What Is the Environmental Impact of Cryptocurrency?
Tracey Forrest
CIGI Paper No. 335 — October 2025
What Is the Environmental Impact of Cryptocurrency?
Tracey Forrest
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vi About the Author
vi Acronyms and Abbreviations
1 Executive Summary
1 The Rise of Cryptocurrency and Proof-ofWork-Driven Energy Consumption
2 Cryptocurrency’s Environmental Impact
6 Key Factors That Influence Cryptocurrency’s Sustainable Trajectory
9 Forecasting Cryptocurrency’s Environmental Impact
10 Recommendations
12 Conclusion
13 Annex A: Cryptocurrency Consensus Mechanisms
14 Annex B: Probability Estimates for Scenario Analysis
15 Works Cited
About the Author
Tracey Forrest is research director of transformative technologies at the Centre for International Governance Innovation (CIGI). Her experience spans renewable energy to quantum technologies and has included working with multi-sectoral partners to accelerate the transition from a laboratory curiosity to an impactful device. At CIGI, she leads a network of researchers focused on opportunities and challenges relating to the evolving interface of transformative technologies and international governance.
Tracey is a professional engineer, adjunct professor at the University of Waterloo and former board member of technology and environmentally focused organizations. Over the course of a career in both academia and industry, Tracey has become an authority on thoughtfully bridging emerging technology to high-value applications. She formerly served as a member of the Federation of Canadian Municipalities Green Municipal Fund Council, director of the Transformative Quantum Technologies program at the University of Waterloo, and advisory board chair of the National Research Council of Canada’s Nanotechnology Research Centre.
Tracey completed a B.A.Sc. in environmental (chemical) engineering at the University of Waterloo, and a master’s in energy and environmental economics at the Scuola Mattei, Italy. She completed professional training in topics such as quantum, data science and sustainable business strategy at Harvard University and MIT.
Acronyms and Abbreviations
AI artificial intelligence
ASICs application-specific integrated circuits
CBECI Cambridge Bitcoin Electricity Consumption Index
crypto cryptocurrency
DLT distributed ledger technology
ESG environmental, social and governance
FBA Federated Byzantine Agreement
IT internet technology
MtCO2e metric tons of carbon dioxide equivalent
OECD Organisation for Economic Co-operation and Development
PoS proof of stake
PoW proof of work
PUE power usage effectiveness
TWh terawatt-hours
Executive Summary
The increasing importance of emerging digital assets has created a multifaceted environmental challenge and opportunity. This paper explores one form of emerging digital asset, cryptocurrency (crypto), and the causal factors that drive its environmental impact. While cryptocurrency makes up a relatively small proportion of overall global electricity consumption (0.6 percent) and carbon dioxide equivalent emissions (0.2 percent), the electricity demand associated with its mining operations is growing rapidly. Its emissions profile surpasses that of traditional banking by a wide margin and, when compared on a climate damages per unit price basis, also exceeds that of gold mining by an order of magnitude. A scenario analysis reveals that cryptocurrency is set on an unsustainable path. The paper concludes with recommendations that include efforts to improve cryptocurrency’s environmental performance and enable migration toward greater adoption of efficient algorithmic approaches; increased transparency of cryptocurrency mining operations through monitoring and reporting frameworks to promote grid stability and decarbonization; and investment that prioritizes the use of cryptocurrency for everyone’s benefit.
The Rise of Cryptocurrency and Proof-of-Work-Driven Energy Consumption
Emerging digital assets, including cryptocurrencies, have risen in importance in recent years. Crypto is a digital form of currency that uses a distributed ledger technology (DLT), blockchain, to secure, record and verify transactions. Blockchains aim to reduce reliance on centralized authorities by validating transactions through a combination of cryptography (Nakamoto 2008) and economic incentives (Budish 2025).
There are thousands of cryptocurrencies making up a total market capitalization of about $3.9 trillion.1 Bitcoin is more than $2 trillion of this total and uses a “proof of work” (PoW) consensus algorithm (described below), which is the most energyintensive form of cryptocurrency mining. This paper focuses on bitcoin’s environmental impacts. Other cryptocurrencies, such as Ethereum, are far less energy-intensive and remain in the minority. Ethereum accounts for just under 10 percent of the cryptocurrency market, and stablecoins — the vast majority of which are US dollar-denominated assets that live on multiple blockchains — account for around seven percent of the total market capitalization of crypto-assets.2 It is worth noting that stablecoins are dominated by Tether and USDC, which were originally built on Ethereum and have since expanded to other blockchains. There are many different cryptos, some being quite “green” but also small relative to others in the market. See Annex A for a description of the various consensus mechanisms and cryptocurrency taxonomy.
The combined value of all cryptocurrencies represents roughly 2.9 percent of the global equity market ($133 trillion). Despite the relatively small percentage compared to traditional equities, the crypto market has seen significant growth in recent years. For example, the bitcoin index (in US dollars) annualized three-year return is 79 percent.3
With the growth of the crypto market, energy demands and associated environmental impacts have risen in tandem. The US Energy Information Administration (2024) estimates that the annual electricity use from cryptocurrency mining ranges from 0.6 percent to 2.3 percent of US electricity consumption, demonstrating rapid growth. At the same time, as an emerging digital asset, cryptocurrency presents new opportunities for investors and broader market participants across a range of geographies and industries.
This paper examines the environmental impact of cryptocurrency, focusing on bitcoin, and the related forces that shape its sustainable trajectory. Select future scenarios are analyzed that consider the growth of bitcoin and the state of environmental action to provide a basis for anticipatory governance and policy solutions.
