The White House Report on Crypto’s “Climate Impact” is a Joke

By L. Mary Thomas, J.D., LL.M.

 

 

The White House Office of Science and Technology Policy (“OSTP”), along with twenty federal agencies/entities, revealed that they understand neither energy, science, nor digital assets in the recently issued interagency report on the Climate and Energy Implications of Crypto-Assets in the United States (“OSTP Report” or “Report”). This article will address and correct the Report’s major misconceptions and false narratives, as well as show how the Report is a politically-motivated attack on the free market, freedom, innovation, and American ingenuity.

 

  1. The Report places unreasonable scrutiny on a nascent industry.

The OSTP Report affirms a false, yet increasingly common, narrative– that bitcoin and other digital assets, which rely on a “proof of work” consensus mechanism, harm the environment by using too much energy and must therefore be subject to strict regulation. The Report states that “To help the United States meet its climate change commitments, DLT (digital ledger technology) must be deployed in a manner that enables reductions in GHG emissions.” In the event of non-compliance, the Report goes so far as to recommend a potential ban on proof of work.

“Should these measures prove ineffective at reducing impacts, the Administration should explore executive actions, and Congress might consider legislation, to limit or eliminate the use of high energy intensity consensus mechanisms for crypto-asset mining.” 

To put bitcoin’s energy use in perspective, bitcoin mining, which is said to be the most intensive use of energy in the bitcoin network, utilizes about 62 TWh/yr. For comparison, domestic refrigeration uses 10 times the energy of bitcoin mining (630TWh/yr) and air conditioning/electric fans use more than 32 times the energy of bitcoin mining (2000 TWh/yr.)[i] So, if the White House recommends the elimination of bitcoin mining because of energy and GHG emission concerns, what will be next, a report calling for the elimination of refrigerators, air conditioning, and fans?

A research report from Galaxy Digital found that the banking and gold industries consume more than two times the amount energy per year as the bitcoin network. [ii] Using the same logic as the Report applies to bitcoin, will the banking and gold industries also have to be eliminated?

Dr. Troy Cross, a professor at Reed College and Fellow with the Bitcoin Policy Institute explained the absurdity of the unique and disproportionate scrutiny on bitcoin in a recent tweet. “Bitcoin is being asked to prove it will neither increase C02 nor crowd out other energy users,” Dr. Cross explains, “Imagine asking that of…[any] other technological innovation of the 20th and 21st century at its inception. All would fail the test.” No other technology in American history has ever been treated like this. Innovation and the growth of our capital markets would cease entirely if these burdens were placed on all technology.

 

  1. The OSTP Report is based on junk science.

The OSTP claims in its mission to “provide the President and his senior staff with accurate, relevant, and timely scientific and technical advice on all matters of consequence…[and] to ensure that the policies of the Executive Branch are informed by sound science.” However, the OSTP’s treatment of digital assets, demonstrates very little regard for “sound science.”

To begin with, the OSTP Report admits that “The total power usage of today’s crypto-asset networks cannot be directly monitored.” To combat this problem, the Report cites widely discredited junk science throughout. In fact, almost 1 in 5 of the Report’s 208 citations come from Alex de Vries, the Dutch central bank employee without a doctorate who frequently blogs about cryptocurrency. His work, including his promotion of the idea that bitcoin has a per transaction energy cost, has been thoroughly debunked by energy scholars and industry advocates alike. In reference to DeVries’ work, Johnathon Koomey, Ph.D., says “the assumptions used by Digiconomist (like 60% of Bitcoin revenues equaling electricity costs and 5¢ U.S./kWh being the electricity price) are so simplistic as to make any careful analyst wary.”[iii] Ben Gagnon, who is in the bitcoin mining industry said “The Digiconomist Bitcoin Electricity Consumption Index is not being driven by real world metrics and profitability as stated in the methodology.”[iv]

While experts have long understood that bitcoin’s energy consumption is essentially unrelated to the number of transactions on its network, the Report affirms the “per transaction” lie.

