According to Worldometer, the global energy consumption of Bitcoin mining alone is estimated at around 0.59% of the world’s energy usage. Therefore, Biden’s plan to tax crypto mining might help reduce emissions.
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Cryptocurrency miners based in the United States could soon face a tax equal to 30% of the cost of electricity they use if President Joe Biden’s proposed budget for the fiscal year 2024 is approved by Congress, but the proposal has sparked debate about whether it would actually decrease global emissions and energy prices.
Cryptocurrency mining is a resource-intensive process that attempts to solve increasingly complex equations in order to create new blocks which can then be validated and added to the blockchain.
This process consumes a significant amount of energy, with some estimates placing the global energy consumption of Bitcoin mining alone at around 0.59% of the world’s energy usage, which is roughly equivalent to the energy usage of Malaysia, according to Worldometer.
Biden’s Council of Economic Advisors (CEA), argues that the tax — dubbed the Digital Asset Mining Energy (DAME) excise tax — “encourages firms to start taking better account of the harms they impose on society,” adding:
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“Estimated to raise $3.5 billion in revenue over 10 years, the primary goal of the DAME tax is to start having cryptominers pay their fair share of the costs imposed on local communities and the environment.”
By imposing a tax on electricity usage crypto miners will have a financial incentive to reduce their energy consumption, and with electricity generation making up such a large proportion of carbon emissions, this should theoretically reduce emissions in the U.S.
This idea is similar to the thinking behind carbon taxes, which are intended to disincentivize emitters by forcing them to pay the full social cost of their emissions after attempting to factor in costs associated with polluting.
Deputy Finance Minister Aleksey Moiseev said that he and the Bank of Russia see crypto as a ‘necessary evil’.