The Carbon Bankroll Report was published on 17 May as a joint project of the Climate Safe Lending Network, The Outdoor Policy Outfit and Bank FWD. The collaboration made it possible to calculate the emissions generated by cash and investments in companies, such as cash, liquidity equivalents and marketable securities.
The report found that for some large companies, such as Alphabet, Meta, Microsoft and Salesforce, cash and investment are the biggest source of their emissions.
The energy consumption of the flagship proof-of-work (PoW) blockchain network, Bitcoin, has been a topic of discussion as the network and its participants, especially miners, are criticized for contributing to an ecosystem that could exacerbate climate change. However, recent results have also led the carbon footprint of traditional investments under radar.
Bitcoin is often disgraced for “pictures”
The Carbon Bankroll Report was written by James Vaccaro, CEO of Climate Safe Lending Network, and Paul Moinester, CEO and founder of Outdoor Policy Outfit. Regarding the impact of the report, Jamie Beck Alexander, CEO of Drawdown Labs, said:
“Until now, the role of corporate banking in pushing for the climate crisis has been murky at its best. This landmark report describes the floodlights. The research and findings of this report offer companies a new, vital opportunity to help shift our financial system from fossil fuels and deforestation to global climate solutions. Companies that are serious about their climate promises will welcome this revolution and urgently move towards using this lever for systematic change.
Some of the indicators that the report emphasized regarding the climate impact of the banking industry are:
- 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 the industry.
- The largest banks and asset managers in the United States have provided financing equivalent to 1.968 billion tonnes of carbon dioxide. If the US financial sector were a country, it would be the fifth largest emitter in the world, just after Russia.
- When compared to the direct operating emissions of international financial companies, the emissions generated by investments, lending and underwriting activities are 700 times higher.
The Cointelegraph spoke to Cameron Collins, an investment analyst at Viridi Funds – Managing Director of the Mutual Investment Fund – about the reasons behind the excessive disgrace of the Bitcoin network. He said:
“It is easy to envisage a warehouse of high-performance computers that absorb power, but it is not so easy to envisage the effects of cash in circulation that finances carbon-intensive operations. More often than not, it is this imagery that pervades Bitcoin mining. In fact, the entire banking system uses more electricity in operation than the Bitcoin mining industry.
In addition to the “imagery” described, attempts have been made to monitor the exact energy consumption of operating the Bitcoin network. One of the most widely accepted measures 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 annual power consumption of the Bitcoin network is 117.71 terawatt hours (TWh). The CBECI model uses various variables such as net box ratio, mining fees, mining difficulties, mining equipment efficiency, electricity costs and energy efficiency to calculate the network’s annual usage.
The growth in the number of participants and related activities on the Bitcoin network is evident in the monthly electricity consumption of the network. From January 2017 to May 2022, the monthly electricity consumption has multiplied 17 times from 0.62 TWh to 10.67 TWh today. In comparison, companies such as PayPal, Alphabet and Netflix have witnessed their carbon emissions multiply by 55, 38 and 10 times, respectively.
Collins spoke further about the perception of the Bitcoin network that could change in the future. He added that if more people approach Bitcoin (BTC) mining as a financial service as opposed to mining, attitudes around the PoW network could begin to change and the public may see it more as a necessary service instead of a careless gold mine. He also emphasized the role of thought leaders in society in communicating the true nature of Bitcoin mining to politicians and the public.
Work together to solve the energy problem
Recently, there have been several examples of the Bitcoin mining community working with the energy industry – and vice versa – to work on a methodology that benefits both parties. The US energy company, Crusoe Energy, is recycling waste energy to power Bitcoin mining, which begins in Oman. The country exports 23% of its total gas production and aims to reduce gas blocks to zero by 2030.
Even the American energy giant ExxonMobil could not help but take part in the operations. In March this year, it was revealed that Crusoe Energy had entered into an agreement with ExxonMobil to use excess gas from North Dakota’s oil wells to operate Bitcoin mines. It is a tradition for energy companies to use a process called gas flare to get rid of the excess gas from oil wells.
Connected: Not stranded anymore? Bitcoin miners could help solve Big Oil’s gas problem
A report released by the Bitcoin Mining Council in January found that the Bitcoin mining industry increased its sustainable energy mix consumption by almost 59% between 2020 and 2021. Bitcoin Mining Council is a group of 44 Bitcoin mining companies that account for over 50% of the entire network’s mining power.
Cointelegraph spoke with Bryan Routledge, an associate professor of finance at Carpegie Mellon University’s Tepper School of Business, about a comparison of carbon emissions from Bitcoin and traditional banking.
He said: “Bitcoin (blockchain) is a registration technology. Is there another protocol that would be similarly secure but not as energy costly as PoW? There are certainly many people working on it. Similarly, we can compare Bitcoin to the accounting of ordinary banks.
The block price for mining a block of Bitcoin now stands at 6.25 BTC, over $ 190,000 at current prices, and the current average number of trades per block is around 1,620 according to data from Blockchain.com. This means that the average price of one trade could be estimated at over $ 117, a reasonable reward for one trade.
Routledge added: “Traditional banks are much larger and therefore have a major impact on the environment as a whole. But for many transactions, the cost per transaction is much lower – for example, an ATM fee. BTC has many advantages, in all likelihood. But certainly an important step seems to be more effective.
Since assessing the real impact of Bitcoin is not really a measurable effort due to the significant changes that technology and the currency represent, it is important to remember that Bitcoin’s energy consumption cannot be slandered in an isolated way. The international financial community often tends to forget the great impact of the current banking system, which is not offset by corporate social responsibility and other incentives alone.
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