Sweden demands a ban on crypto-mining to protect the climate
Swedish government officials are asking the European Union (EU) to introduce a general ban on energy-intensive mining of cryptocurrencies, so that the EU can deliver on its climate goals. The call was dialed an open letter was signed last week by the directors of the Swedish Environmental Protection Agency and Finansinspektionen.
In the letter, Swedish officials claim that the actual benefits of cryptocurrency are doubtful and the “enormous” energy consumption during mining and transfer of these currencies outweighs the benefits. They specifically question the so-called “proof of work” verification protocols where crypto users are asked to solve very complex computer problems.
“Everyone who wants to break assets competes to solve an encryption puzzle, and the winner gets new crypto assets as a reward. The only way to solve the puzzle is by repeatedly running computer programs that guess the correct answer. When a large number of crypto manufacturers’ computers work at the same time, demand electricity in height, ”they wrote.
The proof of work is a form of cryptographic proof where one party (the miner) proves to others that a specific computational effort has been made to solve a puzzle. The higher the price of cryptocurrency, the more people are interested in participating in the competition. This automatically increases the difficulty of the puzzle required, which means that more computational effort (and then more electricity) will be required to solve it – accelerating greenhouse gas emissions (GEI) in the countries where cryptocurrency mining takes place. Most of the crypto production takes place in countries with low energy prices and an energy matrix largely based on fossil fuels. This was especially the case with China, which used to stand for two-thirds of Bitcoin mining worldwide. But this has now changed, as the government launched a crackdown on the cryptocurrency industry, which drives companies abroad.
The scale of the problem should not be underestimated. In one year, the Bitcoin network, one of the most widely used cryptocurrencies, consumes 120 terawatt hours (TWh) of energy – equivalent to the entire Netherlands’ energy use, based on estimates from Cambridge Universitys Bitcoin Electricity Consumption Index (CBECI). If it were a country, Bitcoin would rank 32nd in the world after energy consumption, and it is not the only cryptocurrency.
The renewable device
In the letter, Swedish heads of government said that crypto producers are now turning their attention to the Nordic countries, as taxes for mining-related activities are favorable and there is good access to cheaper renewable energy. In Sweden, electricity consumption for Bitcoin mining now amounts to 1 TWh annually, which corresponds to electricity for 200,000 Swedish households.
Although it is much better for companies to mine crypto with renewable energy sources instead of fossil fuels, the directors said that there is a risk that there will not be enough renewable energy to cover the climate change countries must do. Clean energy is needed “in a hurry” to develop fossil-free steel, to manufacture batteries on a large scale and to electrify the transport sector, it is said.
In their letter, the directors said that EU countries can also introduce a tax on energy-intensive production of bitcoin and communicate more broadly about the climate problems related to cryptocurrencies. Still, these alternatives are unlikely to address the “environmental damage we see” from crypto mines today – and instead require a major ban.
Earlier this year, the EU adopted new and more ambitious climate goals to tackle climate change, with a promise to make it legally binding soon. The legislation, agreed between the Member States and the European Parliament, states that the bloc will reduce its emissions by at least 55% by 2030. Nevertheless, Parliament had initially asked for a 60% reduction.