The International Monetary Fund (IMF) reports that crypto mining and data centers together account for 2% of global electricity consumption, a figure expected to rise to 3.5% within the next three years. This trend is raising concerns about the environmental impact of these energy-intensive industries.
To address this, the IMF proposes that increasing electricity taxes by 85% could push the industry to adopt more environmentally responsible practices. As cryptocurrency mining is particularly energy-hungry, policymakers are considering strategies to limit its carbon footprint. One such strategy involves targeted taxation aimed at reducing emissions. The IMF suggests that taxing miners could incentivize them to lower their electricity consumption.
Cryptocurrency mining relies on high-powered computing equipment that consumes vast amounts of electricity. To put this into perspective, the IMF notes that a single Bitcoin transaction uses roughly the same amount of electricity as the average person in countries like Ghana or Pakistan consumes over three years.
This massive energy demand has prompted governments and organizations to seek ways to curb the industry’s environmental impact, especially given the close link between global energy consumption and rising greenhouse gas emissions.
In a blog post, the IMF proposes a direct tax of $0.047 per kilowatt-hour as a potential solution to encourage the crypto-mining industry to align with global emission reduction goals. This tax would target miners directly, incentivizing them to reduce their electricity consumption or shift to cleaner, more sustainable energy sources.
IMF Estimates Levy Could Generate $5.2 Billion in Annual Revenue
According to the IMF, implementing this tax could not only help the crypto industry become more environmentally responsible but also contribute to broader climate goals. If the tax were adjusted to account 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, significantly impacting their operating costs.
The IMF estimates that such a levy could 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.
This proposed taxation strategy offers a way to address the environmental challenges posed by the crypto industry while also 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.