The New York state Assembly passed a bill on Tuesday evening that would place a moratorium on new bitcoin mining facilities that require an air permit for burning fossil fuels on site. The bill now goes to the state Senate, which passed a similar bill last year, and then would need to be signed by Democratic Gov. Kathy Hochul, who has not publicly taken a position on the proposal.
Although this measure is the first of its kind in any state, it will almost certainly not be the last, because the energy-intensive process of mining cryptocurrency is drawing increasing scrutiny for its contribution to climate change. A number of states have set ambitious goals for reducing the greenhouse gas emissions that cause climate change — New York aims for an 85% reduction by 2050 — and environmentalists say allowing unrestricted crypto mining is incompatible with meeting those goals.
“We strongly support this legislation,” Liz Moran, New York policy advocate for the environmental law nonprofit Earthjustice, told Yahoo News. “It takes an incredibly reasonable approach to this emerging industry and concern with the energy consumption of this industry.”
Mining for bitcoin — by far the largest cryptocurrency by market cap — uses staggering amounts of electricity: Last year, Cambridge University researchers calculated that bitcoin consumes approximately 121.36 terawatt-hours annually. That’s more electricity than is used by the 45-million-person country of Argentina, or by Google, Apple, Facebook and Microsoft combined. Last November, a study by the trading education platform Forex Suggest found that just to offset the carbon emissions of bitcoin and ethereum — the second-most-popular cryptocurrency — would require planting 384 million trees every year.
The crypto industry has its own, lower estimates of its carbon footprint. Earlier this year, assuming a much lower amount of electricity is needed to mine cryptocurrency, the digital investing firm CoinShares estimated that the industry is responsible for only 0.08% of global carbon emissions.
Cryptocurrencies do not have a government stamp of approval or a physical object to verify their authenticity. Instead, virtual coins or “tokens” are verified via blockchain technology, in which a database shared across a network records transactions. New bitcoins are released through “mining,” in which new transactions in the blockchain are validated and recorded. In “proof-of-work,” the most energy-intensive approach to mining, miners verify the validity of a group of bitcoin transactions, bundled into a block — a process that involves checking 20 to 30 different variables — and compete to be the first to have their validation accepted by solving a mathematical puzzle.
To win at this game, bitcoin miners have droves of supercomputers running nonstop.
There is a finite amount of bitcoin. As more of it gets unlocked, more transactions are required to unlock the same number of bitcoins. So the energy demands of bitcoin mining are constantly increasing. For instance, last April the website Digiconomist estimated that each bitcoin transaction uses as much electricity as the average U.S. household uses in a month, or 1 million purchases made with a Visa credit card. Now a bitcoin transaction is equivalent to 75 days of average household electricity use, or 2.7 million Visa transactions. At the same time, surging prices for bitcoin — which is now worth more than $46,000 each, up from less than $4,000 in 2019 — bring more miners into the market. (This constant increase in the volume of mining is one reason the Cambridge study from last year found the industry uses more than twice as much electricity as a 2019 study in the scientific journal Joule had found.)
Using all this electricity creates a lot of emissions from coal- and gas-fired power plants. Digiconomist calculates that bitcoin’s carbon footprint is around the same as that of the Czech Republic.
New York has the most bitcoin mining of any state, accounting for 20% of the national total, according to 2021 data from Foundry USA, the largest mining pool in North America. The United States accounts for 35% of bitcoin mining globally.
“We have to get society to a place where we are phasing out fossil fuels, and it’s going to be much harder to do that if we’re increasing energy consumption,” Moran said. “And that’s where the fundamental concerns come with proof-of-work crypto mining, because that industry is consuming so much energy that it will make it much more challenging to move away from fossil fuels. And that’s what we’re particularly concerned about in New York. So New York has a very important climate law on the books, [which] set the stringent goal to have a carbon-free [energy] grid by 2040. That’s going to be harder to do, if not impossible, if we had unfettered expansion of proof-of-work crypto mining in the state. That energy consumption will make it much harder to meet our goals.”
The New York bill is actually quite modest in its reach. It says nothing about crypto mining that takes forms other than proof-of-work, nor about proof-of-work mining operations that simply plug into the electric grid or use on-site clean energy such as wind or hydropower.
The impetus for New York to take action is that in recent years, two companies have bought and reopened once shuttered fossil-fuel-burning power plants in the state to perform proof-of-work mining on site. Cryptocurrency mining firms have realized they can cut costs by drawing electricity directly from a power plant instead of paying the retail rate for electricity sent through the power grid.
Greenidge Generation, a publicly traded company mining bitcoin at a gas-fired power plant in Dresden, N.Y., announced last year it planned to quadruple its operations by the end of 2022 and to “replicate its vertically integrated mining model at other power sites.” So far, it has installed 17,000 machines; it plans to reach 32,500 by the end of this year, an increase that would require enough electricity to power nearly 100,000 homes.
