The UN is proposing a $0.045/kWh tax on cryptocurrency mining to support climate initiatives

The United Nations (UN) is proposing a cryptocurrency mining tax of $0.045 for every kilowatt hour (kWh) of electricity used for mining. This proposal aims to mitigate the environmental impact of the crypto industry and to finance climate projects.

Energy intensity of cryptocurrencies

Cryptocurrency mining, especially Bitcoin, is among the biggest consumers of energy in the digital world. In 2023, the annual energy consumption for Bitcoin mining reached approx 120 terawatt hours (TWh), which is comparable to the annual consumption of countries such as Norway or Argentina.

• Comparison: A single Bitcoin transaction uses approximately 1,400 kWh of energy, which is the amount an average household would use in 47 days.
• Energy sources: Much of the energy used for mining comes from non-renewable sources, especially in regions with cheap electricity such as China, Russia or Kazakhstan.

Objectives of the proposed tax

The UN proposal pursues two main objectives:

1. Reduction of environmental impact: Incentivize cryptocurrency miners to switch to renewable energy sources or less energy intensive technologies such as "Proof of Stake".
2. Financing climate initiatives: Revenue from the tax could finance projects to promote renewable energy, protect biodiversity and mitigate climate change.

Challenges and concerns

1. Global implementation: Cryptocurrency mining is decentralized, which makes it difficult to coordinate taxation between individual countries.
2. Reaction of miners: Many could move their operations to countries with little or no environmental regulation, increasing their carbon footprint.
3. Innovations in the sector: The industry is already working to reduce energy consumption. Ethereum has reduced its energy consumption by more than 99 % by switching to "Proof of Stake".

Impact on industry and the environment

If the tax were to be successfully introduced:

• Motivation for sustainability: Miners could start using renewable energy sources more.
• Climate benefit: According to the UN, the revenues could finance projects that will reduce global greenhouse gas emissions by up to several million tons of CO2 per year.
• Technological shift: The tax could accelerate the development of more energy-efficient blockchain solutions.

The UN proposal emphasizes the need to address environmental issues associated with the growing crypto industry. Although implementing a global cryptocurrency mining tax will be difficult, its potential benefits for climate and technological progress could be significant. Spring