On September 8, the White House published a report (“Climate-Crypto Report”) on the climate and energy implications of cryptoassets in the United States, which was followed by a detailed fact sheet summarizing the report’s findings. The Climate-Crypto Report was prepared following President Biden’s March 9, 2022 Executive Order 1407 which mandated the investigation of distributed ledger technologies’ (“DLT”) impacts on energy transactions and ultimately the environment.
The Climate-Crypto Report addressed four questions: (1) how do digital assets affect energy use and grid management? (2) what is the scale of climate, energy and environmental effects of digital assets? (3) what are potential uses of DLT that can support climate monitoring? and (4) which critical political decisionsis innovation and research needed to mitigate the environmental impact of digital assets?
The report acknowledges that while President Biden’s administration has set guidelines for the responsible development of US digital asset markets, it also recognized the rising costs of US energy infrastructure and the impact on the environment, given that climate change mitigation is also one of President Biden’s key priorities.
First, the Climate-Crypto Report finds that cryptoassets use a significant amount of electricity – globally equal to the amount of electricity used by Argentina or Australia. It also found that not all crypto-asset technologies consume the same amount of power, with Proof of Work (“PoW”) mechanisms far exceeding the power consumption of Proof of Stake (“PoS”) processes.
Second, the Climate-Crypto report found that there is a significant environmental impact of anthropogenic greenhouse gas (“GHG”) emissions associated with crypto-asset markets. In addition to the increased demand on the power grid, the generation of crypto assets also generates noise pollution, water impact and a lot of other environmental waste.
Thirdly, the report also finds that there is a wide and varied use of DLT in environmental markets, better resource coordination and supply chain management.
Finally, the Climate-Crypto report recommends reducing associated greenhouse gas emissions, reducing power-intensive technologies (such as PoW) in favor of more low-impact PoS processes, and efforts to avoid negative impacts on underserved and overburdened communities. In fact, on September 6, Ethereum did just that – it launched The Merge to switch to the less energy-intensive PoS process.
During the recent Senate hearing on September 15 to review the newly proposed Digital Goods Consumer Protection Act, several panelists acknowledged the carbon footprint of the crypto asset markets. These findings are further addressed in a September 16 release from the White House that proposed a comprehensive framework for the responsible development of digital assets in the United States