Governments looking to ban bitcoin (BTC) mining for environmental reasons should think twice — it could backfire.
That’s the conclusion from a new academic paper by crypto research firm Exponential Science, published on Thursday and titled ‘The Unintended Carbon Consequences of Bitcoin Mining Bans: A Paradox in Environmental Policy.’
The paper’s findings? In some jurisdictions, a blanket bitcoin mining ban can actually trigger an increase in the industry’s overall carbon emissions, as the affected miners may relocate to new regions with electric grids that rely on fossil fuels.
"Bitcoin mining has seen a rough couple of years from a PR perspective, with respect to its environmental credentials,” Juan Ignacio Ibañez, one of the paper’s contributors, told CoinDesk.
"Although it is true that proof of work mining is an energy-intensive activity, this does not directly translate into carbon emissions or environmental harm.”
Indeed, it all depends on what the source of energy is. A coal-powered electric grid will obviously produce more carbon emissions than a hydro-powered one. And mining bans “can have the unfortunate effect of driving the industry away from green sources of energy, hence increasing the global emissions from the network," Ibañez said.
It really depends on the region. According to the team’s model, a mining ban in Kazakhstan, for example, would reduce the Bitcoin network’s global annual carbon emissions by 7.63%. The same ban in Paraguay, however, would increase emissions by 4.32%.
Overall, mining bans would be more effective, from an environmental perspective, in countries such as China, Russia, and Malaysia, with Kazakhstan taking the lead in that category. They will backfire, however, in most of the Americas and in Europe, with a special emphasis on Nordic countries and Canada.
But even within the same nation, the situation may vary from region to region. In the U.S., for example, a mining ban in Kentucky or Georgia would likely have a positive impact in terms of emissions, while bans in New York, Texas, the state of Washington, and California would be detrimental.
Interestingly, a similar dynamic is playing out in China. The Chinese government famously banned crypto mining in 2021, but mining models now agree that some Chinese miners, instead of relocating, simply went underground and continued to operate illegally.
The result? The cessation of all mining activity in the province of Xinjiang could still result in a 6.9% reduction in global annual emissions, while a similar move in Sichuan would cause almost a 3.8% increase.
“What this underscores is the importance of science-informed regulation,” Nikhil Vadgama, co-founder of Exponential Science, told CoinDesk. “Emerging technologies such as blockchain are complex systems, and thus regulatory interventions can produce a butterfly effect” — meaning policy decisions can have unintended, far-reaching consequences.
For Ibañez, one of the takeaways of the research is that, as an increasing number of bitcoin mining operations come online, new jurisdictions will grow to have an outsized impact on the network’s total carbon emissions.
“Currently, our model does not place a large effect on Sweden, but it's a safe bet to think that more and more miners may move there if conditions continue to be so favorable. Other countries such as Iceland and potentially Argentina could enter the radar soon," Ibañez said.
