Bitcoin’s Carbon Footprint Revisited: Proof of Work Mining for Renewable Energy Expansion

Abstract

While blockchain and distributed ledger technology offer immense potential, they have been criticized due to the energy-intensive nature of the proof of work consensus algorithm, particularly in the context of Bitcoin mining. We systematically explore the state of the art regarding the relationship between Bitcoin mining and grid decarbonization. We specifically focus on the role of flexible load response through proof of work mining as a potential contributor to renewable energy penetration and net decarbonization of the energy grid. The existing literature has not comprehensively examined this area, leading to contested views. We address the gap, analyzing the capabilities and limitations of Bitcoin mining in providing flexible load response services. Our findings show that renewable-based mining could potentially drive a net-decarbonizing effect on energy grids, although key adaptations in mining practices are needed to fully realize this potential. Overall, the paper suggests a re-evaluation of the environmental impact of Bitcoin mining, highlighting its potential role as a facilitator for renewable energy expansion, and decarbonization more broadly.

Keywords: Blockchain, Carbon Footprint, Decarbonization, Ancillary Services, Flexible Load Response, Sustainability, Renewable Energy Sources

JEL Classification: Q42, Q49, Q54, Q56, Q01