Working Paper: NBER ID: w31745
Authors: Anna Papp; Douglas Almond; Shuang Zhang
Abstract: Environmental externalities from cryptomining may be large, but have not been linked causally to mining incentives. We exploit daily variation in Bitcoin price as a natural experiment for an 86 megawatt coal-fired power plant with on-site cryptomining. We find that carbon emissions respond swiftly to mining incentives, with price elasticities of 0.69-0.71 in the short-run and 0.33-0.40 in the longer run. A $1 increase in Bitcoin price leads to $3.11-$6.79 in external damages from carbon emissions alone, well exceeding cryptomining’s value added (using a $190 social cost of carbon, but ignoring increased local air pollution). As cryptomining requires ever more computing power to mine a given number of blocks, our study highlights both the revitalization of US fossil assets and the potential value of financial industry accounting standards that incorporate cryptomining externalities.
Keywords: Bitcoin; Carbon Emissions; Cryptocurrency; Environmental Policy
JEL Codes: Q40; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| bitcoin price (E42) | carbon emissions (Q54) |
| 1 unit increase in bitcoin price (G13) | daily carbon emissions (Q54) |
| bitcoin price (E42) | nitrogen oxide (NOx) emissions (Q53) |