the accord the most trouble due to the amount of energy it uses. Bitcoin is deliberately inefficient – which is a problem renewable energy sources cannot solve. It uses a model called “proof of work” to keep its ledgers safe. “Miners” who verify transactions to get new coins do so by using energy-guzzling machines to solve increasingly difficult puzzles. (Ethereum also uses proof of work, but has said for years that it will eventually switch to a different model.)
Those machines will continue to do that compete for renewable energy with demonstrably more essential needs, such as keeping the electricity in people’s homes. And if cryptocurrencies increase electricity demand beyond available renewable resources, utilities could turn to fossil fuels. Therefore clean up energy sources and Increasing energy efficiency are two sides of the same coin when it comes to tackling climate change.
Regardless, the accord’s founders are optimistic about a greener future for bitcoin. “I’ve been talking to people from the bitcoin ecosystem, it’s a pretty straightforward pitch,” said Jesse Morris, chief commercial officer of the nonprofit Energy Web Foundation, which is leading the initiative. “If we can make bitcoin green, it will be much easier and less risky for other organizations to buy more Bitcoin.”
Bitcoin is still responsible for this more than half of the full cryptocurrency market cap. But it is facing competition from newer cryptocurrencies that have found ways to be greener. Other cryptocurrencies use different blockchain technology than bitcoin and therefore consume very little energy in comparison. For those cryptocurrencies, such as Ripple’s XRP, it is possible to run on renewable energy sources.
And while the cost of renewable energy has fallen dramatically, luring bitcoin miners to places with abundant renewable energy would likely require heavy subsidies to keep them from turning to cheaper, dirtier fuel sources, de Vries says. “Just the sound of that – it sounds really wrong,” he says. “Why would you want to subsidize an industry that uses energy just because it was set up to waste resources?”
However, the new crypto accord is “not about getting together and asking for a subsidy in any way,” says Morris. “We just want to get everyone together and start the action here.” Many blockchains, such as bitcoin, are designed as a decentralized system without top-down surveillance. So getting everyone on board, even within a single blockchain, is going to be a daunting task.
The goals of the agreement must be fleshed out and finalized by the time of a major United Nations climate conference in November. But Morris admits that the original plans pursue grand ambitions rather than fine detail. “So many of these other decarbonisation efforts are very much thinking about their actions,” says Morris. “While in Crypto, because it’s kind of like the Wild West, it’s about paving our way into a new way of thinking.”