In light of the danger that bitcoin miners and other producers of energy-intensive digital assets pose to the United States’ ability to meet its climate change targets, a White House agency has today urged the Biden administration to consider taking action against them.
The Office of Science and Technology Policy has urged federal agencies to collaborate with states, communities, and industry to develop voluntary environmental performance standards for digital assets secured using cryptographic techniques like bitcoin, ether, and nonfungible tokens (NFTs) before taking any punitive measures on the emerging $1 trillion industry.
The White House agency said in a new report on the climate and energy implication of the crypto industry, “Should these measures prove ineffective at reducing impacts, the Administration should explore executive actions, and Congress might consider legislation to limit or eliminate the use of high energy intensity consensus mechanisms for crypto-asset mining.”
A senior administration official stressed on a call with reporters on Wednesday night that there is no timeline for any prospective executive directives or legislative proposals from the White House.
“We think that there’s a learning opportunity for collaboration, transparency, and innovation to encourage this industry to limit impacts on climate and communities,” said the person, who was not authorized to comment publicly.
The official also declined to comment on recent legislative initiatives to tighten regulation of NFTs and cryptocurrencies, both of which are safeguarded by means of the distributed digital ledger technology known as the blockchain.
At least 25 million metric tonnes of CO2 are being produced annually by the cryptocurrency sector, according to the analysis. That’s almost the same as the total annual direct emissions from the US railroad sector.
The administration official warned that “the rapid growth of energy-intensive crypto-asset technologies, when not directly using clean electricity, could hinder the ability of the United States to achieve its nationally determined contribution under the Paris Agreement and avoid the most severe impacts of climate.”
The Blockchain Association, an industry group for the cryptocurrency industry, welcomed the White House study with open arms.
Crypto data centers can assist facilitate and, in some cases, hasten the United States’ transition to a carbon-free electrical system, according to industry spokesperson Lindsey Kelleher’s email to the White House.
Coincident with the release of this study is the final phases of the transition from the inefficient proof-of-work (PoW) method of confirming blockchain transactions to the much more efficient proof-of-stake (PoS) system, making Ethereum the second most valuable cryptocurrency network behind bitcoin. Those that use PoW systems, known as “miners,” compete to answer increasingly difficult riddles in exchange for a share of the transaction fees generated by the network. “Validators” under the PoS system stake their crypto assets on the possibility of validating transactions and earning the accompanying fees.
Growing PoS networks, or those that use less energy, have much lower hazards than growing PoW networks, the survey found.
As part of a larger crypto policy review, President Joe Biden requested a report from the Office of Science and Technology Policy early this year (Climatewire, March 10).
In one proposal, the Energy Department was tasked with evaluating the stability of the power infrastructure in light of the growing demand for mining cryptocurrencies. Yet another advocate for the United States to take action. Energy Information Administration to initiate data collection on mining’s energy use and fuel mix, power purchase agreements, environmental justice implications, and demand-response involvement.
The White House Office of Science and Technology Policy has proposed establishing energy conservation guidelines for crypto-asset operations and called for a greater study into making digital assets more environmentally friendly. Such a move would require approval from lawmakers.
The survey did provide some positive findings for the crypto sector. The White House Office of Science and Technology Policy has pointed out that crypto emissions will decrease when more renewables are added to the grid, and that crypto miners may be able to provide demand-response services to the grid by reducing their energy use at peak load.
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It was also acknowledged by the White House agency that voluntary carbon offset transactions may be verified in a decentralized manner using the blockchain. Additionally, the technology has the potential to aid in the management of electrical grids with distributed energy resources, such as electric vehicles and battery storage devices that can both feed and draw energy from the grid.
On the other hand, “alternative options might work as well or better,” the paper said. The government of the United States should promote innovation that solves existing market problems, advances social and economic justice, and adequately protects consumers and investors.
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