CHENNAI: Crypto mining and data centers together accounted for 2 per cent of world electricity demand in 2022. And that share is likely to climb to 3.5 per cent in three years. Further, their carbon emissions could reach 450 million tons by 2027, or 1.2 per cent of the world total, finds the IMF, which wants the tax system to steer companies toward curbing emissions.
Electricity used by high-powered equipment to mine crypto assets, one Bitcoin transaction requires roughly the same amount of electricity as the average person in Ghana or Pakistan consumes in three years. ChatGPT queries require 10 times more electricity than a Google search, due to the electricity consumed by AI data centers.
Crypto mining and data centers together accounted for 2 per cent of world electricity demand in 2022. And that share is likely to climb to 3.5 per cent in three years. That would be equivalent to the current consumption of Japan, the world’s fifth-largest electricity user. The climate impact of these activities—irrespective of their social and economic benefits—is cause for concern. The IMF finds that crypto mining could generate 0.7 per cent of global carbon dioxide emissions by 2027. Extending the analysis to data centers, means their carbon emissions could reach 450 million tons by 2027, or 1.2 per cent of the global emissions.
The tax system is one way to steer companies toward curbing emissions. According to IMF estimates, a direct tax of $0.047 per kilowatt hour would drive the crypto mining industry to curb its emissions in line with global goals. If considering air pollution’s impact on local health as well, that tax rate would rise to $0.089, translating into an 85 per cent increase in average electricity price for miners. Such a levy would raise annual government revenue of $5.2 billion globally and reduce annual emissions by 100 million tons.
For data centers, a targeted tax on their electricity use would need to be set at $0.032 per kilowatt hour, or $0.052 including air pollution costs. This could raise as much as $18 billion annually.
On the flip side, AI applications could lead to smarter and more efficient power use. The right policies can still incentivize developing AI applications with positive societal spillovers while addressing the environmental damage.
