Bitcoin Mining Bans Can Backfire on Climate Conscious Governments, a New Research Finds

The intensive energy usage of the Bitcoin network could tempt governments to ban mining due to environmental concerns. A new research paper indicates that could be a mistake, depending on the jurisdiction.

Some governments may consider banning Bitcoin (BTC) mining due to concerns over the industry’s carbon footprint, but a new study suggests that such measures could actually backfire in some jurisdictions.

According to the study, titled “The Unintended Carbon Consequences of Bitcoin Mining Bans: A Paradox in Environmental Policy,” a blanket ban on bitcoin mining can lead to an increase in the industry’s overall carbon emissions.

The study was conducted by crypto research firm Exponential Science and published on Thursday. It found that when miners are forced to relocate due to a mining ban, they may move to new regions with electric grids that rely on fossil fuels.

“Bitcoin mining has seen a rough couple of years from a PR perspective, with respect to its environmental credentials,” Juan Ignacio Ibañez, one of the paper's contributors, told CoinDesk.

“Although it is true that proof of work mining is an energy-intensive activity, this does not directly translate into carbon emissions or environmental harm.”

The carbon footprint of bitcoin mining depends on the source of energy used. A coal-powered electric grid will obviously produce more carbon emissions than a hydro-powered one.

“Mining bans can have the unfortunate effect of driving the industry away from green sources of energy, hence increasing the global emissions from the network,” Ibañez said.

The study’s findings suggest that the effectiveness of a mining ban from an environmental perspective will vary widely depending on the country.

The team’s model showed that a mining ban in Kazakhstan, for example, would reduce the Bitcoin network’s global annual carbon emissions by 7.63%. The same ban in Paraguay, however, would increase emissions by 4.32%.

Overall, mining bans would be more effective, from an environmental perspective, in countries such as China, Russia, and Malaysia, with Kazakhstan taking the lead in that category. They will backfire, however, in most of the Americas and in Europe, with a special emphasis on Nordic countries and Canada.

But even within the same nation, the situation may vary from region to region.

In the U.S., for example, a mining ban in Kentucky or Georgia would likely have a positive impact in terms of emissions, while bans in New York, Texas, the state of Washington, and California would be detrimental.

Interestingly, a similar dynamic is playing out in China. The Chinese government famously banned crypto mining in 2021, but mining models now agree that some Chinese miners, instead of relocating, simply went underground and continued to operate illegally.

The result? The cessation of all mining activity in the province of Xinjiang could still result in a 6.9% reduction in global annual emissions, while a similar move in Sichuan would cause almost a 3.8% increase.

“What this underscores is the importance of science-informed regulation,” Nikhil Vadgama, co-founder of Exponential Science, told CoinDesk. “Emerging technologies such as blockchain are complex systems, and thus regulatory interventions can produce a butterfly effect” — meaning policy decisions can have unintended, far-reaching consequences.

For Ibañez, one of the takeaways of the research is that, as an increasing number of bitcoin mining operations come online, new jurisdictions will grow to have an outsized impact on the network’s total carbon emissions.

“Currently, our model does not place a large effect on Sweden, but it's a safe bet to think that more and more miners may move there if conditions continue to be so favorable. Other countries such as Iceland and potentially Argentina could enter the radar soon,” Ibañez said.

The full version of the study can be found here.

By Tom Carreras

Markets Reporter

Tom Carreras is a markets reporter for CoinDesk. He holds BTC, ETH and SOL above CoinDesk's disclosure threshold of $1,000.