The Carbon Bankroll report was released on May 17 as a result of collaboration between the Climate Safe Lending Network, The Outdoor Policy Outfit, and Bank FWD. The collaboration made it possible to calculate the emissions generated by a company’s cash and investments, such as cash, cash equivalents and marketable securities.
The report revealed that for several large companies, including Alphabet, Meta, Microsoft and Salesforce, cash and investments are their largest source of emissions.
The energy consumption of the flagship proof-of-work (PoW) blockchain network, Bitcoin, has been the subject of debate in which the network and its participants, especially miners, are criticized for contributing to an ecosystem that could climate change is worsening. However, recent discoveries have also highlighted the carbon impact of traditional investments.
Bitcoin is often reviled because of the “images”
The Carbon Bankroll report was authored by James Vaccaro, CEO of the Climate Safe Lending Network, and Paul Moinester, CEO and founder of the Outdoor Policy Outfit. Regarding the impact of the report, Jamie Beck Alexander, director of Drawdown Labs, stated
“Until now, the role that corporate banking practices play in fueling the climate crisis has been murky at best. This landmark report sheds a spotlight. The research and conclusions contained in this report offer businesses a critical new opportunity to help shift our financial system away from fossil fuels and deforestation and toward global climate solutions.Companies that are serious about their climate commitments will welcome this report. move forward and mobilize urgently to seize this lever for systematic change.
Some of the metrics the report highlighted in relation to the climate impact of the banking industry include:
- Since the signing of the Paris Agreement in 2015, 60 of the world’s largest investment and commercial banks have invested $4.6 trillion in the fossil fuel industry.
- Banks like Citi, Wells Fargo and Bank of America have invested USD 1.2 billion in this industry.
- The largest banks and asset managers in the United States have been responsible for financing the equivalent of 1,968 million tons of carbon dioxide. If the US financial sector were a country, it would be the fifth largest issuer in the world, just after Russia.
- Compared to the direct operating emissions of global financial companies, the emissions generated through investment, lending and underwriting activities are 700 times higher.
Cointelegraph spoke with Cameron Collins, an investment analyst at Viridi Funds, a cryptocurrency investment fund manager, about the reasons behind the excessive vilification of the Bitcoin network. She said:
“It’s easy to imagine a warehouse of high-performance computers sucking up power, but it’s not so easy to imagine the after effects of money in circulation funding carbon-intensive activities. More often than not, it’s this image that demonizes Bitcoin mining.” In reality, the entire banking system uses more electricity in its operations than the Bitcoin mining industry.”
In addition to the “imagery” portrayed, there have been several efforts to track the exact power consumption of the Bitcoin network’s operation. One of the most widely accepted metrics for this complex variable is the one calculated by the Cambridge Center for Alternative Finance and is known as the Cambridge Bitcoin Electricity Consumption Index (CBECI).
At the time of writing, the index estimates the annualized energy consumption of the Bitcoin network to be 117.71 terawatt-hours (TWh). The CBECI model uses various parameters such as network hash rate, miner fees, mining difficulty, mining equipment efficiency, electricity cost, and energy usage efficiency to calculate the annualized consumption of the network.
The growth in the number of participants and related activity on the Bitcoin network is evident in the network’s monthly electricity consumption. From January 2017 to May 2022, monthly electricity consumption has multiplied more than 17 times, from 0.62 TWh to currently 10.67 TWh. By comparison, companies like PayPal, Alphabet and Netflix have seen their carbon emissions multiplied by 55, 38 and 10 times, respectively.
Collins also spoke about the perception of the Bitcoin network that could change in the future. He added that if more people were to approach Bitcoin (BTC) mining as a financial service rather than mining, the sentiment surrounding PoW networks might start to change, and the public might appreciate it more as an essential service rather than an reckless gold rush. He also highlighted the role of community opinion leaders in conveying the true nature of Bitcoin mining to policy makers and the general public.
Work together to solve the energy problem
Recently, there have been several examples of collaboration between the Bitcoin mining community and the energy industry, and vice versaRecently, there have been several examples of the Bitcoin mining community collaborating with the energy industry -and vice versa- to work on mutually beneficial methodologies . US energy company Crusoe Energy is repurposing energy from wasted fuels to power Bitcoin mining, starting with Oman. The country exports 23% of its total gas production and aims to reduce gas flaring to absolute zero by 2030.
Even US energy giant ExxonMobil has been unable to avoid taking action. In March of this year it became known that Crusoe Energy had signed an agreement with ExxonMobil to use leftover gas from North Dakota oil wells to power Bitcoin miners. Traditionally, energy companies use a process known as gas flaring to get rid of excess gas from oil wells.
A report published by the Bitcoin Mining Council in January revealed that the Bitcoin mining industry increased the sustainable energy mix of its consumption by almost 59% between 2020 and 2021. The Bitcoin Mining Council is a group of 44 Bitcoin mining companies that represent more than 50% of the mining power of the entire network.
Cointelegraph spoke with Bryan Routledge, an associate professor of finance at Carnegie Mellon University’s Tepper School of Business, about comparing the carbon emissions of Bitcoin and traditional banking.
He stated that “Bitcoin (blockchain) is a record-keeping technology. Is there another protocol that is comparatively secure but not as energetically expensive as PoW? There are certainly a lot of people working on it. Likewise, we can compare Bitcoin with the registration of financial transactions in normal banks.”
The reward for mining a Bitcoin block currently stands at 6.25 BTC, more than $190,000 based on current prices, and the current average number of transactions per block is around 1,620, according to data from Blockchain.com. This implies that the average reward for a transaction could be estimated at more than $117, a reasonable reward for a single transaction.
Routledge further added: “Traditional banks are much larger and therefore collectively have a large impact on the environment. But for many transactions, the cost per transaction is much lower, for example, the commission of a ATM. BTC arguably has a lot of advantages. But being more efficient certainly seems like an important step.”
Since gauging the true impact of Bitcoin is not really a quantifiable endeavor due to the significant change that the technology and currency represent, it is important to remember that the energy consumption of Bitcoin cannot be vilified in isolation. The global financial community often tends to forget the high impact of the current banking system that is not compensated only by corporate social responsibility and other incentives.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.