Monday, June 7th 2021, 9:41 am - The billionaire's recent criticism of bitcoin has drawn attention to the cryptocurrency craze's intense energy use, and accompanying CO2 emissions.
It’s not often that a single person can throw entire financial markets into a tailspin, but earlier this month, Tesla CEO Elon Musk managed it with a single Tweet.
The electric vehicle magnate announced on Twitter that Tesla would no longer accept bitcoin as payment, due to concerns over emissions from the energy-intensive cryptocurrency mining process. In the days that followed, bitcoin and other cryptocurrencies lost more than $1 trillion in market value, a scant two months after crossing the trillion-dollar threshold for the first time.
Musk can move the markets in the other direction as well: another tweet this past week referencing discussions with crypto-miners over energy use nudged bitcoin upward a hopeful 4 per cent.
As dramatic as this whole affair has been, Musk’s maneuvering over the past few weeks has highlighted two huge drawbacks of cryptocurrency: its colossal energy use, and, depending on where that energy comes from, its CO2 emissions.
No one can hold a bitcoin in their hand. Rather, it’s a purely digital currency, generated by “miners,” who use powerful computers to solve complex mathematical problems, “earning” units of cryptocurrency as a kind of reward, similar to a real-world miner finding a nugget after sifting through enough soil.
But those powerful computers are a gigantic power hog, outstripping sovereign nations in total energy use. As of May 28th, the University of Cambridge’s online tracker said bitcoin alone accounted for around 114 TWh — slightly more than the Netherlands, slightly less than the United Arab Emirates, and a bit more than a fifth of Canada’s consumption.
The degree to which that translates into CO2 emissions depends on the source of energy. A 2018 study found four major cryptocurrencies pumped 13 megatonnes of CO2 into the atmosphere from January 1st, 2016, to June 30th, 2018. That amount has certainly increased since then, and China alone is expected to produce 10 times that level of crypto-mining-related emissions by 2024, according to a study released in April.
Burgeoning cryptocurrencies such as bitcoin are gaining more attention due to their excessive energy use, and concurrent CO2 emissions. (André François McKenzie/Unsplash)
LESSONS FROM QUEBEC
Crypto-miners don’t turn their noses up at Canada as a location for their operations, but the emissions problem is lessened here, largely due to Canada’s overwhelmingly green grid, more than 80 per cent of which is made up of renewable sources, led by hydro and nuclear.
As crypto-mining expands, there’s even evidence that the firms behind it are actively seeking to bid for access to new power capacity from renewable sources: in April, two B.C.-based bitcoin mining companies announced plans for a joint subsidiary in Alberta that would secure 20MW of the 600MW of new wind power slated to come online in 2022 in the province.
On the other end of the country, Quebec is becoming something of an old hand of dealing with crypto-miners. Currently, some 90 such companies operate in the province, according to Hydro Quebec, which says the sector consumed around 1.1 TWh in 2020. In December, crypto-miners’ energy use was the equivalent of 65,000 homes.
Bitcoin hold concept. Cryptocurrency stored in the ground - saving symbol. (Velishchuk. iStock / Getty Images Plus)
Hydro Quebec spokesman Jonathan Côté told The Weather Network the province doesn’t actively court crypto-miners, and doesn’t really need to.
“This industry already has natural advantages of setting up in Quebec, as the rates are competitive and the average temperature is colder than in many other areas, lowering cooling costs and/or extending their hardware’s useful life,” Côté said, adding the province’s overwhelming use of hydroelectricity also sidesteps emissions questions.
Energy-intensive as they are, however, Hydro Quebec does treat crypto-miners differently from other power customers.
In 2019, Hydro Quebec offered a fixed block of 300 MW to would-be crypto-miners, but only managed to attract five customers for projects totalling 32.6 MW. The province’s energy regulator is currently holding public hearings to figure out how to handle the unassigned portion, but in the meantime, new crypto projects are subject to a “disincentive” rate of 15 cents per KWh. As well, companies in the sector are asked to lower their energy consumption by 95 per cent up to 300 hours per winter, to better manage peaks during cold weather.
“We are not concerned about the energy consumption of this sector, but we have always been prudent and have taken measures to ensure that we can offer electricity to this industry within the block of energy available at a low cost for consumption here in Québec (called the heritage pool), without having to resort to extra energy purchases, which could have driven up the rates for all customers in Quebec,” Côté says.
Thumbnail credit: Westend61. Getty Images