The White House is trying to persuade Congress to pass a 30% tax on electricity used in cryptocurrency mining in the next federal budget to minimize the impact of the infant industry on climate change.
"The high energy consumption of cryptominers has negative effects on the environment, quality of life, and the electrical grids where these companies are located throughout the country," argues the President's Council of Economic Advisers (CEA) in a publication. of blog that will appear in White. House website on Tuesday, which Yahoo News got early access to. The publication will make the case for the special tax on digital assets, mining and energy (DAME), which, according to the CEA, is an "example of the Administration's efforts to combat climate change and reduce energy prices."
โCurrently, crypto mining companies do not have to pay the full cost they impose on others, in the form of local environmental pollution, higher energy prices, and the impacts of increased greenhouse gas emissions on the climate.โ , writes the CEA in its publication. . โThe DAME tax encourages companies to start taking more account of the harms they impose on society.โ
Burn fossil fuels to create electricity bills 25% of annual US greenhouse gas emissions and releases harmful air pollutants such as nitrogen oxides and particulate matter.
Critics of the proposed tax say the crypto mining industry is being unfairly targeted. โThis puts a clear line in the sand that they don't like the industry. They are looking for ways to shut it down,โ Tom Mapes, director of energy policy at the Digital Chamber of Commerce, told Yahoo News. โThis is just a way to go after the industry that they don't support.โ
In "proof-of-work" cryptocurrency mining, the most energy-intensive mining approach and the one that uses bitcoin by far the largest cryptocurrency, massive supercomputers compete to be the first to solve a mathematical puzzle. This process requires massive amounts of electricity. According a White House report from last September, cryptocurrency mining consumes more energy than the entire country of Australia. In the US, which is home to about a third of crypto mining operations, it accounts for between 0.9% and 1.7% of all electricity use in the country.
That energy use is growing rapidly as the cryptocurrency industry expands. In the United States, the world leader in cryptocurrency mining, 34 large-scale bitcoin mines collectively use as much electricity as nearly 3 million American householdsreported the New York Times. Ten of those mines are connected to the power grid in Texas, and the demand for electricity from those mines has led state grid operators to charge higher prices for all customers to make sure supply and demand are matched. in balance and avoid blackouts.
In New York, where a crypto mining company bought and reactivated a natural gas power plant To jumpstart their operation, Gov. Kathy Hochul, a Democrat, signed a bill late last year that put a moratorium on licensing more fossil fuel-powered crypto mining facilities.
State or local regulation could lead the industry to move elsewhere, the White House says, so it believes the federal government needs to step in and provide some national regulation that reflects the societal cost of crypto mining. The tax would be phased in over three years, starting at 10% the next year, then rising to 20% and finally 30%.
โWhere we see tensions emerge is in these places that are going off the grid, where this starts to show at the level that communities are pulling back and experiencing the consequences,โ a CEA economist who spoke on condition of anonymity told Yahoo News. "Localities are dealing with it and are struggling to find solutions on their own."
The proposed tax on mining cryptocurrency would generate an estimated $3.5 billion over 10 years. But revenue is not the point, according to the CEA, which writes in its forthcoming post that โthe main objective of the DAME tax is to make crypto miners pay their fair share of the costs imposed on local communities and the environment.โ
Economist James Broughel has criticized the proposal, arguing in Forbes that it would make more sense to tax greenhouse gas emissions from crypto mining, rather than electricity use. In other words, why penalize crypto mining companies that use clean energy?
The White House counters that any increase in electricity use makes it harder to green the grid because it means much more clean energy is needed.
Of course, there are other energy-intensive industries, such as chemical and steel manufacturing, that are not subject to a tax on their electricity use. But the White House argues that crypto mining does not necessarily generate the same benefits, including job creation and the supply of essential products, as those other sectors of the economy. At the same time, the volatility of cryptocurrency prices: the value of a bitcoin has fluctuated between $15,000 and $40,000 over the past yearโmay pose risks to the financial system.
โIt is not yet clear what the economic benefits of this activity are,โ the White House economist said of cryptocurrencies. "At the same time that the benefits have not been fully documented, there are concerns about risk to financial stability and certainly environmental concerns."
Defenders of the cryptocurrency industry say that it has benefits for its users.
โMillions of people are using this to transact all over the world,โ Mapes said. "It's an opportunity for the unbanked or underbanked to bank, and it's a way to send money across borders without having to pay an intermediary."
Mapes argues that the White House is selectively picking winners and losers across industries.
โIt seems like there is an inordinate focus on us,โ he said.
