Chinese Province Could Ban Bitcoin Mining to Cut Energy Use

Over the past decade, bitcoin has put increasing stress on the largely coal-powered grid of China’s Inner Mongolia. Now, the province is clamping down. Late last week, province officials announced plans to ban all new bitcoin and other cryptocurrency mining ventures and quickly phase out existing activity in order to reduce electricity consumption.

Cryptocurrency is massively resource intensive. Globally, mining for bitcoin—which is not literally mining, but rather creating new bitcoin by solving complex, cryptographic math problems—uses as much carbon as the entire country of New Zealand, according to one study. It accounts for roughly 0.5% of total global electricity consumption, according to those researchers’ estimates.

Nearly half of all bitcoin mining globally takes place in China. Since energy prices in Inner Mongolia are particularly low, many bitcoin miners have set up shop there specifically. The region is the third-largest mining site in China. Because the grid is heavily coal-powered, however, that’s led to skyrocketing emissions, putting it in conflict with President Xi Jinping’s promise last September to have China reach peak carbon emissions by 2030 at the latest and achieve carbon neutrality before 2060.

Local Chinese governments are rushing to lower their electricity consumption in the wake of those commitments. In a draft rule published last Thursday, Inner Mongolia Development and Reformation Commission proposed immediately halting all new cryptocrurrency mining, as well as ending all existing projects by the end of April. The public comment period for the rule runs through Wednesday.

The plan comes as part of a wider effort to reduce energy intensity—or the amount of energy consumed per unit of economic growth, showing an economy’s energy efficiency—by 3% compared to 2020. To meet that goal, Inner Mongolian officials also plan to stop approving other new projects in the province that require large amounts of energy, including new steel, methanol, and coke projects (coke as in the fuel with a high carbon content, though you might say bitcoin is its own kind of, uh, coke project).

Inner Mongolia’s cryptocurrency crackdown is a welcome policy to quell a truly stupid industry. But to really get the sector’s energy impact under control, bigger changes will be needed. Cryptocurrency is energy intensive by design, because it requires constantly mining for new tokens and running computers to solve computational puzzles in order for transactions to be accepted. The blockchain works this way to ensure that each coin is unique and thereby prevent spending a single digital coin more than once. But while this makes it secure, it also makes it highly carbon intensive. Alternative methods of mining, such as proof of stake (as opposed to the current proof of work setup), could lower emissions by reducing the number of computers focused on solving puzzles. But ultimately, bitcoin emissions are tied to the bigger problem of polluting fossil fuel infrastructure that powers most of the world’s grid.

Transitioning more of the grid to run on renewables would certainly reduce bitcoin’s carbon intensity. But honestly, the world already has enough essential sectors to decarbonize, like heating and housing. The less energy the world uses, the easier it will be to create enough renewable sources to power everything. Sorry, cryptocurrency stans, but I don’t think bitcoin is particularly needed.