1 All dollar amounts in US dollars.
2 See www.coingecko.com/en/global-charts.
3 See www.spglobal.com/spdji/en/indices/digital-assets/ sp-bitcoin-index/#overview.
Cryptocurrency’s Environmental Impact
Despite growing awareness of the environmental impact of cryptocurrencies, quantifying their environmental footprint remains challenging. This is largely due to three reasons (Organisation for Economic Cooperation and Development [OECD] 2022):
→ Limited energy and broader environmental data is available for cryptocurrency mining operations, and the mining industry’s use of specialized hardware (not reflected in primary internet technology (IT) equipment shipment data) makes comprehensive facility-level data collection impractical (Shehabi et al. 2024).
→ Miners can easily change their internet protocol address to conceal their true location, often to avoid regulatory monitoring.
→ The data provided by known mining polls may not reflect all miners.
The latter two are implications of the decentralized nature of cryptocurrencies.
Crypto’s energy use is driven by its choice of consensus algorithm. Bitcoin runs on the PoW mechanism, which requires participants to solve a computationally intensive cryptographic problem and add transaction blocks to a public ledger. The nature of this algorithm is energy-intensive by design. As the problems become harder to solve, miners need more computing hardware to win the competition. This translates into greater electricity use to run the hardware and associated cooling, and an increased data centre footprint.
There are at least four primary approaches to quantifying the energy use of blockchain systems. These are: the top-down approach, the economic approach, the hybrid topdown approach and extrapolation based on direct measurement. As a result, a wide and increasingly diverging range of estimates are provided for the power consumption of mining activities (Lei, Masanet and Koomey 2021).
Given bitcoin’s market dominance and its use of the highly energy-intensive PoW consensus mechanism, its environmental impact is often used as a proxy for the overall environmental
impact of cryptocurrencies. The following sections describe a range of impacts associated with bitcoin, starting with its energy demands, which are largely responsible for the remaining impacts (on emissions, water consumption, electronic waste, the electricity system and the public good). Comparisons are given where appropriate to help contextualize the numbers given.
Energy
The source of data that most closely adheres to best practices for analyzing the direct energy use of blockchain is the Cambridge Bitcoin Electricity Consumption Index (CBECI).4
CBECI follows a hybrid top-down approach to provide current estimates of bitcoin’s daily power demand and annualized electricity consumption. As reported by CBECI in February 2025, bitcoin’s network power demand and annualized consumption were 20.01 gigawatt and 175.44 terawatt-hours (TWh), respectively.5
CBECI’s estimate is plotted along with several other recent estimates of global energy use of bitcoin (Figure 1). In 2021, these estimates varied between 78 TWh to 173 TWh. Apart from the approach chosen to quantify the energy consumption, assumptions regarding the following key factors may explain the divergence in estimates: the energy efficiency of the hardware used; the level of profit based on choice of hardware; and power usage effectiveness (PUE) of the mining facility.
Bitcoin’s annual energy usage of 175.44 TWh amounts to about 0.6 percent of world electricity consumption in 2023 (Energy Institute 2024). To set this in context, consider the annual energy consumption of the following:
→ global data centres of 460 TWh in 2022 (International Energy Agency [IEA] 2024);
→ global payment system of 47.3 TWh (Agur et al. 2022) and banking system of 129 TWh to 263.72 TWh in 2021 (Siddik, Amaya and Marston 2023; Rybarczyk, Armstrong and Fabiano 2021);
→ the Province of Ontario of 137.1 TWh in 2023;6 and
→ global electric vehicle fleets of 130 TWh in 2023.7
4 See https://ccaf.io/cbnsi/cbeci/methodology.
5 Ibid.
6 See www.ieso.ca/corporate-ieso/media/year-end-data.
7 See www.iea.org/energy-system/transport/electric-vehicles.
Figure 1: Bitcoin Energy Estimates across Studies
Scientific Reports (Jones, Goodkind and Berrens 2022)
University of Cambridge*
Galaxy (Rybarczyk, Armstrong and Fabiano 2021)
* See https://ccaf.io/cbnsi/cbeci.
Source: Author.
Put differently, bitcoin’s annual energy usage is equivalent to 4.1 percent of global solar energy consumption (Ritchie, Rosado and Roser 2020) and on par with countries such as Poland.
Cryptocurrencies’ electricity use surpasses that of the conventional transaction system by some estimates (Siddik, Amaya and Marston 2023), despite cryptocurrencies representing less than 0.5 percent of global cashless financial transactions. On a transaction basis, a comparison in estimates of energy use for credit cards and various digital ledger technologies showed that PoW-based systems use many orders of magnitude more energy per transaction than credit cards and non-PoW-based systems (Agur et al. 2022). It is important to note that with DLT-based systems, multiple payments can be batched into a single transaction and Layer 2 protocols (see Annex A) may increase scalability and transaction speed. For example, bitcoin may process approximately 2.5 times the number of payments than transactions per year (ibid.).
Earth’s Future (Chamanara, Gaffarizadeh and Madani 2023)
OECD (2022)
Cryptocurrency is part of a larger trend of digital technologies — including artificial intelligence (AI) — that are emerging as major drivers of data centres’ growing electricity consumption, despite currently constituting a small portion of global electricity demand. The growth of data centres is so rapid — and accelerating in the United States (Shehabi et al. 2024) — that it outpaces the technical efficiency improvements in hardware and data centre efficiency gains, leading to a substantial increase in electricity demand.
Emissions
The CBECI provides estimates for annual emissions from bitcoin. As of February 2025, this amounts to a “best-guess estimate” of 94.85 million metric tons of carbon dioxide equivalent (MtCO2e) per year.8 To arrive at this estimate, CBECI considered the environmental impact associated with the electricity consumption of bitcoin mining, including geographical distribution and hardware efficiency.
