The International Monetary Fund (IMF) has recently called for a tax of 85% on energy used by crypto miners due to environmental impact.
The plan, which is intended to limit CO2 emissions, has garnered much opposition from business executives. Critics have pointed out that the IMF’s report fails to consider the progress that has been made by the cryptocurrency industry in adopting sustainable energy sources.
IMF Advocates for Higher Energy Taxes to Curb Emissions
According to the IMF’s report, the government should impose a tax of $0. 047 per kilowatt-hour on crypto miners to promote better energy efficiency and therefore more sustainable mining practices.
This rate could increase to $0. 089 when accounting for local air pollution, which is a price rise of 85% in electricity for miners. According to the IMF, this tax may yield $5. 2 billion in revenues worldwide and cut its annual emissions by 100 million tons.
However, the proposal also suggests a slightly lower tax rate for AI data centers, which is proposed at $0. 032 per kilowatt-hour or $0. 052 with local air pollution costs.
To this, the IMF has argued that AI data centers are usually situated in regions with cleaner electricity sources.
Furthermore, the report revealed that crypto mining and AI data centres collectively consumed 2% of the global electricity in 2022 and this is expected to increase to 3% in the future. 5% by 2025.
Industry Criticism Overlooked Sustainable Energy Efforts
The proposal has received a lot of backlash from industry leaders accusing the IMF of persecuting the crypto industry.
Critics have however argued that the report doesn’t capture some of the progress made in ensuring sustainable power sources. Some suggest that as much as 52% of the energy used in mining Bitcoins is derived from renewable energy sources.
Critics have also noted that the IMF’s report overstates the environmental effects of these industries by referring to both crypto mining and AI data centers. They posit that these sectors have varying energy use and environmental impacts.
According to some industry insiders and experts like Daniel Batten, the IMF data is misleading and that the carbon footprint of Bitcoin mining has not rampantly increased as the network expands.
Debate Over Environmental Impact Continues
The proposed tax has also given rise to a more general discussion on the sustainability of cryptocurrency mining. While the IMF claims the sector accounts for 0.7% of global carbon emissions by 2027, industry supporters offer different numbers. According to the Bitcoin Mining Council, Bitcoin mining uses only 0.2% of the world’s energy. It only has a carbon footprint of only 0.135%.
Cryptocurrency miners have defended the industry as helpful in balancing power grids by using excess energy. They argue that Bitcoin mining activities tend to look for the cheapest and efficient energy sources and even the so-called stranded energy that cannot be readily used in the grid.
However, countries like Iran and Venezuela have either restricted the mining of crypto or have prohibited it due to power constraints.
