Blockchain Environmental Accountability: A Vision from its Energy Demand

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Severe weather events are increasing international climate change pressures from UNFCCC climate regime and its subsequent Paris Agreement, calling for the urgency of ‘peaking global emissions as soon as possible’ and to ‘reach net-zero emissions by 2050’. Achieving these global targets require a profound transformation of national energy mixes, in what is denominated a ‘global energy transition’ towards cleaner, renewable and more sustainable sources to replace fossil fuel. 

Fossil fuel burning (coal, oil and gas) since mid-1850s, has been responsible for historically unseen atmospheric concentrations of CO2 that by now surpass the 400 parts per million (ppm); while data from the Antarctic ice-cores shows that during last 800,000 years before industrial revolution, such concentrations were maintained below 300ppm. Following the same line, data shows that by the 1900s, global emissions reached 2 billion tonnes of CO2 per year while by 2017, global emissions reached 36 billion tonnes of CO2 per year and have been increasing around 4% yearly since then (IRENA, 2019). As a consequence, policies towards decarbonisation of economies have been focused in two main fields: 

  1. Energy Efficiency: focused on the energy needed per unit of output. Energy efficiency contributes to the use of less amounts of energy to achieve the same or better outputs, ultimately causing less emission per unit of energy. 
  2. Carbon Efficiency: focused on the amount of CO2 emitted per unit of energy (i.e. tonnes of CO2 per kWh). Carbon efficiency actions are focused on increasing shares of renewable energy generation as the amount of CO2 emitted per unit of energy is close zero.  

Given the previous framework of global decarbonisation, Information and Communication Technologies (ICTs) have been emerging as an important source of energy demand. Data Centres worldwide consumed around 194 TWh by 2014 (equivalent to 1% of global demand) and by 2020, although these facilities triplicated their workloads, their energy consumption only grew 3% due to efficiency improvements (OECD/IEA, 2017). Similarly, Data Networks consumed around 185 TWh of electricity by 2015 and it is expected to have an increase of 70%, or a potential fall of 15%, by 2021 mainly caused by mobile network increases and energy efficiency improvements (OECD/IEA, 2017). Also, the rapid proliferation of interconnected devices through the Internet of Things (IoT) will also require further electricity needs to operate since it is expected that more than 20 billion devices will be connected to the IoT by 2020. In overall, digitalisation of economies, such as data storage, networking and processing, requires increasing amounts of electricity that must be considered under the current global decarbonisation framework. 

Blockchain technology energy consumption has been a strong topic of interest. Given the novelty of the technology and variety of governance attributes (consensus algorithms) affecting its energy demands, there are few estimations about the energy needs in the applications of blockchain. In this regard, although estimations are sustained in assumptions and there is no standard methodology to calculate it, the Digiconomist (2020) estimates Bitcoin energy demand around 78 TWh (similar to the energy demand of Chile) with a carbon impact of 37 thousand tonnes of CO2 (equivalent to the carbon footprint of New Zealand). Additionally, Digiconomist estimations for Ethereum’s energy demand are established around 18 TW. Other studies like Bevand (2018), estimates a yearly demand for Bitcoin around 18 TWh, while de Vries (2016) estimates energy consumption from Bitcoin mining in 2.5 GW of installed capacity (close to the demands of Ireland). Although is well known that Proof-of-Work (PoW) consensus mechanism inherent to Bitcoin application is highly energy intensive due to mining activities, there are other consensus mechanisms such as Proof-of-Stake (PoS) and Proof-of-Identity, that are not required for mining, resulting in less energy intensive blockchain networks. 

Given the rise of electricity demands for ICTs, in this era of digitalisation under climate change and decarbonisation pressures, blockchain technology surges as a solution for decentralisation and automatisation in many sectors of the economy. Such solutions are integral for enhancing sustainability and promoting renewable energy solutions in some cases.

Nevertheless, for blockchain technology to be aligned with decarbonisation and climate change targets, it needs to eliminate uncertainties about its energy demands and environmental impacts. This means that blockchain technology applications need to be able to clearly calculate its energy requirements as well as subsequent emissions, based on standard criteria/methodologies that serve for comparative purposes. In other words, if blockchain technology will help humanity to overcome climate change, it needs to be transparent and accountable about its own energy demands and emissions first. Transparency has the potential to wipe out stakeholder doubts about the environmental impacts of blockchain and thus, trigger financing towards applications and promote specialisation and competency towards energy efficient systems. 

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