8 See https://ccaf.io/cbnsi/cbeci/methodology.
At this level of CO2e emissions, bitcoin represents 0.2 percent of the world’s CO2e emissions (ibid.). For comparison, the aviation industry is accountable for 2.5 percent of total CO2 emissions.9
Bitcoin is generally viewed as operating independently of the traditional banking system, which also consumes significant amounts of energy as previously mentioned. The climate change impact of printing money, powering institutions and maintaining the physical infrastructure (including data centres) of traditional banks results in emissions estimated in the range of 10.83 to 11.1 MtCO2e per year (Pagone, Hart and Salonitis 2023; Fleck 2023). Emanuele Pagone, Alexandre Hart and Konstantinos Salonitis (2023) also showed that bitcoin has a CO2e footprint as much as 10 times larger than banknotes or coins and about four times larger than the sum of all traditional currency forms.
Cryptocurrency is often compared to gold as a store of value and an inflationary hedge and is thus sometimes referred to as “digital gold.” A comparison of bitcoin and gold mining reveals that they are currently roughly equivalent on an absolute basis, with the global carbon footprint of gold mining estimated at 100.4 MtCO2e per
year.10 The World Gold Council (2019) presented a higher figure of 126.4 MtCO2e in its 2019 report.
The annual greenhouse gas emissions for bitcoin are compared on a CO2e basis with the banking sector and gold mining (Figure 2).
These findings vary dramatically when climate damages are viewed from a unit or share price basis. One study found that bitcoin mining generates climate damages on a per unit price basis an order of magnitude above those generated by precious metal mining (including gold). For gold in particular, bitcoin’s average climate damages are 8.75 times greater (Jones, Goodkind and Berrens 2022).
Eric Budish (2025) argues that if cryptocurrencies were to become a more significant part of the global financial system, their costs would have to grow to “absurd” levels. For example, under a “base case analysis,” it would take all of global GDP to secure the system against a $40 billion attack. The cost considers the fixed cost of specialized capital (for example, applicationspecific integrated circuits [ASICs]), the rental cost of capital per unit time and variable costs per unit time (for instance, electricity). Given that electricity is inextricably linked with emissions (unless the grid is fully decarbonized),
* See https://ccaf.io/cbnsi/cbeci/ghg. Source: Author.
9 See www.iea.org/energy-system/transport/aviation.
10 See https://ccaf.io/cbnsi/cbeci/methodology.
Figure 2: Comparison of Annual Global Carbon Emissions — Banking, Gold Mining and Bitcoin
Procedia CIRP (Pagone, Hart and Salonitis 2023)
Statista (Fleck 2022)
World Gold Council (2019)
University of Cambridge*
University of Cambridge*
this analysis implies that if it were tenable for bitcoin to replace existing forms of money, then the resulting climate damages would exceed current levels by several orders of magnitude.
Water
Cryptocurrency consumes water indirectly, through its demand for electricity (water used in power generation) and cooling of data centres. Estimates for cryptocurrencies’ annual water consumption vary widely, for example from 1,647 million cubic metres (Chamanara, Ghaffarizadeh and Madani 2023) to 3,670 million cubic metres (Siddik, Amaya and Marston 2023). For each bitcoin transaction, an estimated 19,965 litres of fresh water is consumed, or roughly the amount of water in a backyard swimming pool.11
Cryptocurrencies’ water footprint is more than double that of conventional currencies because cryptocurrency mining takes place in countries with higher water intensities for electricity (Chamanara, Ghaffarizadeh and Madani 2023). Furthermore, these areas tend to be already water stressed. For example, major data centre operators such as Microsoft and Google have reported that 42 percent (2023) and 15 percent (2024) of their water consumption, respectively, came from areas with water stress or scarcity (Wiggers 2024).
Electronic Waste
The bitcoin network also generates significant quantities of electronic waste or e-waste. The reason is that bitcoin mining uses highly specialized hardware, ASICs (see Annex A), which is designed solely for mining cryptocurrencies. These machines have a relatively short lifespan, becoming obsolete roughly every one-and-a-half years. As a result, millions of mining devices are discarded each year, contributing to the growing e-waste issue (e-waste is rising five times faster than documented e-waste recycling) (Baldé et al. 2024). Unlike regular consumer electronics, ASICs cannot be repurposed or recycled easily, meaning that much of this waste ends up in landfills.
Alex de Vries and Christian Stoll (2021) estimated bitcoin’s annual e-waste generation amounts to 30.7 kilotons, generating on average 272 grams of e-waste per transaction processed on the blockchain. More recently, this figure
is estimated at 43.28 kilotons; comparable to the small IT equipment waste of the Netherlands.12 In terms of a single bitcoin transaction, this equates to 311.7 grams, or the weight of roughly two iPhone 12 devices.
Electricity System
As cryptocurrency mining has increased in various jurisdictions around the world, concerns have grown about its effects on the electric power industry. Electricity operators are having to contend with unanticipated electricity demand and cryptocurrency-related congestion. In particular, the spatial concentration of data centres in specific regions poses challenges for local grids.
Electricity impacts include risks to the electricity grid during peak demand periods, as well as the potential for higher electricity prices and for increased non-renewable energy supplies to meet unanticipated demand. There are several examples to point to:
→ Ireland’s EirGrid cancelled 30 data centre projects in 2022 in part due to projections that these future data centres’ energy needs may result in rolling blackouts on their system.
→ New York state passed a law in 2022 temporarily banning new cryptocurrency mining operations that rely on fossil fuels, in part due to a contested Greenidge proposal that sought to bring back a retired coal-fired power plant to fuel cryptocurrency electricity demand.
→ Grid reliability issues have already caused blackouts in Iran and power shortages in Kazakhstan.
Conversely, proponents would argue that cryptocurrency can play a beneficial role in incentivizing more renewable energy and improving grid reliability. The former may result from cryptocurrencies that incorporate the purchase of offsets or verifying credits. Alternatively, cryptocurrency may drive emissions reductions where miners are co-located or near renewable energy such that they may utilize any “excess” energy that would otherwise need to be stored or sold at a loss. This is seen in Africa, where the firm Gridless is working with renewable, rural, mini-grid energy generators to monetize
11 See https://digiconomist.net/bitcoin-energy-consumption.
12 Ibid.
the full capacity of their output to support bitcoin mining. In particular, there is evidence that bitcoin miners have supported the renewable energy industry in countries such as Kenya and Malawi by monetizing excess power generation that would otherwise be lost (Book 2024).
