Crypto’s climate impact: Are carbon offsets good enough?

Global leaders are discussing what must be done to address climate change concerns at the COP26 summit, which is taking place in Glasgow, Scotland. Businesses around the globe are striving to reach carbon neutrality. The topic of environmental impact is a hot topic within the crypto sector. It has been designated a top priority.

Tesla, an electric car manufacturer, began accepting Bitcoin (BTC), and invested $1.5 Billion in the cryptocurrency. However, BTC payments were stopped a few months later due to concerns about the “rapidly rising use of fossil fuels for Bitcoin mining, transactions, and especially coal.”

Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
Elon Musk (@elonmusk), May 12, 2021

The efforts to make crypto more environmentally friendly have increased since then. This partly reflects Elon Musk’s statements that Tesla would accept BTC payments if there is a confirmation of reasonable (50%) energy use by miners with a positive future trend.”

BitMEX, a cryptocurrency exchange, was one of the first to announce a carbon neutral status. It pledged to offset all Bitcoin transactions that come to and go to the platform.

BitMEX announced it had purchased 7,110 metric tons CO2 credits in partnership with Pachama, an AI carbon data tracking company. The purchase was valued at approximately $100,000. Carbon credits are official approvals that allow corporations to use 1 ton of carbon dioxide. This allows them to be accountable and trackable.

BitMEX will take this action to ensure it continues its operations in the coming calendar year. It will also offset any emissions from Bitcoin transactions to and fro its servers. A “holistic effort” is required by the exchange to include both research into the environment and education about the “possibilities not locked by crypto technology.”

Alex Salnikov (co-founder and head product at NFT marketplace Rarible) stated that the transparent design of cryptocurrency is a major reason why it is being scrutinized for its carbon footprint. This is not necessarily because of its environmental impact.

Salnikov said that “additional pressure” is a good thing as the space is pushing to become more energy efficient with proof of stake blockchains. The ultimate goal, according to Salnikov is to make sure that all Web 3.0 tools have a minimal or zero carbon footprint.

Salnikov stated that carbon offsets are “definitely essential as a steppingstone.” However, not everyone agrees with this statement. Some argue that offsets could do more harm than good.

Are carbon offsets greenwashed

Jennifer Morgan, Greenpeace’s executive director, spoke on October 1st at the Reuters Impact conference about the increasing carbon-offset trend. She suggested that companies are avoiding their responsibilities by using carbon credits.

Morgan stated that “no time” is available for offsets, as we are currently in a “climate emergency” and therefore, it is imperative to eliminate fossil fuels. Morgan said that offset schemes are just “greenwash” and allow companies to keep doing what they have been doing while still making a profit.

Martha Reyes from cryptocurrency exchange Bequant spoke to Cointelegraph and said that carbon credits were “not the ideal solution for carbon emissions.”

Reyes suggested that using more renewable energy to mine Bitcoins is a more sustainable way to do business. China banned crypto mining, which meant that miners who were using carbon-based energy sources had to flee the country.

Morgan says carbon offsets enable companies to continue polluting, but not reduce their emissions. They simply purchase credits from projects that reduce, or avoid, the release of CO2, like solar power farms.

According to Reuters, a group investigating the integrity of carbon offsets stated that 29% of the forest carbon offsettings it analyzed in a program costing $2 billion overestimated their emissions. This totaled around 30 million metric tonnes of CO2.

While the problems with carbon offsets are obvious, it is still up for discussion whether there are other ways that cryptocurrency industry players can make a difference if not involved in mining.

ESG crypto assets

Greenpeace is taking a more aggressive stance against polluting entities in the face of a climate crisis. In May, the organization stated that it could no longer accept Bitcoin donations. It had started accepting BTC donations in 2014. The reason was a better understanding of how much energy is required to run Bitcoin.

Eric Berman, senior editor of U.S. finance at Thomson Reuters Practical Law said that he doesn’t see anything “dirty” in Bitcoin or other cryptocurrency. Berman said that BTC, like all commercial enterprises, uses energy. Sustainability “is in the eyes of the miner.”

Berman believes that large mining companies can be required to use renewable energy sources. This is not because they are forced to by regulators, but because the market collectively votes for it. He prefers BTC mined from renewable energy. Cointelegraph was informed by Berman:

“As far as I know, developers are working on ways to digitally tag Bitcoin or other crypto units in order to indicate that they have been sustainably mined. This could create bifurcated market within each cryptocurrency, with the sustainably mined version having the greater value.”

