- Senior IMF officials suggest a tax on electricity used by crypto mining and data centers to reduce carbon emissions.
- $0.047 per kWh for crypto mining, aimed at cutting emissions and aligning with global targets.
- Bitcoin transactions consume as much electricity as three years’ worth for an average person in Ghana; AI queries use significantly more than Google searches.
- Crypto mining could account for 0.7% of global CO2 emissions by 2027; data centers could contribute 1.2%.
Two senior officials at the IMF have outlined a groundbreaking plan to fix the environmental impact of cryptocurrency mining and data centers. In an August 15 blog post, Shafik Hebous, deputy division chief of the IMF’s Fiscal Affairs Department, together with Nate Vernon-Lin, an economist in the Climate Policy Division, suggested that imposing a significant tax on electricity used by these sectors could drastically cut global carbon emissions.
Their plan is to tax the electricity consumed by crypto miners at $0.047 a kWh rate, whose result they claim will force the industry to align themselves with global environment targets on greenhouse gas emissions.
Projected Impact of Crypto Mining on Global Electricity Demand
In a blog post titled “What do crypto assets and artificial intelligence have in common? Both are power hungry,” Hebous and Vernon-Lin highlighted the immense energy consumption associated with these technologies.
They pointed out that one Bitcoin transaction uses as much electricity as an average person in Ghana or Pakistan consumes over three years. In comparison, ChatGPT queries consume ten times more electricity than a Google search, owing to the high energy demands of AI data centers.
In 2022, crypto mining and data centers together were responsible for 2% of global electricity demand. Projections suggest this could rise to 3.5% in the next three years, equivalent to Japan’s current consumption.
The environmental impact is alarming: a recent IMF paper predicts that crypto mining alone could contribute to 0.7% of global CO2 emissions by 2027. When including data centers, the emissions could total 450 million tons or 1.2% of the global total.
The projected tax could bring in billions in revenue while restoring emissions. A $0.047 per kilowatt hour tax on crypto mining may net $5.2 billion annually and reduce carbon dioxide emissions by 100 million tons.
For data centers, a slightly lower rate of $0.032 per kilowatt hour, or $0.052 as it includes the costs of air pollution, might net as much as $18 billion annually. This reflects the more generally greener energy sources for data centers than crypto mining operations.
The IMF now calls for tax breaks and incentives against their ecological footprint, while most data centers and crypto miners have usually been generously given an avenue. The suggestion from the IMF comes as a response to these industries’ minimal employment benefits and their potential impacts on the electrical grid.
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