The ability of miners to quickly ramp up or scale down their operations enables their participation in demand response programs, thereby improving grid reliability. The Electric Reliability Council of Texas is an example of a demand response program that includes large participation from cryptocurrency miners.
Furthermore, those advocating for cryptocurrency point to its potential role in reducing greenhouse gases. Such reductions may occur where methane gas, a byproduct in oil and gas exploration, is used to generate electricity for mining activity rather than be left to vent as a fugitive emission. Given the mobile and modular nature of mining hardware, miners can more economically use this “stranded” energy resource. CBECI quantifies the potential of bitcoin for global flare gas recovery in the amount of 688 TWh — enough to fuel the bitcoin network 4.2 times.13
There are counterpoints to the above benefits. For example, methane can instead be flared to mitigate harmful fugitive emissions (thereby reducing the comparative benefit of gas-fired generation) and the reliability of miners to participate in demand response may be called into question when cryptocurrency profits exceed demand response incentives. Today, the United States is the epicentre of bitcoin mining, and most of this activity is powered by fossil fuels (not excess or stranded renewable energy). In the end, the picture is mixed and requires a detailed understanding of the multifaceted role that cryptocurrency plays in the electricity system as a whole.
Public Good
The carbon footprint of blockchain extends beyond the data centres that power it. For every one dollar of value created by bitcoin’s energy use, it has been reported that an estimated $0.49 would need to be spent on addressing the network’s associated environmental issues and remedying other associated public health problems induced by cryptocurrency data
centre operations (Howson and de Vries 2022). Another study normalized the cost externality as follows: to address global warming, a corrective excise on the electricity used by crypto miners would require an estimated $0.045 per kWh, on average — and $0.087 per kWh considering air pollution costs (Hebous and Vernon Lin 2023).
For developing countries, the story is once again mixed. There is the potential for cryptocurrency market participants from advanced economies to exploit the economic instabilities, weak regulations, and cheap electricity and resources that may be found in poor and vulnerable economies (Howson and de Vries 2022).
Others have argued that cryptocurrency has the potential to improve efficiency, economic stability and access to financial services in developing nations while tackling corruption (Cheikosman 2022). Lending support to this argument is the fact that the top three countries adopting cryptocurrency are India, Nigeria and Indonesia, as reported in the 2024 Global Crypto Adoption Index (Chainalysis Team 2024).
An additional benefit of cryptocurrency may be found where bitcoin data centres bring new sources of capital and co-locate their own energy sources (see the previous section on the electricity system). In this context, bitcoin miners may help to remove obstacles to bringing power to those without access.
Key Factors That Influence Cryptocurrency’s Sustainable Trajectory
Cryptocurrency’s environmental impact is largely driven by three factors: the underlying consensus algorithm, the price of the cryptocurrency and the location of the mining activities. Each factor is analyzed, in turn, below, and sustainable approaches are highlighted where applicable.
Consensus Algorithm
Consensus mechanisms are the dominant consideration affecting the performance and energy consumption of a blockchain network.
13 Ibid.
At one end, there is PoW, which represents the most energy-intensive algorithm, and on the other is the significantly more efficient Proof of Stake (PoS). PoS involves “staking” (or locking onto the blockchain for a given amount of time) a validator’s own cryptocurrency. It is instructive to look at the example of Ethereum, the secondlargest cryptocurrency after bitcoin, which successfully transitioned from PoW to PoS in 2022 and reduced its energy consumption by approximately 99.95 percent.14 Notably, it took Ethereum seven years to make this transition.
The IEA (2024b, 8) predicts data centres’ total electricity consumption worldwide could reach more than 1,000 TWh in 2026 — roughly equivalent to the electricity consumption of Japan. Furthermore, projections indicate that data centres could account for up to 10 percent of total electricity demand growth globally by 2030 (ibid.). These projections are based on forecasted energy efficiency and the demand of AI and cryptocurrency (among other load drivers), both of which are highly uncertain. In the past, similar steep (multifold) rises in data centre demand have been followed by a levelling off due to the industry’s strong incentive to taper costs (Kann 2025). This growth is mitigated through various efficiency measures (software, hardware and systems-level improvements). A recent example is DeepSeek, an AI model that reportedly uses significantly less energy than its counterparts.
In contrast to AI, further efficiency improvements in cryptocurrency beyond hardware are limited to either selecting a different algorithm or using ancillary approaches that serve to modify the demand. There are numerous energy-efficient alternatives to PoW (see Annex A). In addition, there are other approaches to “green” crypto including investments in carbon offset programs, supporting renewable energy projects (Plural Energy, Solaris and so on), or using technology to promote environmental sustainability (Chia, for example, which uses a variant of PoS and offsets its emissions, or Celo, which combines financial incentives with environmental restoration). It is worth noting, however, that the integrity of carbon offset accounting has been called into question (O’Brien 2024), an issue that some consensus mechanisms seek to address (Fedrok’s Proof of Green, for instance) in
addition to other novel approaches to quantifying the emissions impact of renewable energy purchases (for example, the Rocky Mountain Institute’s Renewable Energy Emissions Score).
For bitcoin, the most dominant cryptocurrency, moving to the least energy-intensive algorithm (PoS) has been lacking the necessary industry consensus: it has been reported that bitcoin participants do not want to destroy the security of the protocol by making such a move (McGovern and Branford 2025). This connects back to the origin of the cryptocurrency and its followers, which were built on Satoshi Nakamoto’s implementation of PoW and the promise of security and decentralization, as well as the time horizon needed to implement such a transition. The OECD (2022) expressed doubts as to whether bitcoin could transition to alternative, less energy-intensive methods given its highly decentralized network, with the community of participants showing less willingness to make such a transition (ibid.). In short, normal scaling laws and incentives will prove difficult for PoW-based cryptocurrencies.