In 2020, according to information obtained by Earthjustice and the Sierra Club via the Freedom of Information Law, the power plant’s carbon dioxide and nitrogen dioxide emissions increased tenfold.
Greenidge has defended its environmental track record, noting in a March 31 statement that the facility produces 70% fewer carbon emissions than when it was a coal-fired power plant in 1990 (the year the New York climate goals use as a baseline) and that its current emissions “are only 0.2% of the statewide target for 2030.”
“This is not really a game of people validating cryptocurrency in their homes anymore. It’s really become a very competitive process where it’s these companies that are competing to validate cryptocurrency,” Moran said. “The reason why they are, in many cases, firing up old power plants is because they need a tremendous amount of energy to conduct their operation. These computers use a lot of energy so they can be running 24/7 and compete.”
If the bill becomes law, New York would not issue new permits for additional facilities like that for two years while its Department of Environmental Conservation conducts a review of the crypto mining industry.
Even places with relatively clean power sources can suffer from an influx of cryptocurrency mining operations. In 2016 the small city of Plattsburgh, N.Y., near the Canadian border, saw an influx of bitcoin miners who came to take advantage of its cheap electricity provided by nearby hydropower dams on the St. Lawrence River. Under a long-existing contract, Plattsburgh has a monthly allotment of cheap power, but once it exceeds that amount it has to pay much higher rates.
Residents and local businesses saw their monthly bills skyrocket, Plattsburgh’s then-Mayor Colin Read told Forbes magazine. Neighbors of the bitcoin miners complained about noise and heat from the constantly whirring supercomputers.
The town imposed a moratorium on new cryptocurrency mining operations, but lifted it once it had created regulations to ensure that the excess electricity bills would be paid by the mining companies and to offset the other impacts of their presence.
Crypto mining detractors also point to other environmental impacts besides emissions. “Every day, the Greenidge plant removes 139 million gallons of water — the equivalent of 27,000 full tanker trucks — from Seneca Lake to cool its machines,” the Natural Resources Defense Council reported on its website Wednesday. “It then dumps the heated water, up to 108 degrees Fahrenheit, back into the lake. Warmer water can exacerbate the growth of toxic algal blooms, which have been forming on the lake in recent years, threatening health and the drinking water for 100,000 people.”
However, earlier this month, a state judge rejected a lawsuit from environmental organizations attempting to block Greenidge’s planned expansion, ruling that the project “would not impact the air or water of Seneca Lake.”
“The project is another significant investment in Yates County, allowing us to continue to create good-paying jobs and new careers in an emerging, future-focused sector for local residents — and do it within the state’s nation-leading environmental standards,” Dale Irwin, president of Greenidge Generation, said in a statement celebrating the ruling.
In terms of climate change, however, some within the cryptocurrency industry are working on solutions. The Crypto Climate Accord is an initiative to decarbonize the cryptocurrency and blockchain industry. More than 200 companies and individuals from the crypto, finance, tech, climate and energy sectors have joined and pledged to transition away from fossil fuels.
“It was very much framed after the Paris climate agreement,” said Jesse Morris, the CEO of Energy Web, an international nonprofit that builds open-source software to help energy companies “build business models and products focused on all of the technologies that are going to get us out of the climate crisis.” Energy Web is a founding member of the Crypto Climate Accord because it uses blockchain technology itself.
“Our focus almost lines up one-to-one with the legislation that came out of New York,” Morris said. “What we’re building is a tool to make it very easy for bitcoin miners to prove they’re actually using renewable electricity.” Currently, there is no way to check a bitcoin miner’s claims about the kind of energy they use.
“We’re developing both technology and some certification criteria to help miners prove they’re actually sustainable,” Morris said. The New York law, after all, allows new bitcoin mining that’s powered by clean energy, but it’s unclear how a mining operation would prove to the state that it is using renewable energy.
Mining operators have a variety of options, Morris said, including locating in an area that already has a clean energy portfolio, setting up a power-purchase agreement with a clean power source, such as a wind farm, or even building new clean-power generation on site.
Some individual bitcoin mining companies are already advertising their reliance solely on renewable energy, but, as Morris noted, those claims are currently hard to verify.
Not every state or local government is as concerned about the effects of bitcoin mining as the New York Assembly or the city of Plattsburgh. In an effort to attract more bitcoin entrepreneurs to her city, Fort Worth, Texas, Mayor Mattie Parker announced Tuesday that the city is now mining bitcoin in City Hall. New York City Mayor Eric Adams is also a crypto booster, having chosen to receive his paychecks in crypto.
But environmentalists hope that if New York state passes the crypto bill, the state’s review of the industry will lead to rules that also govern crypto mining that doesn’t take place specifically at a power plant, and will require measures like those advocated by the Crypto Climate Accord.
“It only addresses one area, but we think it’s an important starting place,” Moran said. “We do want the state to analyze the industry and make sure the state could still meet its climate goals if we have this expanded energy consumption.”