KPMG recently released a report on Bitcoin and mining.
The report, a 12-page-long PDF, is devoted precisely to the role Bitcoin can play within the new guidelines for environmentally friendly investing (ESG, or Environmental, Social, and corporate Governance).
ESG criteria are those that are required for responsible investing, and ESG corporate reporting is what is used to assess risks and opportunities related to the environmental sustainability of production activities.
As more and more of these criteria are likely to be imposed on companies looking to raise capital in the future, it is important to assess them in crypto as well.
KPMG
KPMG is a conglomerate of companies that provide various business services including audit and accounting organization, management consulting, tax, legal and administrative services.
Its companies are active in 147 countries with about 219,000 employees, and total revenues exceed $32 billion.
Given these numbers, it is included within the so-called “Big Four,” the four accounting firms that globally share much of the market.
Its main operational office is in the Netherlands, while the holding company’s registered office is in Switzerland.
Part of its work also lies in monitoring ESG metrics, since according to them they express the new direction capitalism is taking.
Indeed, according to KPMG, companies can no longer afford to limit themselves exclusively to pursuing pure profit, but are also called upon to have a positive impact on society and the environment through new governance models.
Bitcoin mining according to KPMG
In its recently released report, KPMG states that Bitcoin is now a mature asset class, but despite continued adoption it continues to be misunderstood. The goal of the report is to assess the real environmental, social and governance impact of this technology, and dispel some of the misconceptions that still thrive in this regard.
In particular, they state that there is a variety of high-impact use cases offered by Bitcoin, which have a proven track record of delivering value to its users and society at large.
That said, the analysis mostly delves into the environmental aspects of mining.
The real problem, they point out, is not energy consumption per se, as huge as it is, but
rather the emissions associated with the production of the energy consumed, and in particular those produced by burning fossil fuels.
Comparison with other human activities globally shows how the CO2 emissions associated with Bitcoin mining are very minimal: 67 MtCO2e per year, compared, for example, to the 100 associated with gold mining.
But the comparison is even more striking if we take into account other human activities, such as tourism, which emits 4,500 MtCO2e per year, or fashion, which emits 2,100.
In other words, it makes no sense to focus on the CO2 emissions of Bitcoin mining if we do not first focus on those of, for example, tourism or fashion.
If we then throw in the more than 1,000 MtCO2e emitted due to deforestation, it becomes clear that those generated by Bitcoin cannot be considered a serious problem at all.
Reducing the environmental impact
The report also mentions some ideas for reducing the environmental impact.
The first, which is already widely known, is to use primarily energy produced from renewable sources for Bitcoin mining.
In particular they point out that Texas produces far more renewable energy than any other state in the US, especially wind and solar. So it is not surprising that Texas has become a popular destination for Bitcoin miners, with about 59% of the total hashrate in the US.
In addition, Bitcoin mining has demonstrated the ability to help balance power grids, given its ability to rapidly reduce its power consumption during periods of high demand, and this could help renewable energy producers.
The second is to reduce mining’s energy consumption when energy is scarce, which is something that miners have already been doing for some time.
The third is recycling the waste heat generated by mining’s power consumption. Using that heat, which for all intents and purposes is zero-cost waste, can save other energy consumption that would be necessary to spend to produce the same amount of heat in other ways.
Miners operating in hot places actually have the opposite problem, which is that they have too much heat and need to dissipate it, but mining in cold places can actually serve to save on heating costs.
However, it is the fourth idea that is the most interesting.
Reducing methane consumption
Methane (CH4) is an even more powerful greenhouse gas than CO2. In fact, the one extracted in excess is not released directly into the environment, but is first burned.
According to a 2021 study, the energy produced in the US and Canada alone from the combustion of the waste gas burned before being released into the atmosphere alone would be enough to power the entire Bitcoin network.
Mining Bitcoin with energy produced from burning waste gas would reduce emissions, since that gas would be burned anyway, and could create an additional revenue stream by monetizing energy that is currently wasted instead.
It is worth noting that 14.3% of anthropogenic methane emissions to the atmosphere in the US come from landfills, so much so that it really begs the question why that gas is not being used to mine Bitcoin.
KPMG’s conclusions on Bitcoin mining
The report concludes by stating that Bitcoin does actually provide a range of benefits related to ESG criteria, and not just problems as is often claimed.
It is probably only a matter of time before mining is also used to help stabilize energy grids, reduce greenhouse gas emissions, and provide sustainable heat for real estate.
KPMG analysts write:
“Time will tell what Bitcoin’s role might be in the transition to renewable energy and how it might serve as a financial tool for those in authoritarian regimes or those experiencing significant inflation.”