Price
Bitcoin price and the energy used in bitcoin mining are highly correlated. Mining operators are highly sensitive to the economic factors that govern its market structure: the combination of block reward halving and computational hash rate adjustment factors. The dominant variable that relates energy consumption of cryptocurrency mining at equilibrium is the exchange rate between cryptocurrency and dollars. If cryptocurrency price goes up, so too does the energy used to mine it (Narayanan 2018; de Vries 2021). However, the relationship between price and bitcoin consumption is chaotic and non-linear (Maiti 2022). A 400 percent increase in bitcoin’s price from 2021 to 2022 spurred a 140 percent increase in the energy consumption of the entire bitcoin mining network (Chamanara, Ghaffarizadeh and Madani 2023).
With favourable bitcoin price and other economic factors, including the price of electricity, miners are incentivized to increase their mining activity. The more miners competing to solve the puzzle, the harder the puzzle becomes. As miners race to solve these puzzles faster, they deploy larger and more powerful mining farms, which, in turn, require more energy to operate.
14 See https://ethereum.org/en/roadmap/vision/.
The most accurate estimates of electricity used in bitcoin mining are built from the bottom up. These estimates factor in the number of servers installed; total computational load; the current mining difficulty of the bitcoin network (which is a function of price, as described above); the data centres’ location; and the efficiency of these centres and the servers within them (Koomey 2019).
Number of users, trade volume and price volatility may also play a role. Daniel Traian Pele and Miruna Mazurencu-Marinescu-Pele (2019) showed that the value of a network is proportional to the square of the number of connected users of the system. Anna Papp, Douglas Almond and Shuang Zhang (2023) established a clear relationship between bitcoin price movements and carbon emissions. Furthermore, Samuel Asumadu Sarkodie, Maruf Yakubu Ahmed and Thomas Leirvik (2022) observed that an increase in bitcoin trade volume spurs both carbon and energy footprint by 24 percent in the long run, whereas a dynamic shock in trade volume escalates this footprint by 46.54 percent.
Unfortunately, options are limited to “green” cryptocurrency via constraints on price and the number of miners. Proposals for embedding a carbon price in cryptocurrency remain on the fringe. In 2023, the Biden administration proposed the Digital Asset Mining Energy tax of 30 percent on cryptocurrency miners’ electricity use; however, this initiative failed during debt ceiling negotiations. Cryptocurrency prices are not controlled by central banks or institutions, such as traditional fiat currencies. As a result, wild fluctuations in cryptocurrency prices are expected to continue.
Stablecoins may offer a pathway to reduced price volatility and, indirectly, energy consumption associated with volatile cryptocurrencies. Stablecoins are designed to maintain a consistent value, often pegged to a fiat currency (the US dollar), which minimizes price fluctuations and reduces energy-intensive mining activities associated with some cryptocurrencies during periods of high price volatility. Although stablecoins represent less than 10 percent of the crypto market today, their average supply in circulation is growing roughly 28 percent year over year (Feingold 2025).
Other purported solutions to climate challenges via cryptocurrency are tethered to profitdriven imperatives rather than broader market transformations. This market structure
underscores the importance of the efficiency underlying the consensus mechanism and means to reduce price volatility.
Location of Mining Activities
Where a miner chooses to locate has direct and indirect environmental impacts. The mix of electricity sources fuelling the grid where the mining facility draws its electricity largely determines the greenhouse gas emission profile of the cryptocurrency, in addition to demand response incentives and other measures that promote reduced mining costs. Cost considerations tend to dominate the geographic distribution of mining activity. Miners look for low electricity prices, cooler climates (which lead to lower data centre cooling costs) and favourable regulatory regimes (including policy incentives).
The drive to locate in favourable regulatory, tax and legal environments has pushed cryptocurrency miners to cluster in Canada, China, Kazakhstan, Russia and the United States (Dickert 2023). Since China banned cryptocurrency mining activities in 2021, the percentage of mining activities fuelled by renewable energy dropped from 41.6 percent to 37.6 percent (including nuclear) in 2022, since miners in China lost access to hydropower from regions within China.15 While some of this hydropower would have been used to offset coal use, had there not been mining activity, there are reports that small hydropower plants were put up for sale after the ban (Borak 2021).
Crypto-asset providers offer and market their services in many jurisdictions, which makes their environmental regulation more challenging. For example, most transactions on crypto exchanges take place through entities that operate primarily in offshore financial centres and where countries may not have regulations in place that govern crypto-asset service provider activities (and where this exists, its scope is often limited). The absence of effective supervision and regulatory frameworks can create regulatory arbitrage and curtail enforcement (Bains et al. 2021, chapter 2).
In North America, Canada offers lower temperatures and abundant energy resources, making it an attractive location for cryptocurrency mining. It is the United States, however, with its relatively low-cost power and rapid shift
15 See https://ccaf.io/cbnsi/cbeci/methodology.
Box 1: Future Scenarios for Cryptocurrency — Unsustainable or New Opportunities?
The names assigned to each of these futures are explained below.
→ Business as usual is as it sounds: cryptocurrency continues to operate with modest growth prospects and minimal regulation or innovation affecting its environmental profile. Environmental impacts continue unabated.
→ Green paradise describes a world in which environmental externalities are addressed through international cooperation. Here, new opportunities for cryptocurrency are embraced and drive positive sustainable impacts, and productive multilateral and cross-border engagement leads to innovation and an increasing share of renewable energy sources in the electricity supply mix.
→ Unmitigated climate damage speaks to a future in which bitcoin price/activity rises aggressively, causing extreme growth in energy consumption with no counterbalancing measures that would mitigate its associated environmental damages.
