Lately, there's been a lot of talk about how much energy Bitcoin (BTC) uses. Some have even ventured to claim that BTC's energy usage alone could be responsible for a 3ºC increase in global temperatures—an unlikely scenario. In such a polarized debate, it's hard to cut through the noise and find solid data. That's why we wanted to share Canopi's preliminary findings. (Check out our Climate API to get data on a daily basis).

At Canopi, we're focused on the amount of CO2e that BTC produces, not just on its energy use. The rationale is simple: if 100% of the energy used came from renewable sources, its impact on the planet would be minimal. Of course, the hard part about any cryptocurrency is figuring out what percentage of energy comes from renewables. The answer isn't simple, because miners don't have to disclose this data. Based on publicly disclosed data, we believe that on average 30-40% of Bitcoin is mined with renewables.

Key data points:

• Energy usage last year totaled close to 70 TWh. This year, our projections show that the Bitcoin network will consume close to 120 TWh.
• We estimate that BTC produced 45 megatons of CO2e in 2020. Our annualized estimate for 2021 (at the time of writing) is 74 megatons of CO2e. That's almost a 60% increase.
• In 2020, a Bitcoin transaction was equivalent to 396 kg CO2e. On June 22, 2021, each transaction generated about 693 kg CO2e.

As we note in our explainer, it's important to allocate emissions on a per-transaction because it allows companies to account for their Scope 3 carbon footprint. This way companies that benefit from on-chain crypto transactions are absorbing the real cost of using the crypto network.

Note on the Growing Use of Renewable Energy in Mining Operations

We are excited about the growing use of renewable energy in Bitcoin mining. We hope that recent announcements by mining operators generate additional momentum towards fossil-fuel-free operations.

As we discuss in our methodology post, the amount of renewable energy being used in mining operations is hard to ascertain, but it likely ranges between 40-80%. The most reputable figures today come from CCAF and CoinShares, respectively. We encourage readers to engage with these sources. Canopi is working to shed additional light on the matter.

A few noteworthy points on this discussion:

• "Miners are incentivized to use the cheapest energy" is true. However, it does not follow that the cheapest energy is always from renewable sources (even if that is increasingly true in some regions). In China, for example, many miners were located in Sichuan, which has lots of stranded hydropower during the rainy season. However, miners often had to rely on baseline coal power during the dry season, with only some migrating to other locations (given the risk of damage to equipment).
• As miners leave China due to the government’s crackdown, the energy mix is unclear. We hope that most will pick locations such as Iceland or the West coast of the US, which have abundant renewables. However, until we have better data, we continue to believe our methodology provides a best estimate of emissions.
• Given announcements by the American Bitcoin Mining council and work being done by the Crypto Climate Accord, the percentage of renewables should be increasingly feasible to track. Canopi will update our figures such that our estimates reflect the evolving reality.

What can you do to build clean crypto?

We know that many crypto companies, especially early-stage startups, are resource-constrained. They need to focus on growth. That's why Canopi helps companies put climate on autopilot.

• If you're looking to understand how much CO2 your address generated, check out our online calculator here.
• If you're looking to build sustainable crypto products, check out our Climate API. Documentation is here and request access here.
• If you're looking to measure your company's entire carbon footprint, check out our Carbon 360º platform and contact us here. Carbon 360º platform enables companies to measure their carbon footprint in hours, start their decarbonization journey, and invest in a portfolio of frontier carbon removal solutions.
• If you're looking to set up an investment fund in frontier carbon removal solutions, also contact us here.