Sweden calls for crypto mining ban to protect climate

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Swedish government officials are calling on the European Union (EU) to impose a blanket ban on energy-intensive cryptocurrency mining, so that the EU can meet its climate goals. The call was made in an open letter signed last week by the directors of the Swedish Environmental Protection Agency and the Financial Supervisory Authority.

Image Credit: Flickr / Stock Catalog.

In the letter, Swedish officials argue that the actual benefits of cryptocurrency are questionable, and that the “huge” energy consumption of mining and transferring these currencies outweighs the benefits. In particular, they question the so-called “proof of work” verification protocols in which crypto users are invited to solve very complex computer problems.

“Anyone who wants to mine assets is competing to solve a crypto puzzle, and the winner receives new crypto assets as a reward. The only way to solve the puzzle is to repeatedly run computer programs that guess the correct answer. When a large number of crypto-producer computers are running simultaneously, demand for electricity skyrockets, ”they wrote.

Proof of work is a form of cryptographic proof in which one party (the miner) proves to others that a specific computational effort has been put into solving a puzzle. The higher the price of the cryptocurrency, the more people are interested in entering the competition. This automatically increases the level of difficulty of the puzzle required, which means that it will take more computational effort (and subsequently, more electricity) to solve it, which accelerates greenhouse gas emissions. (GEI) in countries where crypto mining takes place. Most crypto production takes place in countries with low energy prices and an energy matrix largely based on fossil fuels. This was particularly the case for China, which accounted for two-thirds of Bitcoin mining in the world. But that has now changed, as the government launched a crackdown on the cryptocurrency industry, pushing businesses overseas.

The magnitude 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, which is equivalent to the entire energy consumption of the Netherlands, according to Cambridge University Bitcoin Electricity Consumption Index (CBECI) estimates. If it were a country, Bitcoin would rank 32nd in the world in terms of energy consumption, and it is not the only cryptocurrency.

Renewable propulsion

In the letter, Swedish government directors said cryptocurrency producers are now turning their attention to the Nordic countries, as taxes on mining-related activities are favorable and there is good access to energies. cheaper renewables. In Sweden, electricity consumption for Bitcoin mining is now 1 TWh per year, which is equivalent to the electricity of 200,000 Swedish households.

While it is much better for companies to mine crypto using renewable energy instead of fossil fuels, administrators said that may not be enough to cover countries in climate transition. Clean energy is “urgently needed” to develop fossil-free steel, manufacture batteries on a large scale and electrify the transport sector, the argument goes.

In their letter, the administrators said EU countries could also introduce a tax on energy-intensive bitcoin production and communicate crypto-asset climate issues more widely. Nonetheless, these options are unlikely to resolve the “environmental damage we see” caused by cryptocurrency mining today, instead calling for a broader ban.

Earlier this year, the EU adopted new, more ambitious climate targets to tackle climate change, with a commitment to make them legally binding soon. The legislation, agreed between member states and the European Parliament, says the bloc will cut emissions by at least 55% by 2030. Yet Parliament originally called for a 60% cut.

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