→ Regulation forces decarbonization depicts a scenario in which cryptocurrency firms and power companies are compelled to invest in energy-efficient solutions and renewable energy by risk of regulatory action. In this scenario, rising bitcoin price/activity catalyzes government action to accelerate the decarbonization transition, and new opportunities for investors and other stakeholders emerge as cryptocurrency becomes a forcing function that drives environmental innovation.
toward favourable crypto policies under the Trump administration, that holds the dominant position in the crypto mining industry. Donald Trump announced in June 2024 that “we want all the remaining Bitcoin to be made in the USA.” He and his family are increasingly linked to crypto-asset ventures, including American Bitcoin, which debuted in July 2025 with a reference to the Trump administration’s dedication to low-cost energy (Yaffe-Bellany 2025).
In the United States, bitcoin mines induce electricity production mainly from fossil fuelpowered plants, which frustrate policy efforts to retire these facilities. Furthermore, regulatory efforts in the United States are further complicated because bitcoin mines in one state often induce air pollution and other environmental impacts in other states, leaving residents in affected regions with no state-based political power to reduce the adverse impacts they experience (Guidi et al. 2025).
Forecasting Cryptocurrency’s Environmental Impact
In general, the sustainability question facing cryptocurrency is influenced by two main sources of uncertainty:
→ What is the velocity of future bitcoin price/ activity movements?
→ Will governments act?
For reasons discussed earlier, bitcoin is used as a proxy cryptocurrency, and the value and direction of bitcoin price changes (and related mining activity) are key elements driving its environmental impact. Whether governments act relates to which, if any, levers are employed by them to coordinate internationally on environmental issues, regulate their domestic cryptocurrency industry or enact other policy measures that would either restrict or otherwise enable environmental impacts (“environmental action”).
Table 1: Probabilistic Forecast of Future Scenarios
Bitcoin Price/Activity High Growth (60%)
Environmental action high (70%) Regulation forces decarbonization (18%)
Environmental action low (30%) Unmitigated climate damage (42%)
Source: Author.
This forecasting analysis uses a simplified approach as follows:
→ Identify the two most “critical” uncertainties relevant to the question — and whose resolution would make a material difference to the environmental fate of cryptocurrency.
→ Assign probabilities to each uncertainty. The analysis is more useful if only two possible outcomes for any single uncertainty are given, so that the probabilities add up to 100 percent. With two uncertainties and two possible outcomes for each, the result is four different scenarios.
→ Determine the probabilities for each of the four possible futures by multiplying the corresponding probabilities.
Four different future scenarios emerge when these uncertainties are systematically analyzed based on the key uncertainties and approach described above. These scenarios are summarized in Box 1. Probabilities are assigned to bitcoin price/activity movement and the level of environmental action. The resulting likelihood of each scenario is given in parentheses (Table 1).
This probabilistic forecast highlights the ways in which the future may be different from the past and provides a basis to project the present reality by assigning estimated (“best guess”) probabilities. The most likely scenario, unmitigated climate damage, reflects today’s reality: poor international cooperation (and inadequate environmental progress); increasing domestic isolationism (with negative consequences for innovation); and rising bitcoin price/activity (given recent signals that point to higher shares of Bitcoin holdings in federal reserves and sovereign funds).
Bitcoin Price/Activity Medium Growth (40%)
Green paradise (12%)
Business as usual (28%)
For further background on key sources used in establishing estimated probabilities, see Annex B.
The key takeaway from this scenario analysis is that market forces and existing levels of environmental action are inadequate to address the growing environmental impact of energyintensive cryptocurrencies such as bitcoin. The complexity in the market calls for a rapid, innovative and flexible policy response.
It is worth noting that the question of how fast technology will advance was not a factor in this scenario analysis. On an absolute basis, hardware efficiency improvements have not translated into net energy-use reduction of cryptocurrency. This is expected given the economic incentives featured with the PoW mechanism. It is also indicative of the broader finding that any technological efficiency gains do not correlate with reduced net energy consumption (a consequence of secondorder rebound effects first exposed by William Stanley Jevons, a leading Victorian economist).
Recommendations
Given the context that surrounds the most likely scenario, unmitigated climate damage, the following policy approaches are needed to position cryptocurrency on a more sustainable footing.
Improve the environmental performance of cryptocurrency and prepare the groundwork for a shift toward energyefficient consensus algorithms.
Given that nearly all cryptocurrency-induced environmental damage is driven by the nature
of the consensus mechanism, a key opportunity is to promote substantial change in the way cryptocurrency is governed. To promote a shift toward energy-efficient digital assets, stakeholders may take a proactive stance now to develop and implement a governance framework that guides and supports a large-scale transition from PoW to more efficient consensus algorithms such as PoS. In doing so, policy makers may lay the groundwork for building trust in PoS (and other efficient) systems and promote their adoption. Policy makers may also introduce targeted measures to motivate the adoption of less energy-intensive mining operations and influence the growth of emerging assets such as stablecoins toward “greener” blockchains.
An important objective is to accelerate the addition of renewable energy to avoid cryptocurrencies’ sharp rise in electricity demand being met through fossil fuel sources. Cross-border coordination also remains important, as stricter measures in one location might incentivize cryptocurrency miners to relocate to jurisdictions with lower standards — an undesirable form of regulatory arbitrage (which could lead to higher net emissions and exploitation of vulnerable environments).
Further research may determine which measure or suite of measures may yield the best result for reducing greenhouse gas emissions. These measures might include, for example, “pricebased instruments in well-designed policy mixes” (Stechemesser et al. 2024) that would result in more expensive non-clean energy sources when accessed by miners; using existing financial regulations and tax frameworks to encourage innovation that boosts sustainability performance; and imposing well-coordinated regional and/or international bans on PoW mining based on a holistic cost-benefit analysis.
The above prescription requires a concerted push given the market-driven context in which cryptocurrency operates and the absence of a centralized authority for regulating cryptocurrency (either at the national or international level).
