How Can We Reduce the Climate Impact of Bitcoin Mining?

Bitcoin mining causes CO2 emissions and is therefore harmful to the climate. Anyone claiming otherwise is deluding themselves. However, things get more complicated when it comes to addressing the problem. What options do we have for action?

There are few debates as entrenched as the one over Bitcoin and the climate.

While one side—the Bitcoiners—like to proclaim that Bitcoin not only doesn’t harm the climate but even protects it, for example by promoting the expansion of renewable energy, the other side argues that Bitcoin would still harm the climate even if mined 100 percent with renewable energy, as this electricity would then be lacking elsewhere.

This divide appears unbridgeable because, as is often the case with entrenched positions, the debate serves as a proxy for something else. Bitcoiners love Bitcoin, no matter its impact on the climate, and Bitcoin critics oppose Bitcoin regardless of its effect on the environment. The real arguments are not examined on their own merits, but rather serve another purpose that has already been determined.

Staying with the facts

The fact remains that mining requires A LOT of electricity, and it is equally true that this electricity does not come exclusively from renewable sources. Even if only half—or just a third—of the electricity emits CO2, it still constitutes a huge climate burden.

Of course, one could argue that it’s not Bitcoin’s fault but misguided energy policy, such as fossil fuel subsidies and so on. One could also point out that Bitcoin mining can help to expand solar and wind power or burn landfill gas or flaring methane at oil drilling sites to reduce greenhouse gases.

All of this is not wrong—but it initially does nothing to change the fact that Bitcoin increases global CO2 emissions rather than reducing them.

Instead of trying to downplay the fossil footprint of Bitcoin, one should face the facts—and dare to ask whether and how Bitcoin’s CO2 emissions can be reduced.

Bitcoin’s Self-Regulation

To begin with, it should be understood that Bitcoin will very likely reduce its CO2 emissions on its own. This is, so to speak, programmed into the protocol.

Every four years, the amount of Bitcoin that miners receive per block is halved. Unless the price of Bitcoin doubles within this period, the amount of electricity miners spend per block—and thus the resulting CO2 emissions—will inevitably decrease.

It is possible that the Bitcoin price will continue to double for a while: perhaps reaching $200,000 at the next halving (2028), $400,000 at the one after (2032), and finally $800,000 in 2036. However, we’re already talking about price levels that would only be realistic if the US dollar undergoes massive inflation—which would also mean less electricity can be purchased per dollar.

Every regulatory measure aimed at reducing Bitcoin’s CO2 emissions should be considered in this temporal context: Over the next decade, Bitcoin will reduce its electricity consumption by itself.

But what if you don’t want to wait that long? What options are available then?

The usual approaches

There are numerous seemingly obvious approaches that can lead one astray.

The first would be to follow Greenpeace’s suggestion to change the code (“change the code, not the climate”). Ethereum, for instance, transitioned from proof-of-work miners to proof-of-stake (PoS) and reduced its energy consumption by more than 99%. Since Ethereum remained secure, and there are several other stable PoS coins, this might seem a logical path.

The second approach would be to ban Bitcoin mining. If mining does not take place, no CO2 emissions are produced. Left-wing political parties in the EU support this, Norway is currently seriously considering such a ban, Iceland has also thought about it, and China enacted it a few years ago. This approach repeats what was done with CFCs or incandescent bulbs, and what is long-term being considered for combustion engines.

A third approach would be to first make the environmental impact of cryptocurrencies transparent and then regulate exchanges or asset managers so that they cannot trade or include energy-intensive coins like Bitcoin in their portfolios. An Ethereum ETF is sustainable, a Bitcoin ETF is not.

Ineffective, harmful, expensive

The first two approaches are doomed to fail.

In a decentralized network like Bitcoin, you cannot enforce a code change; since the magic of proof-of-work—which anchors Bitcoin solidly in the physical world—is core to the Bitcoin mythos, there is virtually no chance of convincing the community and the market.

A local or national ban is also ineffective and can even be counterproductive. Bitcoin mining is a zero-sum game. If mining doesn’t occur in the EU, it simply moves elsewhere. If a country like Norway, which derives most of its electricity from renewable sources, bans mining, it not only fails to decrease CO2 emissions—it increases them, as miners relocate to places where electricity comes from fossil fuels.

The textbook example of this effect is China. After the country banned mining in 2021, swarms of miners moved from large hydroelectric dams to coal power plants in Kazakhstan—massively increasing CO2 emissions. You would think a modern nation like Norway would learn from history; bans are purely symbolic policies, potentially with harmful consequences.

The third approach fares a bit better. It has the potential to depress the price of Bitcoin. If the cryptocurrency cannot be traded on exchanges or included in ETFs, demand may decrease, which could lower the price. However, there’s a risk that exchanges under such regulation might go bankrupt (for example in the EU), and people would simply turn to platforms in third countries. This could turn the approach into an expensive way to achieve nothing.

None of these options are truly convincing so far. So what if the goal is genuinely to benefit the climate, rather than just make a political point?

Real climate protection

The answer is, in essence, obvious. Miners produce “hashes,” i.e., the outputs of a cryptographic operation. Each hash is either climate-neutral if generated by renewable energy or climate-damaging if generated by fossil fuels.

If you want Bitcoin to emit less CO2, you should strive to increase the share of clean hashes. In other words, do the opposite of what Norway plans, which, through its intended mining ban, would actually increase the share of dirty hashes.

The only truly effective answer to the question of how to make Bitcoin less harmful to the climate sounds paradoxical: Mining must be promoted. But that’s the way it is. The only margin for action European policymakers actually have is to maximize the number of hashes produced by green European energy.

If the EU is serious about climate protection, it should sharply criticize Norway for its plan to ban mining and condemn it for what it really is—an act of deliberate climate harm.

The EU—and its member states—should develop support programs for green mining. They should subsidize every miner who shuts down their farm at a US or Kazakh coal power plant and rebuilds it at a wind farm in Brandenburg, for example. To support mining using variable energy sources like solar and wind, the EU should compensate miners for their losses during nights and lulls when their machines have to stand idle.

When good deeds are also lucrative

That sounds absurd and may be difficult for many to accept. Climate protection—by subsidizing “wasteful” electricity use instead of incentives for electricity savings?

But realistically, this is the only available course of action if one truly wants to make a difference. Those who care about “doing the right thing” or having the “right motives” instead of focusing on the right outcome will resist this. Those who are outcome-oriented, however, cannot help but demand subsidies for green mining.

As a bonus, supporting green mining will have a very pleasant side effect. As the block reward decreases over time and Bitcoin’s electricity usage falls with it, generation capacity is freed up. The public partly co-financed this capacity, through mining subsidies—but only partly. The other part comes from the Bitcoin reward.

An economy that supports green mining and thereby does the right thing for the climate receives, as a reward, partial financing for the expansion of its power supply. Seldom do “the right thing” and “the lucrative thing” align so well. But why is it so hard to recognize this—especially for those who supposedly care so much about climate protection?