There's no denying that the process of mining Bitcoin (BTC +3.09%) consumes a significant amount of energy. If the cryptocurrency were a country, it would consume the 32nd most electricity in the world -- ahead of large countries like Argentina, The Netherlands, and other highly developed nations with populations in the tens of millions.
Environmentalists often use statistics like these to portray Bitcoin as a gluttonous and unnecessary nuisance that generates huge amounts of carbon emissions and exacerbates global climate change. Yet these comparisons fail to paint the complete picture of Bitcoin's energy consumption.
Image source: Getty Images.
Like many industries, Bitcoin mining is working to reduce its carbon footprint, and its miners increasingly utilize renewable energy sources. Based on the current trajectory, Bitcoin has the potential to reach net-zero emissions and eventually even take on a more proactive approach by combating climate change.
But don't just take my word for it.
Bitcoin goes green
In a recently published report, the Massachusetts Institute of Technology highlighted how new energy strategies among Bitcoin mining companies are turning the narrative of Bitcoin's negative impact on the environment on its head.
The report describes how Bitcoin miners are constantly searching for the cheapest and most readily available forms of energy to power their machines and minimize their expenses, a dynamic that underpins Bitcoin's evolution toward becoming more environmentally friendly.
The MIT researchers note that as costs associated with electricity produced from fossil fuels continue to rise, miners have begun shifting toward renewable energy sources such as wind and solar to power their operations, since electricity from those sources is becoming cheaper and more accessible. Today, more than 50% of the Bitcoin mining sector is estimated to run off renewable energy sources.
Putting unused energy to work
Arguably, the most interesting topic discussed in MIT's report was Bitcoin's potential role in cleaning up emissions from notorious polluters in the natural gas and oil industries.
Due to a lack of appropriate distribution infrastructure, oil and natural gas companies are frequently forced to burn or "flare" off excess natural gas that they are unable to transport from wellheads to markets. While clearly wasteful, this practice also creates an additional problem. The flaring of natural gas also releases methane into the atmosphere -- and methane's impacts as a greenhouse gas are over 80 times more potent than carbon dioxide's in terms of warming effects.
This previously unused natural gas can be an ideal and cost-effective energy source to power Bitcoin mining operations. The energy producers have come to recognize this, and now companies like ExxonMobil are setting up systems to capture that natural gas at the source and generators to burn it on-site, with the electricity generated powering Bitcoin mining equipment that is also on-site, producing additional revenue.
MIT researchers suggest a similar strategy could be employed at the millions of abandoned and orphaned oil and natural gas wells around America that are still leaking methane into the atmosphere. By constructing operations at these locations, Bitcoin miners could have convenient access to inexpensive energy, reduce greenhouse gas emissions, and even fund well-sealing efforts.
CRYPTO: BTC
Key Data Points
Appealing to institutional investors
So, Bitcoin is becoming greener and can help climate change by utilizing previously wasted energy. This is obviously beneficial, but how does it help Bitcoin's value appreciate?
Well, the answer lies in a similar report published by KPMG, one of the Big Four international accounting firms. In its analysis, KPMG analysts describe how Bitcoin positively contributes to the three pillars of the increasingly popular ESG investing framework as it heads toward net-zero emissions.
Short for environmental, social, and governance, ESG ratings measure a company's or asset's sustainability and ethical impact. ESG-compliant investment strategies have gained significant traction in recent years, particularly among institutional investors.
In line with MIT's report, KPMG found that Bitcoin's ability to recycle unused energy and clean up emissions helps it meet the standard of a positively rated ESG asset. Should Bitcoin solidify an ESG-friendly reputation, it could become a more attractive investment option for institutional investors.
Closing thoughts
Although the improvements to Bitcoin's carbon footprint and its potential to contribute to climate change mitigation have attracted less coverage than the earlier discussions about its negative environmental impact received, circumstances are slowly changing. With two prominent organizations acknowledging that Bitcoin is no longer as much the electricity-hungry climate detriment it is often portrayed as, the cryptocurrency might be turning over a new leaf.
As the conversation around Bitcoin's environmental sustainability gains momentum, another barrier hindering widespread adoption will likely begin to dissipate. Most importantly, though, investors stand to benefit as this could lead to more demand for the crypto, resulting in even higher prices.