Create monitoring and reporting frameworks to promote grid stability and decarbonization, championed through the lens of security.
Examples of where bitcoin mining has been cancelled or curtailed have largely been due to risks posed to the electric power grids. As discussed previously, cryptocurrency mining can
both strain electric grid reliability and, under certain circumstances, improve grid reliability. Effectively assessing and communicating the risk of power shortages may serve to garner the political support needed to bring forward the monitoring and reporting frameworks that would reduce uncertainty associated with cryptocurrency mining (and increase its transparency) and simultaneously address grid stability and environmental objectives.
At present, the cryptocurrency industry’s opacity hinders precise forecasting and planning. There is a need to better characterize the actual mining hardware in operation and its location. There is also growing divergence in bitcoin energy estimates, which is a signal to policy makers that more investment is needed in improved data sources to minimize uncertainties. Furthermore, although the research community has taken initial steps toward quantifying cryptocurrency’s carbon footprint and water usage, these efforts offer a partial view: companies only disclose a narrow range of environmental metrics. More robust life cycle assessment tools would promote much-needed progress (similar to what is called for with AI).
This data can be used not only to construct effective demand response programs that would work in concert with cryptocurrency mining, but also to assist in the design of energy efficiency standards and promote increasing renewable energy sources on the grid. Enhanced monitoring and reporting would also help design appropriate incentives and disincentives for the mining industry (for example, introducing the requirement that miners be responsible for covering the costs of infrastructure upgrades to avoid increased energy costs for consumers).
There is also an opportunity to promote broader sectoral transformation, given the accelerating rate of data centre electricity consumption (notably in the United States). Policy makers may use this relatively near-term electricity demand as an opportunity to develop the leadership and capital for the expansion of modern electricity infrastructure (both domestically and within a trusted alliance) that includes an increasing share of renewable sources.
As digital assets become increasingly mainstream, policy makers and utility companies may support one another’s efforts to develop more sophisticated tools for tracking and managing mining-related
energy demand to ensure grid stability and meet increasingly ambitious environmental goals.
Invest in the use of cryptocurrency for the benefit of society, building on existing efforts.
A wide range of initiatives have been launched to bring about greener cryptocurrency (select examples below). Policy makers may engage with and/or build upon these initiatives to promote sustainability in the sector.
→ The “global multi-stakeholder collaborative network” Climate Chain Coalition, an official observer organization of the United Nations Framework Convention on Climate Change, aims to “co-develop digitally enabled innovative solutions that empower stakeholders to achieve ambitious climate action goals.”16
→ The Crypto Climate Accord, a private sectorled initiative focused on decarbonizing cryptocurrency and blockchain, aims to accelerate the development of “digital #ProofOfGreen” solutions and set a new standard for other industries to follow.17
→ The World Economic Forum’s Crypto Impact and Sustainability Accelerator is an example of advancing research for, among other things, sustainable growth in the cryptocurrency ecosystem aligned with environmental, social and governance (ESG) pillars.
Policy makers may also support further research to improve understanding and innovation in cryptocurrency mining. This research may reveal pathways to responsible cryptocurrency development in vulnerable economies, strengthen our understanding of the causal mechanisms underlying the growth in energy consumption and advance innovative approaches that support increased efficiency in the sector.
Such a comprehensive set of measures that build on existing efforts would empower researchers, policy makers and industry stakeholders to devise strategies that prevent “tech-solutionism” from overshadowing (or skewing) the broader imperative of positioning cryptocurrency on a sustainable trajectory that benefits everyone.
Conclusion
To reconcile the costs and benefits of cryptocurrency requires a more detailed and nuanced approach to framing, articulating and addressing cryptocurrencies’ environmental impacts. This requires a deeper understanding of cryptocurrencies’ carbon emissions, water consumption and e-waste — as well as causal factors that affect its sustainability performance.
This paper has explored the relationship between the amount of energy cryptocurrency consumes (and, by extension, its greenhouse gas emissions profile) and other variables, and has shown its environmental performance is strongly linked to the choice of consensus algorithm (the PoW algorithm being the most energy-intensive); the price of cryptocurrency (higher prices are correlated with higher energy consumption); and the location of mining operations (share of decarbonized sources that fuel the local grid and level of demand response adoption by cryptocurrency miners).
Looking ahead, the most likely scenario points to an unsustainable trajectory for cryptocurrency. A multi-pronged policy approach is needed to address cryptocurrencies’ growing environmental challenges. These measures span improving the performance of cryptocurrency algorithms and cryptocurrencies’ role within the electricity system; increased transparency and utility company policy maker collaboration to secure the electric grid and advance decarbonization goals; and enhanced efforts that bolster innovation in cryptocurrency sustainability and related efforts worldwide.
Acknowledgements
The author gratefully acknowledges feedback and insights from Naod Abraham, and from generous anonymous peer reviewers.
16 See https://climatechaincoalition.org/#charter.
17 See https://cryptoclimate.org/.
Annex A: Cryptocurrency Consensus Mechanisms
Cryptocurrency mining — and its underlying consensus mechanism — is the core activity that affects environmental performance. A consensus mechanism, or algorithm, is used to achieve agreement about the present state of the network. In the case of bitcoin, which currently holds more than 60 percent of the market share, the underlying consensus mechanism is PoW. PoW is highly energy-intensive and is why electricity is the primary operating cost of a bitcoin mining facility.
PoW is a consensus algorithm used to validate transactions and create new blocks. Cryptocurrency miners add blocks of transactions to a blockchain by solving computationally intense cryptographic puzzles. This entitles them to receive rewards in the form of transaction fees and new cryptocurrency coins.
Not all cryptocurrencies use the PoW consensus mechanism. Other cryptocurrencies, such as Ethereum, use a process known as PoS. According to data from the Cambridge Centre for Alternative Finance, Ethereum represents only 0.005 percent of the power demand of bitcoin.
