Cryptocurrency’s Carbon Catastrophe: The Clash Between Climate Goals and Energy-Intensive Mining

Crypto mining rig. Photo courtesy of Money Bright.

In April 2021, US President Joe Biden announced his goal to reduce economy-wide net greenhouse gas emissions by 50-52% by 2030 at the Leaders Summit on Climate. This ambitious undertaking entails the creation of a carbon pollution-free power sector by 2035 and a net zero emissions economy by 2050. However, to achieve these goals, the US federal government must address all sources of greenhouse gas emissions, including those from a rapidly expanding cryptocurrency sector.

Cryptocurrency mining and transactions consume vast amounts of energy—crypto miners alone use as much electricity annually as all of Australia—contributing to significant carbon emissions and straining power grids. Regulating the energy-intensive practices of the cryptocurrency industry is key to achieving Biden’s climate agenda and to ensuring a sustainable future.

The recent surge in cryptocurrency, fueled by record-breaking prices, has led to massive increases in energy consumption that threaten power-grid capabilities and release substantial amounts of CO2 into the atmosphere. From 2020 to 2021, Bitcoin (BTC) mining emitted more than 85.89 Mt of CO2eq, which is equivalent to carbon emissions from 84 billion pounds of coal burned, 190 natural gas-fired power plants, or over 25 million tons of landfilled waste. In 2023, BTC mining energy use grew by more than 101%, reaching 141.2 TWh. Experts worry that the US electric grid may be ill-prepared for this demand. Historically, BTC prices and energy consumption rise in tandem; with BTC prices hitting a record high above $69,000, energy consumption is expected to increase at staggering rates too. Indeed, BTC mining operations drew an astounding 19.6 gigawatts of power in the past month alone, pushing energy consumption up 62% YoY. This amount of power has the capacity to power approximately 3.8 million homes in Texas.

The cryptocurrency industry uses two main approaches to confirm transactions and add new blocks to the blockchain: proof of work and proof of stake. Proof of work, used by cryptocurrencies like Bitcoin, creates new cryptocurrency by adding blocks of transactions to the blockchain. This process, called “mining,” requires computers to solve complex puzzles, which consumes a lot of energy. In return for their work, miners receive transaction fees and newly created cryptocurrency coins.

Proof of work uses a large amount of energy; for example, a single Bitcoin transaction can use as much electricity as an average US household consumes in 37 days. By contrast, some cryptocurrencies, like Ethereum, use a different method called proof of stake. In this approach, participants offer some of their cryptocurrency as a type of security deposit. This method requires far less electricity—around 0.005% of what proof of work consumes.

Crypto mining companies are drawn to deregulated safe harbors like Texas,, which is now estimated to be home to a quarter of all US BTC mining due to its low cost and laissez-faire regulations. This level of consumption poses a burden to local power grids. The appeal lies in the combination of factors such as low electricity costs, minimal regulatory constraints, and favorable tax environments. In these jurisdictions, companies can operate with greater freedom and lower overhead, maximizing their profitability in the highly competitive crypto mining industry. In October 2022, a group of US legislators—including Elizabeth Warren, Al Green, Sheldon Whitehouse, Katie Porter, Edward J. Markey, Jared Huffman, and Rashida Tlaib—wrote to the Electric Reliability Council of Texas expressing concerns about the impact of crypto operations on climate change, the stability of the energy grid, and subsidies. The letter cited investigations that revealed just seven large cryptominers operate over 1,045 megawatts of electric production, enough capacity to power a city of 830,000 residences. This energy use has and continues to  result in substantial amounts of carbon emissions and other “adverse air quality effects” seeping into the atmosphere.

