The International Monetary Fund (IMF) recently suggested a significant increase in electricity taxes for cryptocurrency mining, which could lead to a global reduction in carbon emissions. Two IMF executives, Shafik Hebous and Nate Vernon-Lin, proposed raising electricity taxes by up to 85% for crypto miners. They believe this move could help reduce the environmental impact of crypto mining.
The proposal involves a tax of $0.047 per kilowatt hour on electricity used by crypto miners. This increase could generate about $5.2 billion in annual revenues worldwide and reduce emissions by roughly 100 million tons, as much as Belgium emits in a year. According to the IMF, if the impact of crypto mining on health is taken into consideration, the tax could be as high as $0.089 per kilowatt hour.
The process of mining in the blockchain involves high energy consumption, especially for Bitcoin. For instance, on average, a single Bitcoin transaction requires as much energy as a Pakistani citizen uses in three years. Crypto mining and AI data centers’ footprint has, up to this current year, reached up to 1% for carbon emission and 2% for electricity consumption worldwide.
IMF Urges Global Action to Enforce Crypto Mining Tax
This tax raise could drive miners to use less energy in their operations. However, the IMF executives also understand that international cooperation is inevitable. If it is strictly imposed in one country, most miners might shift their operations to other areas with lower taxation, which will compromise the goal.
This comes after the IMF released a report on how the electricity usage of crypto mining and AI is set to surge. By the end of the next three years, these industries themselves could be using electricity, as Japan is the fifth largest electricity consumer in the world.
Despite this, there is still some controversy regarding the amount of emissions that crypto miners are responsible for as compared to other industries. For example, an American multinational company, Amazon, noted its carbon footprint at 71.54 million metric tons of CO2 in 2021, which is significantly higher than the estimated 65.4 million metric tons of CO2 of Bitcoin.
Some countries have already made efforts to curb crypto mining. Venezuela has prevented the same because it puts pressure on the electrical power facility, and Iran has introduced a $24 reward for reporting illegal miners amid a severe heatwave.
The success of the IMF’s tax proposal depends on global coordination. Hebous and Vernon-Lin warned that stricter measures in one location could lead miners to relocate to jurisdictions with lower standards, undermining the effort to reduce emissions. However, they suggested that the tax could encourage the adoption of more energy-efficient equipment by crypto miners and AI data centers.
