A group of more than 20 firms comprising crypto, finance, technology, energy, and nongovernmental organizations has banded together to focus on the environmental impact of cryptocurrency.
In an announcement on Thursday, the Crypto Climate Accord — reportedly inspired by the 195-signatory Paris Climate Agreement — said it aims to address the "large and growing energy consumption of cryptocurrency and blockchain, and the climate impact of their energy use." Launched by nonprofits Energy Web Foundation, the Rocky Mountain Institute and the Alliance for Innovative Regulation, the group’s partners include high-profile firms in the crypto space like blockchain-based payments company Ripple, Canadian mining firm Hut 8, digital asset investment firm CoinShares, Ethereum software company Consensys, and others.
"Industries from across the global economy are beginning to decarbonize their operations," the group stated. "We can do the same in crypto. We have the opportunity to decarbonize the industry."
Among the Crypto Climate Accord’s long-term goals are transitioning all of the world’s blockchains to be powered by 100% renewable energy — by the time of the United Nations Framework Convention on Climate Change in 2025 — and developing an open-source accounting standard for measuring emissions from the cryptocurrency industry. The group has also set a target for the entire crypto industry to become carbon net-zero by 2040.
Many fintech and crypto firms have made public pledges for greener initiatives as the environmental impact of digital assets becomes more apparent. Last year, Ripple announced it was committing to becoming carbon net-zero by 2030 by partnering with the Energy Web Foundation and investing in carbon-removal technologies.
"The Crypto Climate Accord recognizes that financial technologies — including blockchain and cryptocurrency — are well-positioned to lead global finance’s commitment to a sustainable future," said Ripple in response to the launch on Thursday. "Recent studies suggest that now through 2023 are the most critical years of adoption growth for crypto and we know it will be more difficult to 'reverse engineer' a systemic characteristic like sustainability the longer we wait."
Both Bitcoin (BTC) and blockchain have received praise for their roles in transforming global finance, but have also drawn criticism over the technology’s impact on climate change. The energy required to maintain the Bitcoin network is estimated to consume roughly 95.4 terawatt-hours per year — an amount comparable to the power consumption of Kazakhstan — according to data from the Digiconomist’s Bitcoin Energy Consumption Index. Bitcoin also has an annual carbon footprint — 45.34 megatons of carbon dioxide — that rivals Hong Kong’s.
If "decarbonizing the cryptocurrency industry in record time" is the goal of the Crypto Climate Accord, the challenges it faces will be comparable to those of the signatories to the Paris Agreement, which aims to prevent the Earth from warming more than 1.5 degrees Celsius above “pre-industrial levels.” Reports suggest that global carbon dioxide emissions fell by 6.4% last year, as many industries were slowed or stopped by the impact of the pandemic. However, this still fell short of the 7.6% cut the United Nations Environment Programme estimated was required to meet the numbers set in the Paris Agreement.