The Virtual Coal in Your Stocking
Jessica Bell (Deputy Director) / Liz Moran (New York Policy Advocate, Earthjustice) / December 16, 2021
If you are thinking about holiday gifts this month, be careful about cryptocurrency mined with coal. Cryptocurrency is a virtual currency that has been getting increasing levels of negative attention due to environmental harms associated with how it is “mined.”
Cryptocurrency isn’t mined like gold or other minerals - in fact, the most common method uses computers. Environmental concerns particularly lie with the “proof of work” cryptocurrency mining method. This is currently the most commonly used method and is used with popular currencies, such as Bitcoin. This method requires “miners” to complete cryptographic puzzles to claim a blockchain. Completing those puzzles and keeping others from claiming the blockchain requires having more computing power than a competitor, and so this method is incredibly energy intensive. Due to the finite nature of Bitcoin, it was designed so that the more “miners” there are, the harder and more energy intensive the puzzles become. Estimates put global annual energy use for Bitcoin at almost three times that of Amazon, Apple, Facebook, Google, and Microsoft combined, or approximately the same amount that the state of Washington uses in a year.
Not only does this electricity usage create climate and air pollution, but it can also affect the makeup of the power sector, as fossil fuel plants are kept online or even restarted specifically to support cryptocurrency mining. The Greenidge Generating Station, for example, is a former coal plant that was purchased by a private equity firm and converted to run on natural gas as a peaker plant. Changing economic conditions decreased demand for the plant as an electricity source, so the business model pivoted to cryptocurrency mining fueled by the gas generation. The New York State Department of Environmental Conservation is currently considering a renewal of Greenidge’s Clean Air Act permit and compliance with New York’s Climate Leadership and Community Protection Act, but that review remains pending (with a decision expected any day now).
The additional consumption of the mining can also drive up rates for electricity customers as demand grows. In response to that concern, the city of Plattsburgh, NY, had a temporary moratorium on cryptocurrency operations, and the city secured a rider from the New York Public Service Commission to ensure that residential customers were not saddled with higher costs due to the mining operations. Other locales will have to grapple with these rate and environmental impacts, as utilities and firms beyond New York are eyeing Bitcoin mining as a way to ensure their fossil generation is profitable.
And proof of work cryptocurrency mining can be so energy intensive that it threatens to make current plans for renewable growth insufficient to help decarbonize the grid. For example, Swedish officials recently explained that even where miners use renewable energy, extensive cryptocurrency mining could drive energy demand to outpace the growth in renewable energy needed to transition away from fossil fuels more broadly.
In addition to the harms associated with increased electricity consumption, the electronic waste from the extensive hardware needed for proof of work mining is staggering. One estimate is that generating one Bitcoin creates the same e-waste as throwing out two iPhones.
Beyond environmental issues, scams are also a concern. Bitcoin has been subject to state attorney general action to protect against fraud on the unregulated platforms.
There are other, less energy-intensive methods of mining cryptocurrency. For example, “proof of stake” is an alternate system of completing these transactions that utilizes over 99% less energy. Ultimately, the environmental and consumer impacts of proof of work cryptocurrency mining require scrutiny. So stay on the nice list this holiday season to avoid that virtual lump of coal.