The electricity generation required for cryptocurrency trading could jeopardize China’s commitment to carbon emissions.
A study published in the journal Nature said mining bitcoin runs the risk of hampering the country’s climate targets.
Bitcoin and other cryptocurrencies are based on “blockchain” technology, a transaction database shared with inputs that need to be verified and encrypted. The network is secured by so-called “miners” with bitcoins, which use high-powered computers to verify transactions and are offered as a reward. These computers also consume enormous amounts of electricity.
The study states that about 40% of China’s bitcoin mines are powered by coal, while the rest use renewable energy. However, the coal plants are so large that the study warns that they may weaken Beijing’s commitment to peak carbon emissions before 2030 and become carbon neutral by 2060.
The research revealed that China’s bitcoin mines would produce 130.5 million metric tons of carbon emissions by 2024 if not controlled. This amount is close to the annual greenhouse gas emissions of Italy or the oil-rich Saudi Arabia.
According to the study, Chinese companies with access to cheap electricity and hardware handled 78.89% of global Bitcoin blockchain transactions as of April 2020. This includes issuing new coins and tracking cryptocurrency transactions.
“Intense bitcoin blockchain operation in China could rapidly grow as a threat that could potentially weaken emissions reduction efforts,” said Wang Shouyang, co-author of the study from the Chinese Academy of Sciences.
Wang said the government should focus on upgrading the electricity grid to ensure a stable supply of renewable resources and said, “As energy prices in China’s clean energy regions are lower than in coal-based regions… miners will have more incentives to move to clean energy areas.”
The crypto mining industry is expected to use 0.6% of the world’s total electricity generation or more than Norway’s annual use this year, according to the University of Cambridge’s Bitcoin Electricity Consumption Index.
The price of one bitcoin increased fivefold last year, reaching a record high of over $ 61,000 in March and is currently hovering just under $ 60,000.
Given current profits, Wang said enforcing carbon taxes would not be enough to deter miners.
China banned the trading of cryptocurrencies in 2019 to prevent money laundering, but mining was allowed.