Bitcoin and banking’s differing energy narratives are a matter of perspective

The Carbon Bankroll Report was released on May 17 as a collaboration among the Climate Safe Lending Network, The Outdoor Policy Outfit and Bank FWD. The collaboration made it possible to calculate the emissions generated due to a company’s cash and investments, such as cash, cash equivalents and marketable securities.

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

The energy consumption of the flagship proof-of-work (PoW) blockchain network, Bitcoin, has been a matter of debate in which the network and its participants, especially miners, are criticized for contributing to an ecosystem that might be worsening climate change. However, recent findings have also brought the carbon impact of traditional investments under the radar.

Bitcoin is often vilified due to “imagery”

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

“Until now, the role that corporate banking practices play in fueling the climate crisis has been murky at its best. This landmark report shines a floodlight. The research and findings contained in this report offer companies a new, massively important opportunity to help shift our financial system away from fossil fuels and deforestation toward climate solutions on a global scale. Companies that are serious about their climate pledges will welcome this breakthrough and move urgently toward tapping this lever for systematic change.”

A few metrics that the report highlighted regarding the climatic impact of the banking industry include:

• Since the signing of the Paris Agreement in 2015, 60 of the world’s 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 said industry.
• The largest banks and asset managers in the United States have been responsible for financing the equivalent of 1.968 billion tons of carbon dioxide. If the U.S. financial sector were a country, it would be the fifth-largest emitter in the world, just after Russia.
• When compared to the direct operational emissions of global financial firms, the emissions generated through investing, lending and underwriting activities are 700 times higher.

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

“It’s easy to picture a warehouse of high-performance computers sucking down power, but it’s not so easy to picture the downstream effects of cash in circulation financing carbon-intensive activities. More often than not, it’s this imagery that demonizes Bitcoin mining. In reality, the entire banking system uses more electricity in operations than that of the Bitcoin mining industry.”

In addition to the portrayed “imagery,” there have been various efforts to track the exact energy consumption of operating the Bitcoin network. One of the most widely accepted 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 that the annualized consumption of energy by the Bitcoin network is 117.71 terawatt-hours (TWh). The CBECI model uses various parameters such as network hash rate, miner fees, mining difficulty, mining equipment efficiency, electricity cost and power usage effectiveness to compute the annualized consumption for the network.

The growth in the number of participants and related activity on the Bitcoin network is evident in the monthly electricity…