The International Monetary Fund (IMF) reports that crypto mining and data centres together account for 2% of global electricity. This figure is expected to rise to 3.5% within the next three years, raising concerns about the environmental impact of these energy-intensive industries.
Increasing the electricity tax by 85% could in turn force the industry to become more environmentally responsible, proposes the IMF.
Cryptocurrency mining being particularly energy-hungry, policymakers are starting to consider strategies to limit carbon footprint. One strategy is the potential use of targeted taxation to steer the industry toward reducing emissions. The IMF proposes taxing miners will incentivise them to reduce their electricity consumption.
Cryptocurrency mining relies on high-powered computing equipment that consumes vast amounts of electricity. The IMF said to put this into perspective, a single Bitcoin transaction uses roughly the same amount of electricity as the average person in countries like Ghana or Pakistan consumes in three years.
This energy demand has put pressure on governments and organizations to seek ways to curb the industry’s environmental impact, especially as global energy consumption is closely linked to rising greenhouse gas emissions.
In a blog post, the IMF proposes a direct tax of $0.047 per kilowatt hour as a possible solution to encourage the crypto-mining industry to align with global emission reduction goals. This tax would target miners directly, incentivizing them to either reduce their electricity consumption or adopt cleaner, more sustainable energy sources.
IMF Says Levy Could Generate $5.2B in Annual Revenue
According to the IMF, implementing tax could help the crypto industry become more environmentally responsible while contributing to broader climate goals.
However, if the tax also accounted for the adverse effects of air pollution on local health, the rate would need to rise to $0.089 per kilowatt hour. This would result in an 85% increase in the average electricity price faced by crypto miners, impacting their operating costs.
The IMF estimates that a levy would generate $5.2 billion in annual revenue for governments worldwide and reduce global emissions by 100 million tons, approximately the same as Belgium’s current annual emissions.
The proposed taxation strategy is one way to address the crypto industry’s environmental challenges while simultaneously raising revenue for governments.
As the global push for climate action intensifies, the role of crypto mining in energy consumption and emissions is becoming an increasingly important topic for policymakers.
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