Table 2 compares select energy-efficient (low computational difficulty) alternatives to PoW (OECD 2022; Lei, Masanet and Koomey 2021).
Although other consensus mechanisms, such as PoS, offer advantages in energy efficiency and reduced hardware requirements, PoW is still preferred in many blockchain networks. PoW’s reliance on computational work makes it highly resistant to attacks, as altering the blockchain would require an immense amount of computational power. However, PoS and its variants are not necessarily inferior in terms of security. One common measure of blockchain security is its resilience to a “51% attack,” a scenario in which an entity gains majority control of the network. For both PoW and PoS, the cost of executing such an attack would far outweigh any potential benefit.
Modern energy-efficient approaches include Layer 2 solutions, sidechains and sharding. Layer 2 solutions work by processing transactions off the main blockchain and only settling the final result on-chain, resulting in substantial energy reductions (for example, Lightning Network for bitcoin and optimistic rollups for Ethereum). Similar to Layer 2 solutions, sidechains run in parallel to the main blockchain. Transactions are processed on the sidechain and the final result is recorded on the parent chain, thereby reducing traffic congestion. Sidechains differ
Description Validators are chosen based on the amount of cryptocurrency they stake as collateral to add new transaction blocks.
Source: Author.
Validators are selected based on their authority (identity and reputation) within the network to add new transaction blocks.
Crypto-asset holders vote for “delegates” to add new transaction blocks on their behalf. Voting power increases with the amount of assets held.
Under FBA, validators are chosen from network members to form quora of nodes, and then the quora can sign the transactions to make the final decision.
Table 2: Comparison of Select Energy-Efficient Consensus Algorithms
Application examples Ethereum, PPCoin, etc. Energy Web Chain, Microsoft Azure, etc.
EOS, Tron, etc. Ripple, Steller, etc.
from Layer 2 solutions by operating according to their own set of rules, consensus mechanisms and security protocols. Sharding is the process of dividing the blockchain into smaller pieces or “shards.” Each shard operates independently and processes a portion of the network’s transactions, allowing multiple transactions to be processed in parallel. Sharding also dramatically reduces the computational burden on the network.
A miner’s probability of earning rewards depends on their hash rate. A hash represents the number of attempts to solve a cryptographic puzzle, and a hash rate measures the number of hashes per second. The hash rate is used as a measure of the computational power of a miner’s cryptocurrency network. Cryptocurrency miners make use of specialized hardware that can perform many trillions of calculations per second. These ASICs operate constantly at full capacity, and their combined hash rate determines their share of network rewards.
Larger networks of mining units can be configured to increase computational power. Individual cryptocurrency facilities can employ as many as 100,000 mining units.
Annex B: Probability Estimates for Scenario Analysis
Several sources were used to derive estimated probabilities for bitcoin price/activity highgrowth and medium-growth scenarios, of 60 percent and 40 percent, respectively. Select examples are included below.
→ A recent study by Lawrence Berkeley National Laboratory (Shehabi et al. 2024) presented two projections for US bitcoin mining energy consumption for the period spanning 2024–2028: one based on a moderate price growth (two times) scenario and another on an aggressive price growth (five times) scenario. Implicit in each scenario were different trajectories for energy consumption based on hardware and PUE efficiencies.
→ The current US administration has set up a Crypto Task Force and has indicated that it will focus on starting up a national bitcoin reserve — “a move that is likely to spur similar efforts worldwide” — and announced the creation of a sovereign wealth fund that would “consider key U.S. crypto companies/market leaders, as strategic assets to own” (Canny 2025).
→ Recent examples of other major investments include the Mubadala investment fund, a sovereign wealth fund of the emirate of Abu Dhabi, that owns shares in BlackRock’s bitcoin exchange-traded fund worth $461.23 million.
→ The US Congress may also soon adopt legislation to regulate stablecoins, with the GENIUS Act passing the Senate on June 17, 2025, and the STABLE Act pending in the House. In addition, there has been a general movement toward cutting legal barriers and streamlining the process for traditional finance to get more involved with cryptocurrencies.
→ Rather than face a carbon and/or public health tax, many data centres and cryptocurrency miners enjoy generous tax exemptions and incentives on income, consumption and property (Hebous and Vernon-Lin 2024).
Similarly, several sources were used to derive estimated probabilities for environmental action high and low scenarios, of 70 percent and 30 percent, respectively. Select examples are included below.
→ Following the UN Climate Change Conference (COP28), it has been acknowledged that “the Paris Agreement is lacking across all areas and not where it should be.”18 Given the current trajectory, global emissions will exceed the global temperature increase of 1.5°C, including when all climate action plans are considered.
→ The World Energy Scenario Foundations 2024 presents two foundations from which a set of scenarios may be built. One foundation references challenges in global environmental cooperation, noting intense pressures for energy security, industrial competitiveness and other aspects of national self-interest, and
18 See https://unfccc.int/topics/global-stocktake/about-the-global-stocktake/ why-the-global-stocktake-is-important-for-climate-action-this-decade#Whatdoes-the-global-stocktake-tell-us.
the other acknowledges that the old system of international collaboration is under strain (World Energy Council 2024).
→ The wave of high-profile exits from the Net-Zero Banking Alliance, which may cause a loosening of membership criteria and less ambitious climate goals (Marsh 2025), is indicative of a “pulling back” from environmental cooperation in the banking sector.
→ The sustainability of cryptocurrencies is hampered by the lack of regulations, which, for example, would ensure that participants adopt practices that are aligned with ESG values (Bessala 2024).
→ The current US administration has significantly cut environmental programs, and further cuts are proposed for the National Oceanic and Atmospheric Administration (Harvey and E&E News 2025). Other measures include pulling the country out of the Paris Agreement and severing international partnerships on climate, including the involvement of US scientists in the Intergovernmental Panel on Climate Change (Mehta 2025).
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