Evaluating the Potential of Bitcoin Mining in Reducing Carbon Emissions Under Different Electrical and Regulatory Markets Through Optimization Models

Abstract

Many studies have investigated the use of Bitcoin mining and its environmental footprint, yet have dismissively declared that mining has led to increased carbon emissions and resource consumption. To corroborate these findings, they point towards the fact that medium sized mining operations can utilize nearly as much water as a city of 50,000 people. Yet, there is a lack of research into the potential positive effects of Bitcoin mining, its ability to encourage renewable energy investment and potentially lower carbon emissions. This project investigates whether Bitcoin mining can have a positive environmental impact, acting as a flexible electricity load which can absorb excess renewable generation, in the scope of different regulatory markets. Using an hourly scenario model calibrated with baseline inputs, 16 electricity system cases were compared, including no mining, always-on mining, surplus-following mining, carbon-aware mining, price-responsive mining, municipal surplus mining, reliability-response mining, and renewable-investment scenarios. The results have shown widely different results amongst these different systems. For example, the high-renewable scenario produced the highest social welfare, about $810 million (based on defined parameters) and the lowest carbon emissions (1 million tons CO2), while always-on mining performed the worst on both metrics. However, the private-profit and social welfare metrics did not go hand in hand: while the regulated-utility scenario generated the highest mining profit, about $350 million, it was not the social optimum. Overall, the analysis supports a nuanced claim: mining can only reduce emissions when it is flexible, tied to surplus or low-carbon electricity, and paired with sufficient renewable availability.