Bitcoin’s Energy Consumption and Its Environmental Impact
Bitcoin’s energy consumption is projected to remain substantial, estimated at around 138 terawatt-hours (TWh) by 2025. Recent academic studies delve deeper into the environmental ramifications of Bitcoin mining, examining factors such as carbon dioxide emissions, water usage, electronic waste, and land disturbances. With governments increasingly scrutinizing the energy sources for Bitcoin mining, the location of these operations, and the associated externalities, the pressure for policy reform is mounting. Professor Andrew Urquhart, who leads the Department of Finance at Birmingham Business School, highlights these critical insights in the ninth installment of his Professor Coin column, aimed at providing the Decrypt audience with valuable academic perspectives on cryptocurrencies. This article focuses on Bitcoin’s energy consumption and the potential for sustainable alternatives in the crypto space.
The Reality of Bitcoin Mining
When thinking about “Bitcoin mining,” many envision expansive warehouses filled with buzzing computers consuming vast amounts of electricity. This depiction is quite accurate. Since its inception in 2009, Bitcoin’s proof-of-work (PoW) mechanism has served as both a foundational pillar and a contentious issue. While it ensures network security and decentralization, it also links digital finance to significant energy consumption and environmental consequences.
Assessing Bitcoin’s Energy Footprint
To gauge Bitcoin’s energy usage, the Cambridge Bitcoin Electricity Consumption Index (CBECI) is frequently referenced, indicating that Bitcoin mining’s electricity consumption is comparable to that of mid-sized nations. However, Bitcoin’s energy demand does not rise uniformly; it fluctuates with market trends. During price surges, miners activate additional rigs, which increases hashrate, difficulty, and electricity needs. Conversely, when prices fall, older and less efficient machines are often shut down. Historical data from Stoll, Klaaßen, and Gallersdörfer in 2019 estimated annual consumption at around 46 TWh with emissions of approximately 22 megatons of CO₂. More recent evaluations suggest a significant rise in these figures. The 2025 Cambridge Digital Mining Industry Report now estimates Bitcoin’s yearly electricity consumption at 138 TWh, with emissions of about 39.8 million tons of CO₂ equivalent. Notably, the report also indicates that over half (52.4%) of the energy utilized by miners is sourced from sustainable energy, including renewables and nuclear power.
Understanding the Broader Environmental Impact
Recent studies are expanding the conversation to encompass Bitcoin’s total environmental cost. Research conducted by Chamanara et al. in 2023 estimates Bitcoin mining’s impact at approximately 173 TWh when accounting for factors such as CO₂ emissions, water use, and land effects. Alarmingly, the UN University has pointed out that mining operations heavily rely on freshwater in regions where it is already scarce. Additionally, de Vries in 2021 estimated that Bitcoin mining generates tens of kilotons of electronic waste each year, as miners frequently replace their hardware. This comprehensive analysis reveals that Bitcoin’s environmental footprint involves multiple dimensions, including energy consumption, emissions, water usage, land disruption, and waste generation.
Comparing Proof-of-Work and Proof-of-Stake
The narrative becomes more intriguing when comparing Bitcoin’s PoW approach with alternative blockchain models. In September 2022, Ethereum transitioned from PoW to proof-of-stake (PoS), resulting in an astonishing 99.9% reduction in energy consumption overnight. This change maintained the user experience while drastically improving its environmental impact, demonstrating that cryptocurrencies need not be adversaries to climate sustainability. Ethereum’s transformation has prompted challenging questions for Bitcoin: If a major blockchain can achieve security and efficiency with significantly lower energy demands, should Bitcoin consider a similar shift? Traditionalists argue against it, claiming that PoW is essential for Bitcoin’s security and integrity. Meanwhile, critics warn that continuing with PoW could invite regulatory backlash, carbon taxes, or even outright prohibitions in certain areas.
Can Mining Become Environmentally Friendly?
Not all Bitcoin miners are detrimental to the environment; some view their operations as part of the solution. In Texas, for instance, mining facilities have made arrangements with grid operators to reduce power usage during peak demand periods. In regions like Iceland and Canada, miners leverage abundant hydropower. Innovative research is even exploring ways to utilize Bitcoin mining to profit from excess methane emissions from landfills or stranded renewable energy sources that would otherwise go unused. Proponents of this viewpoint argue that Bitcoin mining could serve as a “buyer of last resort” for surplus green energy, helping to stabilize the variability associated with solar and wind energy production. Studies by Hossain and Steigner in 2024 and others suggest that, given the right circumstances, mining could potentially foster economic growth for renewable energy projects. However, whether miners genuinely contribute to a green transition or merely capitalize on low-cost energy remains contingent upon factors like location, incentives, and regulatory frameworks.
The Future Outlook for Bitcoin and Energy Consumption
Looking ahead to 2025, several key insights emerge: Bitcoin’s environmental impact is both real and considerable, encompassing not just electricity usage but also emissions, water consumption, land degradation, and electronic waste. The design of blockchain technology matters; Ethereum’s successful shift to PoS illustrates that energy costs can be significantly reduced without compromising network integrity. In contrast, Bitcoin continues to adhere to its PoW model. It is crucial to recognize that not all mining operations are created equal; for instance, coal-powered facilities in Kazakhstan differ vastly from hydro-powered operations in Quebec. As policy scrutiny intensifies, governments are likely to ask not only about energy consumption levels but also the types of power used, the locations of mining operations, and the external impacts associated with them. The ongoing discourse surrounding Bitcoin will forever be intertwined with energy consumption. Whether it evolves into a climate adversary or an unexpected ally in the green energy movement will hinge on the decisions made by miners, policymakers, and communities over the coming years. One undeniable fact remains: in the realm of cryptocurrency, the invisible impacts are anything but weightless. The trajectory of digital currency is intrinsically linked to the energy landscape.