He stated that the tracking of coins made with renewable energy could allow them to be accessible to investment vehicles that are focused on environmental, social, and governance (ESG).

He said that the decision on which coins will get an ESG tag is likely to be politically motivated. Even figuring out who would decide the rating raises would create a “whole spectrum of questions” and could threaten to institutionalize cryptocurrency in a manner that is contrary to the spirit of Bitcoin.

Bequant’s Reyes pointed out that cryptocurrency miners have signed energy deals with suppliers, and are “taking advantage of the renewable energy marketplace.” She said that green mining initiatives are increasing, both in terms of their source of electricity and disposal of old mining equipment.

The cryptocurrency industry has done more than just buy carbon credits to lower their environmental impact. Crypto firms have pledged to be more sustainable through the Crypto Climate Agreement, which is supported by over 150 organisations from the sector.

Most firms have not signed up for the CCA, which requires a public declaration of commitment to net-zero emissions from electrical operations by 2030. Experts argue that neither Bitcoin nor cryptocurrency should be the focus.

Crypto’s role during the climate crisis

Although cryptocurrencies are often the focus of attention when it comes to climate changes, Sarah Manski, assistant professor of George Mason University’s School of Business said that every commodity and currency has a carbon footprint.

“It is reasonable to estimate that printing U.S. banknotes per year consumes approximately 200,000,000 kilowatts of energy, which includes thousands of tons of ink and cotton, as well as water. Our coins are made from hundreds of thousands of tonnes of metal.

Manski said that some carbon offsets may be greenwashing but many others are not. This implies that not all carbon offsets will be equal and that some offsets might not be as transparent as others. Pete Humiston from Kraken Intelligence stated that there have been positive developments in the industry which have helped to alleviate concerns about the industry’s “carbon intensiveness.”

Humiston said that China’s crypto ban has moved mining hashing power from China to North America where it is more favorable for many of the fledgling mining companies. He also stated that Texas derives “a substantial chunk” of its energy through wind power.

He explained that large-scale mining companies deliberately built their operations near local renewable initiatives in order to “take advantage” of low-cost power surpluses, which could otherwise be disposed as waste.

Humiston said that the crypto-asset market has made “significant inroads towards becoming carbon neutral” and will continue to do so. He concluded:

This is because miners are incentivized by the economics to mine Bitcoin and other cryptocurrency assets using cheap renewable energy.

The 3rd Global Cryptoasset Benchmarking Study, conducted by the University of Cambridge in October 2020, showed that 76% of cryptocurrency miner use electricity from renewable sources. 39% of them only consume renewable energy when mining proof of work cryptocurrencies such as Bitcoin Cash (BCH) and Ether (ETH).

According to The Bitcoin Mining Council, 56% of the Bitcoin mining industry’s power mix was made up of renewable energy. However, the industry used a small amount of energy compared to the world’s energy consumption. Based on three questions from just 32% of Bitcoin miners, the BMC estimated that the Bitcoin mining industry used 67% of its power mix. This was used to calculate the 56% estimate.

Humiston estimates how much renewable energy is being used for mining Bitcoin and other cryptocurrencies. Humiston stated that this industry is “going the right direction.” Reyes said that a growing use of blockchain technology can be found in conservation and reforestation efforts. These activities benefit from the transparency and accountability offered by a blockchain.

Key industry players, whether they have carbon offsets or not, are beginning to see a trend toward a more sustainable approach. As not all institutions are running away from BTC due to its carbon footprint, the industry is making efforts to be more eco-friendly.

BlackRock, a multinational investment firm with a $9 trillion market cap, owned nearly $400 million in shares in Bitcoin mining companies through its funds, as of August.

As cryptocurrency adoption grows, some people who are not actively involved in the industry may no longer see the environment as a concern. Only time will tell if other sectors will follow crypto’s green goals.

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Jason Basler

Jason Basler– Financial Updates My Name is Jason Basler and I am also the main source from the ‘Topnewsscoop.com’ of all the exclusive and most delicate visualization of the activities in the business sector. My first step towards this journey was taken in the very early years of my life. I started with an independent financial consultant. However, I only had almost 4 years of skills and experience in this market. I have always been a free personality and like to fly one place to another, to explore more and more. Moreover, this passion and craze of traveling gave me a chance to report a section for best news associations. Last but not least, I am presently working full-time as an editor. Address: 4830 Crim Lane Dayton, OH 45402, United States of America Phone Number:  +1 937 727 7917 Email: [email protected]

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