IMF Executives Propose 85% Increase in Electricity Costs for Crypto Mining

Despite several reports indicating that more than 50% of the energy used in Bitcoin mining is sourced from clean energy (such as a report from Cambridge University), two International Monetary Fund (IMF) executives have proposed an 85% increase in electricity costs for crypto mining operations.

The primary objective of this proposed substantial increase in costs is to reduce CO₂ emissions “in line with global targets.”

This proposal was published on the official IMF blog and also included strong statements regarding Artificial Intelligence: “What do crypto assets and artificial intelligence have in common? Both are power-hungry.” the publication notes.

According to the executives, one of the benefits of this proposal would be an increase in global annual government revenues by $5.2 billion. Additionally, it would reduce emissions by 100 million tons per year, equivalent to the emissions of a country like Belgium.

The proponents of this measure, Shafik Hebous and Nate Vernon-Lin, also mentioned that this tax would raise electricity costs by $0.89 per kilowatt-hour.

It’s important to highlight that this is not the first time the IMF has referenced the impact of Bitcoin mining, as it previously concluded that Bitcoin mining could account for 0.7% of global emissions.

IMF’s Objectives Behind Raising Bitcoin Mining Tariffs

The IMF asserts that it aligns with the global goal of limiting global warming to 2 degrees Celsius. To achieve this, countries would need to introduce additional measures, including raising the price of carbon to $85 per ton by 2030.

Specifically, this increase in electricity costs could incentivize crypto miners and AI data centers to adopt more energy-efficient equipment and reduce overall consumption, according to the two executives.

However, they also acknowledged the need for global coordination, as implementing these measures in one country could drive miners to relocate to another country with “lower standards.”

This proposal would also encourage AI applications to use energy more efficiently. Furthermore, it would promote the development of applications with positive social impacts that address environmental damage.

IMF: The Environmental Footprint of Bitcoin

According to this publication, a single Bitcoin transaction uses approximately the same amount of electricity as an average person in Pakistan consumes in three years. In comparison, ChatGPT requires 10 times the energy of a Google search.

Moreover, the executives also proposed a tax on the energy consumption of AI data centers, ranging from $0.032 to $0.052 per kilowatt-hour, as another measure to reduce pollution.

The executives suggest that this tax could generate up to $18 billion in revenue for governments.

In conclusion, to provide a comparison of these figures, it is worth noting that Amazon reported a carbon footprint of 71.54 million metric tons of CO₂ in 2021, compared to 65.4 million metric tons from Bitcoin mining.

Amid this high energy consumption, smaller Bitcoin miners are struggling to maintain profitability after the April halving event. Consequently, a measure of this nature could significantly impact or even drive a large segment of small miners out of the market.