Bitcoin accounts for an alarming rate of global electricity consumption, 0.55% of global electricity consumption, according to new research from ESCP Business School reveals. Philip Mawusi Adiamah, MSc in Energy Management Student, found that the process of bringing new Bitcoin into circulation (mining) is extremely harmful for the environment due to the mechanism used to record transactions and track assets.
This is despite a different mechanism available which uses 99% less energy and is currently operated by the second largest cryptocurrency, Ethereum.
The data is interesting for insurers who want to cover crypto risks, as ESG and other compliance regulations mean that the underwriter, MGA or broker needs to check how damaging the Bitcoin, or other investment, might be in terms of energy consumption. Those who set up roadblocks, daub paint or physically attack the offices of insurers covering coal or oil might well begin to protest against insurers who cover high consumption crypto mining one day.
Bitcoin is currently at risk of damaging the environment due to the industry’s reliance on non-renewable energy sources and carbon emissions, while the price of renewable energy sources, such as solar, have dropped significantly in recent years.
The findings suggest that the Chinese government’s banning of this mining has been beneficial to the sector, driving some of the world’s largest coal-powered mining farms to regions with vast renewable energy resources, like North America and Iceland.
“According to the University of Cambridge Centre for Alternative Finance’s Bitcoin Electricity Consumption Index (BECI), Bitcoin currently consumes close to 110 Terawatt Hours per year, accounting for 0.55% of global electricity consumption. This is roughly equivalent to the annual electricity consumption of Pakistan and the Netherlands.” says Mr Adiamah.
He suggests that by using the different mechanism to mine its currency and by using renewable energy to run its plants, Bitcoin could lead the way in a new greener world.