The Report also cites what is arguably the most discredited study on crypto mining ever produced, which claims that bitcoin alone could “push global warming above 2°C.” Three different teams of researchers have completely debunked this infamous study, in the same journal where the study was first published, with one group of experts writing that “the scenarios used by Mora et al. are fundamentally flawed and should not be taken seriously by the public, researchers or policymakers.”[v] As Dr. Koomey states, “This study is problematic in many ways, not least for its sensational title, its extrapolation over many decades, and its limited documentation of data and methods. The title of the article is “Bitcoin emissions alone could push global warming above 2°C.” Given the flaws in the analysis, however, that conclusion is also almost certainly wrong.”[vi] It is worth asking why the Biden Administration’s “technology experts” ignored such stark warnings from their colleagues.

 

  1. The Report says bitcoin harms minorities, which is far from the truth.

The Report argues that “Crypto-asset mining raises environmental justice concerns because it can create disproportionately adverse public health and environmental burdens for communities of color, Indigenous communities, and low-income communities.”  However, the Report fails to mention that cryptocurrency is disproportionately held by minority Americans.[vii] In fact, a Pew Research Study found that “Asian, Black and Hispanic adults are more likely than White adults to say they have ever invested in, traded or used a cryptocurrency.”[viii] As a financial service analyst said, “There are communities out there that need better ways to pay,” Principato said. “And that is one of cryptocurrency’s big promises, especially for bitcoin.”[ix] Data shows that minorities, by their own volition, invest in and use cryptocurrency at higher percentage than whites. But, according to the White House-led report, minorities don’t know what’s best for them and they shouldn’t have financial freedom because of tenuous “environmental justice” concerns. What happened to individual liberties?

Let’s look at what the OSTP report says:

“Air-cooled mining computers contain high-velocity fans that can generate noise pollution. While there is a lack of published scientific research on fan noise, numerous media reports describe the loud, irritating, and nearly continuous noise caused by fans at crypto-asset mining centers. Noise pollution can induce physical and mental stress, hearing loss, sleep loss, and cardiovascular disorders. Noise can also reduce property values. In general, noise pollution from industry, road traffic, and airports is higher in communities of color and other underserved populations.”

If we’re going to get rid of Bitcoin because it supposedly creates “noise pollution”, which disproportionately impacts minorities, then will they say next that we should get of rid industry, road traffic, and airports because they also have a disproportionate “noise pollution” impact on minorities? Where does the insanity end?

 

  1. The Report fails to understand proof of work and bitcoin.

The OSTP Report doesn’t try to hide the fact that it picks favorites. Many sections read like an advertisement for proof of stake, an alternative blockchain consensus mechanism that is supposedly “environmentally friendly.” The Report conveniently ignores the unique value of proof of work and the tradeoffs between the two consensus mechanisms. Rather than encourage competition, the lifeblood of US technology leadership, the White House’s scientists use climate alarmism as a cudgel to limit freedom and justify government control of markets.

The Report also ignores the value that bitcoin and cryptocurrencies offer to society. Bitcoin secures property rights and individual liberties for millions of people across the world, places competitive pressure on centralized financial technologies, and protects Americans from having their civil liberties trampled on by cancellation via the traditional financial system. 

 

Conclusion 

It’s very clear, from the actual data and real science, that the White House-led Report is purely a political ploy to seize control over a nascent industry that takes pride in being decentralized and free from government intervention.

 

Endnotes

  1. [i] https://www.weforum.org/agenda/2022/03/crypto-energy-consumption/
  2. [ii] https://docsend.com/view/adwmdeeyfvqwecj2
  3. [iii] https://www.coincenter.org/app/uploads/2020/05/estimating-bitcoin-electricity-use.pdf
  4. [iv] https://bitcoinmagazine.com/business/not-science-digiconomist-bitcoin
  5. [v] https://www.nature.com/articles/s41558-019-0535-4
  6. [vi] https://www.coincenter.org/app/uploads/2020/05/estimating-bitcoin-electricity-use.pdf
  7. [vii] https://www.cnbc.com/2022/02/08/-research-shows-cryptocurrency-adoption-among-hispanics-is-high.html
  8. [viii] https://www.pewresearch.org/fact-tank/2021/11/11/16-of-americans-say-they-have-ever-invested-in-traded-or-used-cryptocurrency/
  9. [ix] https://www.cnbc.com/2022/02/08/-research-shows-cryptocurrency-adoption-among-hispanics-is-high.html