Climate and Energy Implications of Crypto-Assets

Digital assets have provided some benefits and value for many U.S. residents and businesses; however, many current technologies require a substantial amount of electricity for crypto-asset generation, ownership, and exchange. This electricity usage is contributing to greenhouse gas (GHG) emissions and other pollution contributing to climate change. Because the U.S. government has a responsibility to ensure electric grid stability, enable a clean energy future, and protect communities from pollution and climate change impacts, President Biden recently signed Executive Order 14067, “Ensuring Responsible Development of Digital Assets.” In a report released by the White House Office of Science and Technology Policy (OSTP), members of an Interagency Policy Committee explore the challenges and opportunities of crypto-assets for energy and climate change issues in the United States, and answer the four main questions asked by Executive Order 14067:

  1. How do digital assets affect energy usage, including grid management and reliability, energy efficiency incentives and standards, and sources of energy supply?
  2. What is the scale of climate, energy, and environmental impacts of digital assets relative to other energy uses, and what innovations and policies are needed in the underlying data to enable robust comparisons?
  3. What are the potential uses of blockchain technology that could support climate monitoring or mitigating technologies?
  4. What key policy decisions, critical innovations, research and development, and assessment tools are needed to minimize or mitigate the climate, energy, and environmental implications of digital assets?

The report, titled Climate and Energy Implications of Crypto-Assets in the United States, goes on to make key recommendations to ensure the responsible development of digital assets:

  • Minimize GHG emissions, environmental justice impacts, and other local impacts from crypto-assets;
  • Ensure energy reliability;
  • Obtain data to understand, monitor, and mitigate impacts;
  • Advance energy efficiency standards;
  • Encourage transparency and improvements in environmental performance; and
  • Further research to improve understanding and innovation.

The authors note that crypto’s GHG emissions are likely to fall as more renewables are developed and that crypto miners could provide some help by reducing their energy use during times of peak load. They also acknowledged that blockchain technology has the potential to help manage electrical grids with distributed energy resources like electric vehicles and battery storage systems.

“However, other solutions might work as well or better,” the report warns. “The U.S. government should seek to facilitate innovation that addresses market challenges, aligns with environmental and equity objectives, and appropriately ensures customer and investor protection and market integrity.”

For more resources related to this piece, check out HSDL’s In Focus on Climate Change and Cyber Policy or other resources related to cryptocurrencies and energy

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