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A global climate conference concluding today has sparked significant debate over a proposal to tax energy-intensive cryptocurrency mining.
The Global Solidarity Levies Task Force, co-led by Kenya, Barbados, and France, advocates for a $0.045/kWh tax on crypto mining electricity consumption, which could generate $5.2 billion annually for climate funding.
Global Climate Finance Gap and Crypto Mining’s Growing Carbon Footprint
The idea, supported by research from the International Monetary Fund (IMF), is to incentivize cleaner operations among miners while funding renewable energy initiatives in less affluent nations. While the proposed tax is still in its early stages, it signals a growing focus on regulating energy-intensive industries to address climate change.
G20 talks in Brazil have reached a breakthrough on climate finance, according to diplomatic sources, who say that the world’s 20 major economies have reached a consensus – but a fragile one https://t.co/z9es3EscmW pic.twitter.com/K8kYD3B7se
— Reuters (@Reuters) November 18, 2024
Bitcoin mining, a major contributor to global electricity consumption, uses as much energy annually as some mid-sized countries, making it a prime target for climate action.
Mining Bitcoin involves solving complex algorithms in data centers, requiring vast amounts of electricity.
Energy consumption metrics indicate that processing one Bitcoin transaction uses 919.95 kWh and 1,200 kWh of energy. For context, this consumption equates to three months of average German household usage or three years of per-capita energy use in Ghana.
The proposed levy aims to push miners toward renewable energy and more efficient hardware. If implemented, it could cut global emissions by 100 million tons annually—equivalent to Belgium’s current emissions—and increase miners’ electricity costs by up to 85%.
Some experts see this as a step toward internalizing the environmental costs of mining, compelling polluters to bear the expenses of their activities.
The report’s recommendations extend beyond crypto mining, also suggesting levies on billionaires, plastic production, and AI data centers.
However, significant hurdles remain in implementing a global crypto tax. Questions persist about enforcement mechanisms, revenue collection, and allocation.
Countries like Kazakhstan and the US have already tested crypto-specific levies.
In Kazakhstan, a 2022 tax on mining electricity generated $7 million in revenue.
Meanwhile, the Biden administration, through its Digital Asset Mining Energy (DAME) tax, has proposed a 30% tax on crypto miners’ electricity consumption.
Biden administration is proposing a 30% tax on electricity used by #bitcoin miners, even if you are off-grid using your own solar and wind generation. All of the reasons they provide are pretextual, their real reason is that they want to suppress Bitcoin and launch a CBDC. pic.twitter.com/juNHvO2NBx
— Pierre Rochard (@BitcoinPierre) March 12, 2024
However, political support for such measures is mixed, particularly in the US, where the incoming administration may oppose climate-focused levies.
