Two executives from the International Monetary Fund (IMF) said on Thursday that taxes could increase the average global cost of crypto-mining electricity by up to 85%, which could significantly reduce carbon emissions.
This is despite the fact that smaller operations have been unable to generate a profit since the halving of Bitcoin in April, which has heightened the strain on miners to identify more efficient operational strategies. In a blog post, the IMF stated that:
Such a levy would raise annual government revenue of $5.2 billion globally and reduce annual emissions by 100 million tons around Belgium’s current emissions.
IMF
It is uncertain whether a tax increase of this nature would directly reduce emissions, as miners have frequently pursued more cost-effective alternatives in countries with more favorable electricity costs.
IMF execs float raising crypto mining electricity taxes
The IMF Fiscal Affairs Department’s deputy division chief, Shafik Hebous, and climate policy division economist Nate Vernon-Lin wrote that a tax of $0.047 per kilowatt hour “would drive the crypto mining industry to curb its emissions in line with global goals.”
According to them, if the local impact of miners on health were taken into account, the tax would increase to $0.089 per kilowatt hour.
They argued that a single Bitcoin transaction consumes approximately the same amount of electricity as the average person in Pakistan consumes in three years, whereas the artificial intelligence model ChatGPT requires ten times the amount of power compared to a Google search.
The IMF reported that crypto mining and artificial intelligence data centers’ environmental impact collectively accounts for nearly 1% of global carbon emissions and 2% of global electricity consumption.
It follows a September IMF report that stressed the electricity use of both industries. Within the next three years, crypto mining and AI data centers are anticipated to consume as much energy as Japan, the world’s fifth-largest electricity user.
The IMF stated that a direct tax of $0.047 per kilowatt hour on electricity consumed by crypto miners could substantially reduce emissions, thereby integrating the industry with global climate objectives.
According to the IMF, these measures have the potential to generate $5.2 billion in annual revenue and reduce emissions by approximately 100 million tons, which is roughly equivalent to Belgium’s current emissions.
The IMF acknowledged that the tax increase would require a global effort to coordinate and resolve the jurisdictional arbitration that could result in miners relocating abroad and undermining those endeavors.
Hebous and Vernon-Lin suggested that the targeted tax could potentially promote the adoption of more energy-efficient equipment by crypto miners and AI data centers and less energy-intensive operations.
Nevertheless, they said that global coordination was necessary for the tax, as “stricter measures in one location could encourage relocation to jurisdictions with lower standards.”
Nevertheless, there have been disputes regarding the extent to which crypto miners generate emissions compared to other industries. Amazon, a technology behemoth, reported a carbon footprint of 71.54 million metric tons of carbon dioxide in 2021, which is already greater than the estimated 65.4 million metric tons of carbon dioxide emitted by Bitcoin.
Crypto mining has been banned in some countries, including Venezuela because it strains the electricity grid. Iran has also initiated a $24 reward for individuals who report illegal crypto miners, as the nation’s grid is experiencing strain due to a severe heatwave.
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