In March of 2022, President Biden signed an executive order ensuring the responsible development of digital assets—AKA crypto-assets. This was done in an effort to support the United States’ new climate change objectives. But what, exactly, are crypto-assets?
Crypto-assets are digital assets that are implemented using cryptographic techniques like Bitcoin and other cryptocurrencies/digital currencies. They have a total current global market capitalization of nearly $1 trillion. The use of crypto-assets is expanding and it is expected to continually grow over the next few years.
However, some crypto-asset technologies require a considerable amount of electricity for asset generation, ownership, and exchange. Electricity usage from digital assets is seemingly contributing to GHG emissions and additional pollution.
Because of this, the U.S. government has a responsibility to:
- Ensure electric grid stability
- Enable a clean energy future
- Protect communities from pollution & climate change impacts.
Once the executive order (14067) was in place, federal agencies were directed to examine the connections between crypto-assets and pollution. They also looked at the impacts these technologies have on the environment.
In their collective findings, the White House Office of Science and Technology Policy & other federal agencies, answered four key questions:
- What are the implications of digital assets for energy usage and management? This includes things like grid reliability, energy efficiency standards and incentives, and the sources of energy supply.
Crypto-assets use a significant amount of electricity. From 2018 to 2022, annualized electricity from global crypto-assets grew rapidly, with estimates of electricity usage doubling to quadrupling. Electricity usage varies substantially with different crypto-asset technologies.
- What is the scale of (climate, energy, and environmental) impacts of digital assets relative to other energy uses. What innovations and policies are needed in the underlying data to enable robust comparisons?
The top cryptocurrencies by market cap emitted around 140 million metric tons of carbon dioxide last year. Or about 0.3% of global annual GHG emissions.
Crypto-asset activity in the United States is estimated to result in approximately 25 to 50 Mt CO2/y. Which is 0.4% to 0.8% of total U.S. GHG emissions. Similar to emissions from diesel fuel used in railroads in the United States.
Crypto-asset mining operations also cause local noise and water impacts. This can stem from:
- Electronic waste
- Other pollution from any direct usage of fossil-fired electricity
- Additional air
- Waste impacts associated with all grid electricity usage
These local impacts can exacerbate environmental justice issues for underserved communities.
- What are the potential uses of blockchain technology that could support climate monitoring or mitigating technologies?
There is potential for blockchain technologies to play a role in environmental markets. Distributed ledger technologies (DLT) could potentially enable distributed energy resource coordination, as well as broader supply chain management. To help the United States meet its climate change commitments, DLT must be used to reduce greenhouse gas emissions.
- What key policies, innovations, research, and development are needed to reduce the climate, energy, and environmental impacts of digital assets?
The United States needs to reduce its GHG emissions by 50% to 52% by 2030 to meet its climate objectives. There will also need to be a carbon pollution-free electricity system by 2035. As well as a net-zero emissions economy no later than 2050.
Crypto-asset policy during the transition to clean energy should be focused on several objectives. These include:
- Reducing GHG emissions
- Avoiding operations that will increase the cost of electricity generation to consumers
- Avoiding operations that reduce the reliability of electric grids.
- Avoiding negative impacts to equity, communities, and the local environment.
By answering these important questions, federal agencies could determine potential recommendations to assist the US in meeting its climate change objectives.
Recommendations and Conclusions
To ensure the responsible development of digital assets, recommendations include the following action items:
- Minimize GHG emissions, environmental justice impacts, and other local impacts from crypto-assets.
- Ensure energy reliability.
- Obtain data to understand, monitor, and mitigate impacts.
- Advance energy efficiency standards.
- Encourage transparency and improvements in environmental performance.
- Further research to improve understanding and innovation.
Overall, the recommendations aim to resolve data gaps, manage electricity demands, reduce GHG emissions, reduce electronic waste and pollution. It supports a clean energy transition that equitably benefits communities across the country. It also addresses the longstanding concerns of overburdened and underserved communities.
What’s to Become of Our Climate and Crypto-Assets?
Moving forward, research and development should be prioritized. The solutions sought should emphasize innovations in next-generation digital asset technologies that help advance our climate goals.
It’s evident that there is a direct correlation between crypto-assets and an increase in electricity usage. In turn, this produces a large amount of harmful byproducts within our communities. It is critically important that clean energy powers this demand from new sources.
For additional information, view the full report released by the Office of Science and Technology Policy.
Citation: OSTP (2022). Climate and Energy Implications of Crypto-Assets in the United States. White House Office of Science and Technology Policy. Washington, D.C. September 8, 2022.