Want to help save the planet? Mine bitcoin
In a twist worthy of a John Le Carré novel, what I and other environmentalists were led to believe was the villain, turns out to be the good guy
Andrew Angelov/Shutterstock modified by Blockworks
The earth is heating up — that’s a non-negotiable fact.
And the best way to slow down the impending environmental disaster, according to the UN, is to urgently reduce the amount of methane emissions. And the best way to urgently reduce methane, funnily enough, just might be bitcoin mining.
Despite what you may have heard about the harmful effects of bitcoin mining on the environment, the cryptocurrency mining industry could actually be a ready-made way to reduce methane on a large scale.
Yes — in a twist worthy of a John Le Carré novel, what I and other environmentalists were led to believe was the villain, turns out to be the good guy.
It is my opinion as a climate tech investor that if you’re a manager of an ESG fund or a member of an ESG investment committee, failure to consider Bitcoin in the mix is gross negligence of your ESG obligations.
In a nutshell, Bitcoin offers a financial incentive to capture methane from landfills. Not only does Bitcoin mining require the large amount of energy that landfills can supply, this solution could also lead to updated infrastructure at landfills that in theory could benefit other uses of electricity.
My assessment of Bitcoin’s potential environmental impact for good is based on a two-month solid due diligence on bitcoin mining, and it’s only grown stronger during 2023 as I’ve seen new energy and environmental applications.
First, some context. According to a recent PwC report, there are 23 trillion ESG investments, much of which cannot deploy into Bitcoin because of the perception that Bitcoin doesn’t tick the ESG box. Nine out of ten asset managers believe integrating ESG into their investment strategy will improve overall returns, but demand is outstripping supply of good ESG propositions.
In recent months, endorsements by KPMG, the Institute of Risk Management, Bloomberg Intelligence and a peer-reviewed academic study have brought the spotlight on the true impact of Bitcoin as an enabler of renewable transition — and a key force in methane mitigation.
Two years ago, I was hearing very differing views on whether Bitcoin was good or bad for the environment, both in my role in the environmental movement and from my friends in the Bitcoin community.
I resolved this discrepancy by doing my own analysis. What I found surprised me: There were 41 bitcoin mining companies that were either exclusively or almost exclusively using renewable energy. I found that the argument “Bitcoin revives old fossil fuel plants” was not supported by Security Commission filings. Instead, these filings clearly showed that the one gas plant that was claimed to have been revived for bitcoin mining was in fact opened to provide additional power to the grid. It only started bitcoin mining three years later.
I found that the claims “Bitcoin’s major energy source is coal,” “Bitcoin’s emissions are 65 MT CO2e/year and rising,” “Bitcoin’s emission intensity is increasing” and “Bitcoin is struggling to go green” were all based upon a single bitcoin mining model from Cambridge University.
However, on close inspection, I learned that this model measured less than half of hash rate, did not factor in either offgrid mining or flare-gas mitigation, and had not updated its dataset since January 2022 (when fossil-fuel intensive Kazakhstan represented 13.2% of global hash rate, today it is 0.73%).
Once those three exclusions were factored in, the picture changed completely, and all four claims from Cambridge were invalidated: Bitcoin mining was revealed to be mainly powered by hydro, 52.6% sustainable-energy powered, dropping in emission intensity markedly, and emitting 34 MT CO2e — a figure which has not increased over the last four-year cycle.
Now we get to the issue of methane reduction — methane is 84 times more warming than CO2 over a 20-year period, and it’s growing at a parabolic rate.
How do you make mitigating methane from landfills profitable? Well, where possible, the best solution is to capture and scrub that landfill gas, then send it to a generator to create electricity — which removes almost 100% of methane emissions. You’re turning pollution into an asset.
Problem is, many landfills cannot sell that electricity back to the grid. Either the grid upgrade costs too much, or government policies prevent it.
Nuno Barbosa, CEO of Landfill Gas Carbon Consulting company Unicarbo, recently said to me that “50% of the world’s landfills have no option to sell their power back to the grid, but if they had an onsite customer, that would change everything.”
Who could be that user? Landfills are not popular places to set up a business. Furthermore, why would anyone invest millions in power generation, unless electricity is most of your running costs? This is where bitcoin mining company’s huge use of electricity — 80% of their operating budget and once maligned by environmentalists — proves to be its biggest environmental asset.
Unless we make methane mitigation profitable, the methane mitigation our planet needs won’t happen and our climate efforts will be in vain. Bitcoin mining is already the most sustainable-energy powered major global industry, and it’s in a unique position to make methane mitigation profitable for half of the world’s landfills.
Taking all these facts into consideration, my opinion is that Bitcoin is the most important ESG asset of our time — and the fiduciary duty of every ESG fund manager and investment committee to evaluate.
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