In a move aimed at reducing global carbon emissions, two International Monetary Fund (IMF) executives have proposed significantly increasing the electricity costs for crypto mining. On August 15, Shafik Hebous, deputy division chief of the IMF’s Fiscal Affairs Department, and Nate Vernon-Lin, an economist in the climate policy division, suggested that a tax of $0.047 per kilowatt-hour could align the crypto mining industry with international environmental goals.
The executives elaborated that imposing such a tax would not only elevate the average electricity price for crypto miners by 85% but also enhance government revenues globally by approximately $5.2 billion annually. Moreover, this initiative could potentially reduce carbon emissions by 100 million tons each year, an amount comparable to the annual emissions of Belgium.
Local Health and Environmental Considerations
Hebous and Vernon-Lin also noted that considering the local health impacts of mining, the tax rate could increase to $0.089 per kilowatt-hour. This adjustment reflects the broader social costs associated with pollution from crypto mining operations.
The IMF officials highlighted the energy consumption disparities in technology, stating that a single Bitcoin transaction consumes as much electricity as the average resident of Pakistan uses over three years. They also compared the energy usage of the AI model ChatGPT to that of a Google search, noting that the former requires ten times more power.
In addition to their proposals on crypto mining, Hebous and Vernon-Lin introduced the idea of taxing AI data center energy use at $0.032 per kilowatt-hour, escalating to $0.052 when including pollution costs. This tax could potentially generate $18 billion annually for governments worldwide, incentivizing greener practices in these increasingly prevalent technologies.
Global Impact of Crypto Mining and AI
A September IMF paper projected that crypto mining might contribute to 0.7% of global carbon emissions by 2027, with the addition of AI data centers potentially increasing this to 1.2%. This combined total would result in about 450 million tons of emissions.
The IMF executives stressed the importance of global cooperation in implementing these taxes. Without coordinated action, there is a risk that crypto mining and AI data center operations might simply relocate to jurisdictions with less stringent regulations, undermining the effectiveness of the tax.
Comparative Carbon Footprints
The discussion also touched on the relative carbon footprints of different sectors. For instance, Amazon’s carbon footprint in 2021 was reported at 71.54 million metric tons of carbon dioxide, which exceeds Bitcoin’s estimated emissions of 65.4 million metric tons.
Countries like Venezuela and Iran have taken drastic measures to control the impact of crypto mining on their power grids. Venezuela has banned the practice outright, while Iran offers financial rewards to those who report illegal mining activities, especially during periods of power shortages caused by severe heatwaves.
The IMF’s proposal to increase electricity costs for crypto mining through targeted taxes represents a proactive approach to addressing the environmental impact of this burgeoning industry. By setting high economic disincentives for high-energy consumption, the IMF aims to steer the industry towards more sustainable practices, thereby aligning it with global efforts to combat climate change.
Featured image credit: pch.vector via Freepik
Follow us for more breaking news on DMR