The International Monetary Fund (IMF) has recently declared that increasing the taxes for electricity usage in crypto-mining could help to curb the global carbon footprint. The IMF has proposed an 85% tax hike to cut on global carbon emissions. The agency came up with thought-provoking revelations in its recent blog post.
The International Monetary Fund (IMF) estimates that the proposed tax revision will generate $5.2 billion in annual revenue worldwide. Additionally, it will reduce greenhouse gas emissions by 100 million tons, equivalent to Belgium’s current emissions. However, it remains unclear whether this tax will directly contribute to reducing carbon emissions.
The proposed taxation may also have an unintended consequence: driving crypto-miners to relocate to countries with lower electricity costs. This could potentially offset some of the environmental benefits of the tax.
Logic Behind IMF Crypto Mining Tax Revision Thoughts
Financial experts at the IMF believe that higher levies will deter the increasing energy consumption among crypto miners and AI data centers. The analysts have concluded that this might encourage them to look for more energy-efficient devices to help reduce energy consumption through crypto-mining devices.
The Bitcoin mining industry has made decent progress in the last few years. The IMF believes that taxing this industry will benefit the financial health of governments across the world.Recently, some IMF executives had made stark claims that the average electricity cost for crypto miners should be hiked by 85%. They believe that this step will curb global carbon emissions.
Shafik Hebous, the deputy division chief of IMF’s Fiscal Affairs Department, has suggested implementing a $0.047 per kilowatt hour tax on electricity consumption for crypto mining. Another expert, Nate Vernon-Lin, a climate policy division economist, stated that this taxation would deter the crypto mining industry from increasing energy consumption and help curb emissions to meet global goals.Â
Talking the Numbers
According to the two, if the health effects of mining were considered, the tax would rise to $0.089 per kilowatt-hour. They also stated that the energy consumption for one Bitcoin transaction is equivalent to the electricity an average Pakistani consumes in three years. They also said that a Google search consumes one-tenth of what AI Models like Bard and Gemini use for one single query.
Last September, IMF had released a report which stated that by 2027, crypto mining will cause 0.7% of global carbon emissions. Adding the emissions from the AI data centers, this amount could swell up to 1.2% annually equating to 450 million tons of emission each year.
Hebous and Lin believe that tax increases in one jurisdiction could lead to the crypto miners switching locations to places with more efficient taxation. Global tax revision will deter the crypto miners and AI data centers increasing energy consumption. International support and coordination is the only way to cope with this emerging issue.
Several countries, like Venezuela, have already banned crypto mining. They have cited the energy load this activity poses on their electricity grids as the main reason for this ban.Â
Iran, too, has introduced a $24 reward for anyone who reports illegal crypto-mining activities. The country already has difficulty coping with an almost failed grid during an intense heatwave.
