The European Commission is taking huge steps to address the environmental impact of cryptocurrencies. In response to growing concerns about the energy consumption and carbon footprint of crypto-assets, the EU’s executive arm has allocated €800,000 ($842,000) for a comprehensive study aimed at understanding and mitigating the environmental harm caused by cryptocurrencies.
The study, which will run for a year, aims to create a methodology for measuring the climate and environmental impact of different consensus mechanisms utilized by cryptocurrencies.
This initiative aligns with the European Union’s commitment to achieving climate and sustainability goals in line with the Paris Agreement.
There have been several reports on the environmental impact of crypto mining. According to a Whitehouse report, between 2018 and 2022, global crypto-assets usage was estimated to have quadrupled.
As of August 2022, published estimates suggest that crypto-assets globally consume between 120 to 240 billion kilowatt-hours per year.
The European Commission has expressed concerns about the environmental impact of crypto-assets, particularly those that rely on energy-intensive proof-of-work (PoW) consensus mechanisms, such as Bitcoin.
Cryptocurrencies that rely on PoW use significant computational power, resulting in high electricity consumption and substantial carbon emissions.
Before this bid for an energy study, the European Commission had discussions on crypto energy when they were developing the Markets in Crypto Assets (MiCA) regulation.
Part of the measures taken included the introduction of green controls and a proposal that requires crypto issuers to declare their environmental impacts.
The contract with a closing bid date of November 10, 2023, is designed to explore various aspects of the environmental impact of cryptocurrencies from water usage to waste generation and depletion of natural resources.
The European Commission stated, “There is evidence that crypto-assets can cause significant harm to the climate and environment.” It also emphasized that the ‘”growing demand for crypto-assets and the expansion of crypto-mining, including within the EU, could potentially hinder the EU’s efforts to align with its climate and sustainability objectives, as outlined in the Paris Agreement.”
The EU’s move mirrors global concerns about the carbon footprint of cryptocurrencies. The study comes at a crucial time when the crypto industry is facing increased scrutiny regarding its environmental impact.