The Intergovernmental Panel on Climate Change (IPCC), a United Nations entity tasked with analyzing climate change science, has published a new report last week in which it cited cryptocurrency as one of the technologies that might require more energy and might cause future climate risks.
According to the IPCC report, cryptocurrencies, with its reliance on data centers and information technology related to blockchain, might become a major global source of carbon dioxide emissions.
Among all cryptocurrencies, Bitcoin and Ethereum are the two most widely traded. The process of creating new cryptocurrencies is known as mining, which consumes a large amount of electricity. According to the Bitcoin Energy Consumption Index, Bitcoin mining uses 204.5 TWh of electricity per year and emits about 114 Mts of carbon dioxide, which is equivalent to the emissions of the Czech Republic, whereas Ethereum uses 111.4 TWh of power and emits 62.12 Mts of carbon dioxide, which is equivalent to the emissions of Belarus.
“The energy requirements of cryptocurrencies is also a growing concern, although considerable uncertainty exists surrounding the energy use of their underlying blockchain infrastructure,” said the report.
Along with crypto and blockchain, the IPCC addressed the energy requirements for artificial intelligence. The group pointed out that, depending on how they were managed, all technologies had the potential to reduce as well as increase emissions.
“In the scenarios we assessed, limiting warming to around 1.5°C (2.7°F) requires global greenhouse gas emissions to peak before 2025 at the latest, and be reduced by 43% by 2030; at the same time, methane would also need to be reduced by about a third,” said the IPCC. “Even if we do this, it is almost inevitable that we will temporarily exceed this temperature threshold but could return to below it by the end of the century.”
As the effects of climate crisis become more severe around the world and the need to reduce emissions intensifies, many regulators and lawmakers have established crypto and blockchain targets.
However, CoinShares, a digital asset management firm, pointed out in January that the carbon dioxide emissions generated by Bitcoin mining reached 49 Mts in 2021, accounting for 0.08% of world carbon dioxide emissions.