Bitcoin, the world’s leading cryptocurrency, is gaining attention as an ESG (environmental, social, and governance) asset. A recently published report by professional services firm KPMG argues that bitcoin can fulfill several ESG functions, including driving investment in renewables, stabilizing power grids, and reducing methane emissions. This view is supported by new research from Cambridge University and Bloomberg Intelligence, which reveal that bitcoin’s environmental impact is smaller than previously believed. The report coincides with BlackRock, the largest asset manager globally, filing for a spot bitcoin ETF, indicating growing interest in bitcoin as an ESG investment.
One of the key advantages of bitcoin as an ESG asset is its ability to create new markets for renewable energy. Bitcoin miners can tap into any energy source worldwide, and they often find low-cost energy in underutilized renewable sources such as hydro, wind, geothermal, and solar. By providing a robust marketplace for stranded energy, which is energy created by renewable sources when nobody needs it, bitcoin can increase revenue for green power providers and encourage further investment in clean energy.
Bitcoin also helps stabilize power grids by acting as an energy sponge. Miners can absorb excess energy when needed, preventing grid overload. At the same time, they can shut down their operations during periods of high demand, mitigating demand spikes and helping keep prices low for consumers. This flexibility benefits both power providers and customers.
Furthermore, bitcoin can contribute to reducing methane emissions, a significant driver of climate change. Companies are finding ways to capture vented methane from landfills and convert it into electricity, which is then used for bitcoin mining. This practice reduces carbon emissions and monetizes stranded energy, effectively turning toxic fumes into digital gold. Similar approaches are being used to convert flared gas into electricity for bitcoin mining, harnessing energy that would have otherwise gone to waste.
Recent research from Cambridge University and Bloomberg Intelligence has also challenged past assumptions about bitcoin’s energy consumption. The Cambridge Center for Alternative Finance revised its methodology for calculating bitcoin’s global energy usage, leading to a significant downward revision of its estimate for 2021. Bloomberg Intelligence’s data also shows that more than 50% of bitcoin’s power mix comes from renewables, indicating a positive shift in the cryptocurrency’s environmental impact.
This new data and use cases have led some climate-tech investors to consider bitcoin as superior to existing ESG technologies. Bitcoin’s ability to pay off its climate debt sooner than technologies like solar energy, as well as its capacity to mitigate methane emissions, make it an attractive option for investors looking to have a greater environmental impact.
As institutional investors, such as BlackRock and Fidelity, show interest in bitcoin and file for spot bitcoin ETFs, the narrative surrounding bitcoin and the environment is likely to change. Education and correcting outdated narratives will be crucial in onboarding investors into the digital asset economy. Recognizing bitcoin’s potential as an ESG technology is a significant step in this direction.
In conclusion, bitcoin’s ability to create new markets for renewable energy, stabilize power grids, and reduce methane emissions position it as a compelling ESG asset. With increasing interest from institutional investors and new research challenging past assumptions, the environmental case for bitcoin is expected to gain traction in the coming months.
