Paper: Bitcoin’s Carbon Footprint Revisited
Bitcoin’s Carbon Footprint Revisited: Proof of Work Mining for Renewable Energy Expansion
by Juan Ignacio Ibañez and Alexander Freier
Abstract
While blockchain and distributed ledger technology offer immense potential for applications in transparency, security, efficiency, censorship resistance, and more, they have been criticized due to the energy-intensive nature of the proof of work consensus algorithm, particularly in the context of Bitcoin mining. We systematically explore the state-of-the-art regarding the relationship between Bitcoin mining and grid decarbonization. We specifically focus on the role of flexible load response through proof of work mining as a potential contributor to renewable energy penetration and net decarbonization of the energy grid. The existing literature has not comprehensively examined this area, leading to conflicting views. We address the gap, analyzing the capabilities and limitations of Bitcoin mining in providing flexible load response services. Our findings show that renewable-based mining could potentially drive a net-decarbonizing effect on energy grids, although key adaptations in mining practices are needed to fully realize this potential. Overall, the paper suggests a re-evaluation of the environmental impact of Bitcoin mining, highlighting its potential role as a facilitator for renewable energy expansion, and decarbonization more broadly.
Introduction
The energy consumption of the Bitcoin blockchain has raised concerns about its greenhouse gas (GHG) emissions and “social license to operate” [1,2,3,4,5]. In turn, this has sparked debate. While advocates argue that a higher energy consumption is associated with enhanced protocol security [3], critics express concern over the significant carbon footprint, and a fear that it may grow further with additional Bitcoin adoption.
Nevertheless, Bitcoin (BTC) proponents make a series of claims in defense of the protocol, arguing that not only is its carbon footprint overestimated, but furthermore that the cryptocurrency could provide an environmental service through flexible load response capabilities and methane onsite neutralization [6,7]. This could support renewable energy (RE) profitability and penetration, as well as decrease Bitcoin’s carbon footprint, and could theoretically result in net decarbonizing additions of load.
Previous studies estimating Bitcoin’s carbon footprint have been limited and debated, often lacking scientific rigor, while few have explored its potential synergy with flexible load response or methane reduction [6,7]. This paper aims to fill this gap by systematically reviewing the characteristics of Bitcoin mining and the renewable energy sector, potential complementarities, and limitations.
Our contribution consists of a comprehensive literature review leading to an assessment of the state of the art in the field. Relevant databases (Google Scholar, IEEE Xplore, ScienceDirect, and JSTOR) were searched using related keywords from 2009 to June 2023. Due to the emergent nature of the field and the novelty of this particular area of study, as well as due to the fact that this article largely deals with industry nuances, a large amount of grey literature was also consulted, including industry reports and online divulgation articles (this is acknowledged in the Supplementary Material).
For both scientific and grey literature, our research unfolded in four stages. We initiated a keyword-driven literature search, then cross-referenced our bibliography with cited articles until nearing theoretical saturation, resulting in a large database of works. Next, we extracted and classified data from the screened studies based on relevance. Finally, we analyzed and thematically categorized the articles, critically assessing their respective contributions to the themes at issue.
We provide an overview of Bitcoin’s environmental impact, discuss challenges in the renewable energy market, identify unique characteristics of Bitcoin mining relevant to decarbonization, and explore potential applications within the renewable energy sector. Additionally, we evaluate the positive effects of green Bitcoin mining, consider its limitations and challenges, and compare Bitcoin mining to alternative ancillary service providers. To do this, we begin by providing necessary background and context to the topic. We then engage with various literary works to build a comprehensive view of this impact. The paper also delves into the complex relationship between variable renewable energy (VRE) and Bitcoin mining, focusing on the business models that enable this partnership.
One of the main angles we explore is the potential positive effects that green Bitcoin mining might have in the push for decarbonization. Despite these potential benefits, we recognize and critically assess the limitations and challenges posed by this approach, especially when it comes to competition with other flexible load resources.
To support our findings and arguments, we survey the landscape of empirical evidence currently available in this field. A discussion of our findings follows, laying the foundation for our conclusion. The conclusion not only provides a summary of our research but also suggests possible directions for future work in this domain.
This approach is designed to bridge a gap in the articulation and communication of credible evidence pertaining to Bitcoin’s energy use and environmental impact. In a context of growing criticism, but also adoption, of a technology with potential that is transformational for issues such as political repression safeguarding and poverty reduction, filling this gap is crucial [8]. In addition, divergent perspectives on the matter further strengthen the need for evidence that is not only reliable but also balanced and systematically examined, encapsulating the myriad nuances in the landscape of this field. Rudd [8] outlines a hundred significant questions in this landscape. This paper endeavors to tackle several of these, including elucidating the larger perspective on Bitcoin’s energy usage, and Bitcoin’s potential applications for methane mitigation and electricity grid transition, aiming to contribute to a comprehensive research agenda’s fulfillment.