This is particularly concerning for the state of Texas, which has been plagued by extreme weather events that have been exacerbated by climate change. A winter storm in February 2021 and a heat wave in July 2022 caused the power grid to collapse, leaving 246 people dead. Currently, the state lacks legislation to regulate energy consumption by crypto companies during extreme weather conditions. Instead, the Electric Reliability Council of Texas paid Riot, a crypto mining enterprise, $31.7 million in energy credits during the heatwave to cut its energy consumption. Concerningly an increased strain on already vulnerable grids could put residents of the state at risk. These consequences were seen in blackouts from crypto related grid failure in Iran, Siberia, Kazakhstan—making it difficult for medical facilities to run their cold-storage facilities such as those used for COVID-19 vaccines. In addition to an increased strain on power grids, increases in energy consumption will make it substantially more difficult for the 20 states to meet their target of decarbonizing the grid to mitigate energy and climate concerns.

In response to these challenges, both state and federal initiatives have aimed to address the energy impact of crypto mining, though these measures have not gone far enough to effectively mitigate the risks posed to power grids and climate goals. In March 2022, President Biden passed Executive Order 14067 on Ensuring the Responsible Development of Digital Assets, directing the White House Office of Science and Technology Policy to produce a report on the climate and energy implications of crypto in the US. The report found that nearly all crypto electricity usage is driven by consensus mechanisms, primarily proof of work. However, the order has yet to result in substantial changes to how digital assets are governed. 

At the state level, legislators are experimenting with different levels of regulation and incentivization. In 2022, New York passed a law temporarily stopping the creation of new proof of work cryptocurrency mining operations that rely on fossil fuels. Other states like Georgia, Illinois, and Kentucky have instituted tax incentives for mining companies. Similarly, Nevada is incentivizing growth in the crypto sector by banning local governments from taxing blockchain technology. Colorado is becoming the first state to accept crypto for tax payments, and Texas recognizes virtual currencies as a category of financial assets subject to the state’s commercial laws. In order to have a real effect on crypto’s carbon impact, unified federal regulation is urgently needed.

One effective way for the US to reduce carbon emissions from cryptocurrency mining is to encourage a shift from energy-intensive methods like proof of work to more efficient alternatives such as proof of stake. Proof of stake significantly reduces the power required for each transaction, making it a more sustainable option that could support greater scalability in the industry. By implementing a governance framework that guides and supports this transition, policymakers can help build trust in proof of stake systems and promote their adoption.

In the meantime, restricting fossil fuel use for mining could further reduce emissions. For example, banning coal and natural gas for proof of work mining may push the industry toward cleaner energy sources. A 2021 study found that coal and gas made up about 61% of Bitcoin’s energy consumption, so a policy shift in this area could make a sizable impact. However, this approach needs regulation to ensure that mining doesn’t divert renewable energy away from other sectors or stress the power grid. Crypto experts at the Tony Blair Institute for Global Change suggest that requiring miners to be transparent about their energy demands and grid connections before they begin operations could help prevent grid overload. They also argue that miners should be responsible for covering the costs of infrastructure upgrades to avoid increased energy costs for consumers.

Simultaneously, policymakers can engage and incentivize existing industry groups to develop sustainability norms in addition to implementing regulations. Some trading platforms, like Sustainable Bitcoin Standard, have begun to invest in regenerative finance through digital renewable-energy certificates (RECs) by creating financial incentives for miners to use REC-verified clean energy. Crypto Climate Accord has pledged to mine exclusively with renewable energy, which is verified with blockchain. Policymakers can support such developments by ensuring their transparency by requiring mining operations to disclose fuel sources. By implementing these policies, the US government can facilitate a shift away from proof of work over time, while remaining dedicated to the goal of decarbonization. 

Although the Biden administration’s executive order on monitoring cryptocurrency is a step in the right direction, more comprehensive policies are needed to address the unregulated growth of the industry and its environmental impact. A combination of governance frameworks, responsible energy use, and industry engagement could allow for a gradual move away from proof of work, contributing to the broader goal of decarbonization while supporting the industry’s future.

Rebecca Tang (CC ’27) is a staff writer at CPR interested in data privacy law, climate policy, gender equality, and reproductive justice. A political science and English double-major, Rebecca is also involved with Columbia Undergraduate Law Review, Consult Your Community, and Columbia Mentoring Initiative. She can be reached at rkt2122@columbia.edu.