Crypto & Environment (ESG)
In this article, we will see more details about the correlation between bitcoin mining and the environment, but also what applies to it as a possible investment for an ESG portfolio.
As we already mentioned in our previous article about Crypto and Environmental, Social and Governance Criteria (ESG), environmental criteria examine the way in which a ‘company‘ operates, such as the use of energy and the levels of pollution from their operations.
Environmental aspects of Bitcoin (Overview):
- Bitcoin burdens the environment due to energy consumption, which comes from fossil fuels and the release of carbon dioxide into the environment.
- In recent years, a large percentage of the energy consumed for the mining of Bitcoin comes from renewable energy sources such as hydroelectric energy.
- The use of green products and technologies is constantly evolving and expanding.
- Many miners operate in geographical areas where the weather is conducive to renewable energy sources.
- By connecting the bitcoin network to renewable energy sources there is no waste energy.
In recent years, official research has shown that bitcoin energy consumption is perhaps equal to the higher electricity consumption of entire countries, but still makes up to 0.3% of energy consumption worldwide.
As is well known to all of us, or at least to those interested in cryptocurrencies and their environmental impact, there are strong concerns about the amount of energy consumed in cryptocurrency mining. These concerns are based on the reliance on a Proof-of-Work consensus model (such as Bitcoin) rather than Proof-of-stake or Proof-of-Authority consensus models.
One thing that needs to be clarified is that there are other cryptocurrencies that use “Proof-of-Work” to operate, such as Ethereum, which also creates similar environmental concerns, but not the same as bitcoin.
As we mentioned, bitcoin mining consumes huge amounts of energy, a big percentage of the consumed energy comes from fossil fuels, such as coal, that releases CO2 and has a significant impact on the environment and contributes to climate change. Today, the Bitcoin network uses around 105.70 TWh (last updated: 22 Oct 2021) of energy globally.
According to the Cambridge Bitcoin Electricity Consumption Index, the world average carbon emissions per unit of electricity consumed is 463 grams of CO2 emitted per kilowatt-hour while for global bitcoin mining is 418 grams.
Total Bitcoin Electricity consumption from January 2017 until October 2021.
Coal and other fossil fuels are now a major, but not the main, source of electricity worldwide, both for cryptocurrency mining and for other large industries. However, coal burning contributes significantly to climate change as a result of the carbon dioxide produced by this process.
Until recently, the majority of Bitcoin miners relied on China, where energy is heavily dependent on carbon. China recently banned bitcoin mining and set off a migration of miners around the globe seeking cheap sources of energy to run their miners. By 2020, China controlled more than 65% of the global processing power managed by the Bitcoin network. This was because there was plenty of cheap electricity from dirty power plants used by the miners. Recently, China has been officially banned from mining cryptocurrencies by government officials because of concerns about the financial risks they could pose, as well as the enormous amounts of energy consumption that were against China’s goal of being neutral by the 60th.
Bitcoin continues to be a resounding success as an asset and is particularly important for the cryptocurrency market, which automatically suggests that environmental concerns will continue to be the focus of attention of both environmentalists, investors and the public.
Bitcoin investors are increasingly interested in where and how cryptocurrency is mined because they refuse to buy a cryptocurrency that is created in a way that significantly burdens the environment and consumes excessive energy.
Bitcoin has the possibility to be extracted using renewable energy sources, such as wind, solar, hydroelectric, geothermal etc. Until recently, almost 56% (last updated: July 2021) of cryptocurrency mining was based on renewable energy. The ever-increasing number of coal miners aims to reduce CO2 emissions and meet investor requirements.
Miners have the ability to convert their credentials to ESG. With this change, they can go and emphasize the use of sustainable energy sources.
Regulators require the integration of sustainability issues into the governance and risk management practices of financial institutions. Organizations and companies need to reveal climate-related risks and opportunities are some of the recommendations in the TCFD report.
The European Union has recently adopted a Sustainable Financial Reporting Regulation (SDFR), which requires products to be classified in specific and environmentally friendly ways — ESG factors. Investors are increasingly focusing on the environmental and sustainable impact of the businesses in which they invest. ESGs are the focus of everyone’s attention. It is very important to balance the expectations of regulators and investors on these issues, which will bring a lot of controversy between them and public opinion.
- Products that support the ESG objectives in a binding manner.
- Products that invest heavily in sustainable or other ESG initiatives.
- Products that do not fall into any category.
Could it be greener?
Bitcoin mining uses a negligible amount of energy, but it is rapidly becoming more efficient and powered by more sustainable energy sources than any other country or industry.
Our main goal as GX Blocks Energy is to promote transparency in the use of energy and to accelerate sustainable mining both on a personal and corporate level globally.
GX Blocks provides Bitcoin Mining Contracts powered by Renewable Energy Sources and Smart Contracts. GX Blocks uses 100% green energy and removes the biggest drawback of bitcoin mining, which is the usage of electricity produced by coal.