Interest in bitcoins is growing. Around twenty large, publicly-listed companies, cumulatively, have over $9.6 billion invested in bitcoins. Investments from retail investors are also on the rise.
Studies indicate that over 55% of BTC investors became interested only in the last 12 months. Investment products in BTC expanded from 55% in 2020 to 59% in 2021.
Together with the growth in the interest for BTC, concerns over its environmental impact have also grown. As the concerns over the environmental impacts of BTC rise, models to address these concerns and make BTC holdings environmentally sustainable are emerging.
Compensating Carbon Emissions
The emerging models aim to enable the calculation of the CO2 footprint of BTC holdings. In these models, the greatest responsibility for CO2 compensation would fall on the bitcoin mining companies.
It is envisaged that carbon emissions would be compensated via a certificate from the EU’s emission trading system. It would cost $50 for one certificate for one tonne of CO2. This implies a cost of $18 to compensate for one BTC transaction. Holding one BTC for a year cost two tonnes of carbon emission. To compensate for this via the EU emissions trading system, it would cost $100.
This model is totally transparent. Companies could use the formula to estimate their carbon footprint and then offset that. Many exchanges and ETFs have already begun adopting similar approaches to offset carbon emissions. It is also important to take note of the source of electricity and efforts should be made to move to renewable sources of electricity.
While various models for achieving carbon neutrality are being adopted, it is also important to assess their accuracy. The numbers and the metrics that go into the model change with time, and this needs to be factored into the model. All the models are open to critique – but are useful despite the shortcomings that might exist. Since the models are still evolving, there is enormous potential for improvement. Awareness is increasing, and it is important for the models to be refined and for initiatives to be put in place to drive greater adoption.