Crypto Mining & AI: The Carbon Monsters Lurking in Your Data—And How to Stop Them (According to IMF)!

AI and Cryptocurrency are placing immense pressure on power generation worldwide. IMF suggests a targeted tax policy against such pressures.

AI and Crypto: A Growing Environmental Concern

AI and crypto mining are increasingly contributing to global carbon emissions. Together, these industries accounted for 2% of global electricity consumption in 2022, with projections suggesting that figure could rise to 3.5% by 2027, equating to Japan’s current electricity usage, reports the International Monetary Fund (IMF). The climate impact is substantial, with crypto mining alone potentially generating 0.7% of global CO2 emissions by 2027.

The Case for Tax Policy

To mitigate these effects, the IMF suggests a targeted tax policy. For crypto mining, a tax of $0.047 per kilowatt hour could significantly curb emissions, raising $5.2 billion annually while reducing emissions by 100 million tons. Data centres, with their slightly greener energy profiles, could face a lower tax of $0.032 per kilowatt hour, potentially generating $18 billion yearly. Despite these benefits, many data centres and crypto miners currently enjoy tax exemptions, contributing to environmental and economic inefficiencies.

Policy and Future Outlook

Implementing a broad carbon tax, ideally coordinated across countries, is viewed as the most effective strategy for reducing emissions. In the absence of such a global policy, targeted measures—like taxes on electricity usage coupled with incentives for renewable energy—could drive significant environmental benefits. The urgency for these actions is underscored by the rapid closing of the window to limit global warming, making immediate policy interventions essential.

(Visit International Monetary Fund for the full story)

*An AI tool was used to add an extra layer to the editing process for this story.