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Bitcoin and Carbon Dioxide Emissions: Evidence from Daily Production Decisions

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Listed:
  • 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.

Suggested Citation

  • Anna Papp & Douglas Almond & Shuang Zhang, 2023. "Bitcoin and Carbon Dioxide Emissions: Evidence from Daily Production Decisions," NBER Working Papers 31745, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31745
    Note: EEE
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    More about this item

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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