In its recent report, KPMG, one of the Big 4 accounting firms, delved deep into the environmental aspects of Bitcoin mining. The report highlighted various comparisons to show that mining shouldn’t be the primary concern in the context of increasing environmental hazards.
The 12-page-long report is devoted to the role Bitcoin can play within the new guidelines for environmentally friendly investing (ESG, or Environmental, Social, and corporate Governance). ESG criteria are those that are required for responsible investing, and ESG corporate reporting is what is used to assess risks and opportunities related to the environmental sustainability of production activities.
Notably, the primary goal of the report is to assess the real environmental, social and governance impact of this technology, and dispel some of the misconceptions that still thrive in this regard. KPMG states that as more and more of these criteria are likely to be imposed on companies looking to raise capital in the future, it is important to assess them in cryptocurrencies as well.
While KPMG has a large clientele, part of its work also lies in monitoring ESG metrics, since according to them they express the new direction capitalism is taking. According to KPMG, companies can no longer afford to limit themselves exclusively to pursuing pure profit, but are also called upon to have a positive impact on society and the environment through new governance models.
In the report, KPMG classifies Bitcoin as a mature asset class, but despite continued adoption it continues to be misunderstood. It adds that there is a variety of high-impact use cases offered by Bitcoin, which have a proven track record of delivering value to its users and society at large.
Further, the report states that the real problem is not energy consumption per se, as huge as it is, but rather the emissions associated with the production of the energy consumed, and in particular those produced by burning fossil fuels.
Upon comparison with other human activities globally shows how the CO2 emissions associated with Bitcoin mining are very minimal: 67 MtCO2e per year, compared, for example, to the 100 associated with gold mining. Additionally, other human activities, such as tourism, which emits 4,500 MtCO2e per year, or fashion, which emits 2,100. Hence, the report states it makes no sense to focus on the CO2 emissions of Bitcoin mining if we do not first focus on those of, for example, tourism or fashion.
Furthermore, the report mentions some ideas for reducing the environmental impact. To begin with, it suggests to use energy produced from renewable sources for Bitcoin mining. To this, the report stated Texas produces far more renewable energy than any other state in the US, especially wind and solar. Hence, it is not surprising that Texas has become a popular destination for Bitcoin miners, with about 59% of the total hashrate in the US.
Additionally, Bitcoin mining has demonstrated the ability to help balance power grids, given its ability to rapidly reduce its power consumption during periods of high demand, and this could help renewable energy producers.
Coming to the second, which is to reduce mining’s energy consumption when energy is scarce, which is something that miners have already been doing for some time.
The third is recycling the waste heat generated by mining’s power consumption. Hence, miners operating in hot places actually have too much heat and need to dissipate it, but mining in cold places can actually serve to save on heating costs.
However, sources suggest it is the fourth idea that is the most interesting involving the use of methane, which is burnt before being released Reportedly, mining Bitcoin with energy produced from burning waste gas would reduce emissions, since that gas would be burned anyway, and could create an additional revenue stream by monetizing energy that is currently wasted instead.
The report concludes by stating that Bitcoin does actually provide a range of benefits related to ESG criteria. It is only a matter of time before mining is also used to help stabilize energy grids, reduce greenhouse gas emissions, and provide sustainable heat for real estate. KPMG analysts write:
Time will tell what Bitcoin’s role might be in the transition to renewable energy and how it might serve as a financial tool for those in authoritarian regimes or those experiencing significant inflation.
As highlighted in the report, Bitcoin mining is not the only issue that is threatening in the picture of increasing global temperature and other environmental hazards. This clearly contrasts the stance that has been a concern to regulators and specifically US Democrats who repeatedly outlined the effects of mining.