US considers climate change tax on crypto miners

The White House is advocating for a 30 per cent tax on the electricity used in cryptocurrency mining as a cost of the industry's impact on climate change.

 The tax proposal will be included in the next federal budget, and the Biden administration is urging Congress to pass it.

According to the President's Council of Economic Advisers (CEA), the high-energy consumption of crypto miners has negative effects on the environment, quality of life and electricity grids where these companies operate across the country. Media reports say the CEA is preparing a case for the Digital Asset Mining Energy (DAME) excise tax, calling it an example of the administration's efforts to fight climate change and reduce energy prices.

The CEA states that crypto mining firms do not currently pay for the full cost they impose on society in the form of local environmental pollution, higher energy prices and increased greenhouse gas emissions' impact on the climate. The DAME tax would make miners consider the damage they cause to society.

Burning fossil fuels to generate electricity is responsible for 25 per cent of annual US greenhouse gas emissions and produces harmful air pollutants such as nitrogen oxides and particulate matter.

Critics argue that the crypto mining industry is being unfairly targeted.

Speaking to Yahoo News, Tom Mapes, director of energy policy at the Chamber of Digital Commerce, said: "This puts a clear line in the sand that they do not like the industry. They are looking for ways to hamstring it. This is just a way to go after the industry which they do not support."

Cryptocurrency mining consumes more power than the entire country of Australia, according to a White House report from last September, and in the US, which hosts roughly one-third of all crypto mining operations, it accounts for an estimated 0.9 per cent to 1.7 per cent of all the country's electricity usage.

The industry's energy usage is rapidly expanding as the crypto industry grows. In the United States, the world's leader in cryptocurrency mining, 34 large-scale bitcoin mines collectively consume as much electricity as nearly 3 million US households. Ten of those mines are connected to the energy grid in Texas, and those mines' electricity demand has resulted in higher prices for all consumers to ensure supply and demand balance and avoid blackouts.

Governor Kathy Hochul, a Democrat, signed a bill last year that placed a moratorium on licencing any more fossil-fuel-powered crypto mining facilities in New York, where one crypto mining firm purchased and reactivated a decommissioned natural-gas-fired power plant to power its operation.

The proposed tax would be phased in over three years, starting at 10 per cent next year and gradually increasing to 20 per cent and finally 30 per cent. It's expected to generate roughly $3.5 billion over the next 10 years, although revenue is not the primary goal of the DAME tax.

Instead, it aims to make crypto miners pay their fair share of the costs imposed on local communities and the environment.