UN CLIMATE CONFERENCE SPARKS CONTROVERSIAL PROPOSAL FOR CRYPTO MINING 'CLIMATE TAX' TO RAISE BILLIONS FOR CLIMATE ACTION
At a recent United Nations climate conference, the spotlight was trained on cryptocurrency mining as a potential source of funds for climate action. A novel proposal to implement a tax on the energy-intensive process could incentivize crypto miners to adopt cleaner operations and raise substantial funds for climate initiatives, particularly in less wealthy countries.
The proposal, which would charge $0.045 per kilowatt-hour (kWh) of electricity consumed by cryptocurrency mining, was presented by the Global Solidarity Levies Task Force—an entity inaugurated last year with the original intention of imposing taxes on heavily polluting industries. Now, in line with a broader perspective on environmental impact, its focus has expanded to also include potential levies on the extreme wealth of billionaires, plastic production, and cryptocurrency mining.
Such a tax could, according to the task force's calculations, generate an impressive $5.2 billion annually. This significant sum may prove instrumental in helping less affluent nations transition to cleaner, renewable sources of energy—a crucial step in reducing the carbon footprint of developing nations. At the same time, with Bitcoin mining garnering criticism for using more electricity annually than many individual countries, the tax could act as a much-needed check and balance on crypto miners.
One might ask how such a tax aligns with the energy consumption associated with Bitcoin. The International Monetary Fund (IMF) cites that verifying a single Bitcoin transaction consumes as much electricity as an individual in Ghana would use in three years or that a German might use in three months. Proponents of the tax argue that it aims to increase the cost of pollution, thereby encouraging polluters to reflect upon and account for the external costs they impose on others. This could potentially spur a move towards more energy-efficient hardware or less electricity-intensive methods of mining.
The concept of a cryptocurrency tax is not entirely novel. Kazakhstan, home to a substantial Bitcoin mining industry, implemented a similar tax in 2022, netting around $7 million. Similarly, the Biden administration in the US has put forward a proposal for a 30 percent tax on the electricity use of cryptocurrency miners.
The task force's objective is to present concrete proposals by the IMF and World Bank meetings due next April. The subsequent challenge would be to garner enough support to implement the levies at the next significant UN climate summit in 2025.
Ultimately, the proposal is an innovative step towards leveraging the cryptomarket for positive climate action, shifting the onus onto major polluters to consider the broader environmental fallout from their operations. With adequate support and effective implementation, such measures could significantly aid the global transition toward sustainable energy, fostering a healthier planet for future generations. It also establishes a precedent that even emerging industries, like cryptocurrency, can and should do their part in combating climate change.