carbon bankroll report was released on May 17 as a collaboration between the Climate Safe Lending Network, The Outdoor Policy Outfit and Bank FWD. The collaboration made it possible to calculate the emissions generated from the company’s cash and investments such as cash, cash equivalents and marketable securities.

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The report showed that for several large companies such as Alphabet, Meta, Microsoft and Salesforce, cash and investments are their biggest source of emissions.

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The power consumption of the flagship proof-of-work (PoW) blockchain network, Bitcoin, has been the subject of controversy, in which the network and its participants, especially miners, have been criticized for contributing to an ecosystem that could exacerbate climate change. However, recent findings have also highlighted the carbon footprint of traditional investments.

Bitcoin is often criticized for being “imaginative”

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The Carbon Bankroll was prepared by James Vaccaro, CEO of the Climate Safe Lending Network, and Paul Moinester, CEO and founder of the Outdoor Policy Outfit. Regarding the report’s impact, Jamie Beck Alexander, director of Drawdown Labs, stated:

“Until now, the role of corporate banking practices in fueling the climate crisis has been vague at best. This landmark report is illuminated by a spotlight. The research and findings in this report offer companies a critical new opportunity to help our financial system move from fossil fuels and deforestation to global climate solutions. Companies that are serious about their climate commitment will welcome this breakthrough and will move without delay to use this leverage for systematic change.”

Several indicators highlighted in the report on the climate impact of the banking industry include:

  • Since the signing of the Paris Agreement in 2015, the world’s 60 largest commercial and investment banks have invested $4.6 trillion in the fossil fuel industry.
  • Banks such as Citi, Wells Fargo and Bank of America have invested $1.2 billion in this industry.
  • The largest banks and asset managers in the United States are responsible for financing the equivalent of 1.968 billion tons of carbon dioxide. If the US financial sector were a country, it would be the fifth largest issuer in the world right after Russia.
  • Compared to direct operating emissions from global financial companies, emissions from investing, lending and underwriting activities are 700 times higher.

Cryptooshala spoke with Cameron Collins, an investment analyst at Viridi Funds — a crypto investment fund manager — about the reasons behind the excessive criticism of the Bitcoin network. He said:

“It’s easy to imagine a warehouse of high-performance computers sucking up energy, but it’s not so easy to imagine the subsequent effects of cash in circulation that finances carbon-intensive activities. Most often, it is these images that demonize bitcoin mining. In fact, the entire banking system uses more electricity in its operations than the bitcoin mining industry.”

In addition to the “images” shown, various attempts have been made to track the exact power consumption of the Bitcoin network. One of the most widely used metrics for this complex variable is calculated by the Cambridge Center for Alternative Finance and is known as the Cambridge Bitcoin Electricity Consumption Index (CBECI).

At the time of writing, the index estimates the annual energy consumption of the Bitcoin network at 117.71 terawatt hours (TWh). The CBECI model uses various parameters such as network hash rate, miner fees, mining difficulty, mining hardware efficiency, electricity cost, and energy efficiency to calculate annual network consumption.

The growth in the number of participants and associated activity on the Bitcoin network is reflected in the network’s monthly electricity consumption. From January 2017 to May 2022, monthly electricity consumption increased more than 17 times from 0.62 TWh to 10.67 TWh. By comparison, companies like PayPal, Alphabet and Netflix have recorded increases in carbon emissions of 55x, 38x and 10x, respectively.

Collins went on to talk about perceptions of the Bitcoin network that may change in the future. He added that if more people treat bitcoin (BTC) mining as a financial service rather than mining, attitudes towards PoW networks may begin to change and the public may value them more as a vital service rather than a reckless gold rush. . He also highlighted the role of opinion leaders in the community in communicating to politicians and the general public about the true nature of bitcoin mining.

Working together to solve the energy problem

Recently, there have been several examples of the bitcoin mining community collaborating with the energy industry – and vice versa – to work on methodologies that are beneficial to both parties. U.S. energy company Crusoe Energy has been recycling waste fuel for bitcoin mining, starting in Oman. The country exports 23% of all produced gas and aims to reduce gas flaring to absolute zero by 2030.

Even the American energy giant ExxonMobil could not help but take part in the action. In March of this year, it became known that Crusoe Energy signed an agreement with ExxonMobil to use surplus gas from oil wells in North Dakota to run bitcoin miners. Traditionally, energy companies have resorted to a process known as gas flaring to get rid of excess gas from oil wells.

No longer stuck? Bitcoin Miners Could Help Solve Big Oil’s Gas Problem

Report came out The Bitcoin Mining Council in January revealed that the Bitcoin mining industry has increased its sustainable energy consumption pattern by nearly 59% between 2020 and 2021. The Bitcoin Mining Council is a group of 44 Bitcoin mining companies that represent more mining power of the network.

Cryptooshala spoke with Brian Rutledge, associate professor of finance at Carnegie Mellon University’s Tepper School of Business, about comparing the carbon footprint of bitcoin and traditional banking.

He stated: “Bitcoin (blockchain) is a technology of record keeping. Is there another protocol that is comparable in security but not as power hungry as PoW? There are probably a lot of people working on this. Similarly, we can compare Bitcoin to the record keeping of financial transactions in conventional banks.”

The Bitcoin block mining reward is currently 6.25 BTC, over $190,000 at current prices, and the current average number of transactions per block is around 1,620, according to Blockchain.com. This means that the average reward per transaction can be valued at more than $117, which is a reasonable reward per transaction.

Routledge went on to add: “Traditional banks are much larger and therefore collectively have a large impact on the environment. But for many transactions, there is a much lower transaction cost, such as ATM fees. Perhaps BTC has many advantages. But certainly improving efficiency seems like an important step.”

Since estimating the true impact of Bitcoin is not really quantifiable due to the significant changes that technology and currency represent, it is important to remember that Bitcoin’s power consumption cannot be judged in isolation. The global financial community often tends to forget the high impact of the current banking system, which is not offset only by corporate social responsibility and other incentives.