House members pushed back on crypto CEOs' assertion that bitcoin's energy consumption is actually a "feature not a bug."
For years, cryptocurrency has rivaled entire nations in terms of energy use, and US lawmakers are just now starting to investigate how crypto mining operations could be undermining global efforts to combat climate change.
This question was the subject of a House Energy and Commerce subcommittee hearing on Thursday that broadly examined the carbon footprint of cryptocurrencies like bitcoin and ethereum. The panel addressed a growing refrain that certain types of crypto transactions are catastrophically energy intensive and are extending the lifetime of fossil fuel resources. Committee members also questioned some of the promises made by crypto boosters, such as the claim that miners can actually help stabilize energy grids.
“Our focus now needs to be reducing carbon emissions overall, and increasing the share of green energy on the grid,” subcommittee Chair Rep. Diana DeGette said during introductory remarks. While the unique demands of crypto “present potential benefits,” DeGette continued, “it’s important to understand the degree to which this is actually being done.”
The hearing marks one of the few times that lawmakers have discussed crypto’s climate implications on a bipartisan stage. Last year, six crypto company executives testified before the House Financial Services Committee; one of those CEOs, Bitfury’s Brian Brooks, appeared again on Thursday as a panel witness alongside other crypto CEOs and former government officials.
“Crypto’s energy consumption is a feature, not a bug,” said witness John Belizaire, CEO of data center developer Soluna Computing, claiming that “the narrative of [crypto’s] threat to the grid is wrong.”
The crypto CEOs on the panel unanimously testified that mining operations can incentivize the production of clean, renewable energy. This approach is currently playing out in Texas, where crypto businesses, with the blessing of Sen. Ted Cruz, are flooding the state’s power grid in exchange for renewable energy support. As part of these deals, crypto operations have been agreeing to voluntarily power down when energy demands are at their highest.
But whether that approach is sustainable or even realistic is up for question. Witness Steve Wright, former CEO of a consumer-owned power utility in Chelan County, Washington, encountered similar promises in 2014 when crypto miners flocked to the area due to low electricity rates and the availability of high-speed internet. While the “ability to modulate usage would be valuable,” Wright said, “Chelan did not receive serious modulation offers — maybe because of the desire to run [operations] continuously due to the short lifetime of mining machines.”
Committee members stressed concerns that despite these possibilities, miners are still incentivized to use cheap, dirty energy over sustainable power, noting the recent example of bitcoin miners resuscitating coal power plants in Venango County, Pennsylvania.
For years, researchers studying the environmental effects of cryptocurrency have warned of its ability to accelerate ecological decline. Scientists writing for the publication Nature theorized that continued bitcoin usage, if mirroring the growth rates of other broadly adopted technologies, could produce enough emissions to raise global temperatures by 2 degrees Celsius within the next two decades. (The goal of the Paris Accords is to limit global warming to well below 1.5 degrees Celsius compared to preindustrial levels.)
“To achieve these [climate] goals we cannot bring retired fossil fuel plants back online in support of [energy intensive crypto mining],” said Rep. Frank Pallone, chair of the House Energy and Commerce Committee.
At the core of regulatory concerns are “proof of work” (PoW) algorithms used by currencies such as bitcoin and ethereum to mine new tokens and validate transactions. Because PoW involves miners competing to correctly solve a mathematical puzzle in exchange for newly minted coins, it can demand huge amounts of computing power. “This system is inherently inefficient,” said Claudia Herbert, a PhD candidate at the University of California, Berkeley who studies carbon markets and the emerging overlap with cryptocurrency projects.
According to Digiconomist, a digital trends platform that maintains a Bitcoin Energy Consumption Index, bitcoin consumes 204.50 terawatt-hours of electricity annually, comparable to the power consumption of Thailand, and boasts a carbon footprint equaling that of Kuwait. Much of that energy use is concentrated in the US, which accounted for roughly 35% of the world’s bitcoin mining last year — the highest share for any single country, according to Cambridge University. Digiconomist’s consumption index for ethereum, the second-largest cryptocurrency behind bitcoin, estimates that its electrical usage is equal to that of the Netherlands, and that its carbon footprint is roughly the size of Sweden.
PoW “needs to be intensely regulated,” said Zane Griffin Talley Cooper, a doctoral candidate at the University of Pennsylvania who has researched the energy costs of crypto in places like Iceland and Greenland.
Alternatively, the committee’s memo cited “proof of stake” (PoS) algorithms as evidence that some mechanisms “can provide secure, trusted transaction infrastructure without the same energy intensity as popular [proof of work] blockchains.” By comparison, PoS demands fewer computing resources by selecting who gets to validate a transaction based on the amount of crypto they’ve put up as collateral. Ethereum has said it will transition to PoS this year, noting its “better energy efficiency.”
While the US contemplates how to lower crypto’s energy consumption, other countries are actively focusing on reining in mining, in part due to environmental and energy concerns. In 2021, China enacted a ban on all bitcoin transactions after having mined two-thirds of the world’s bitcoins the year prior. Neighboring countries like Kazakhstan saw the cascading effects of China’s crackdown as mining operations flooded their borders and energy grid, taking advantage of empty warehouses and low electricity costs. Swedish regulators are now calling for a ban on PoW mining throughout the European Union.
At the hearing, no committee member suggested a similar ban. Some instead hinted at potential solutions like legislation requiring crypto companies to use a certain mix of renewable fuels, but members mostly emphasized their desire to make space for blockchain technologies while also prioritizing US climate goals or energy interests.
“While the industry has matured and there are now responsible actors in this space, we should be ready to collaborate and encourage innovation and investment in cleaner renewable energy,” Pallone said.
BuzzFeed
