IMF Proposes Steep Tax 85% to Cut Crypto Mining Emissions

Two International Monetary Fund (IMF) executives have proposed a global increase in electricity costs for crypto miners by as much as 85% to significantly reduce carbon emissions.

Shafik Hebous, the IMF Fiscal Affairs Department’s deputy division chief, and Nate Vernon-Lin, an economist from the climate policy division, suggest that a tax of $0.047 per kilowatt hour could align the crypto mining industry’s emissions with global environmental goals. This tax could potentially rise to $0.089 per kilowatt hour when considering the local health impacts of mining.

Potential Financial and Environmental Impact

The proposed tax could raise global government revenue by $5.2 billion annually while reducing emissions by 100 million tons, a figure comparable to Belgium’s yearly carbon output. Hebous and Vernon-Lin argue that a single Bitcoin transaction consumes as much electricity as an average Pakistani citizen does over three years. In comparison, the artificial intelligence model ChatGPT is said to require ten times the energy of a Google search.

Expanding the Scope: AI Data Centers

The IMF officials also floated the idea of an energy tax on AI data centers, proposing a rate of $0.032 per kilowatt hour, which could rise to $0.052 when accounting for pollution costs. This could generate an additional $18 billion annually for governments.

The IMF estimates that by 2027, crypto mining alone could contribute 0.7% of global carbon emissions. When combined with AI data centers, this could reach 1.2%, equivalent to 450 million tons of emissions.

Encouraging Efficiency and Global Coordination

Hebous and Vernon-Lin suggest that such targeted taxation could push crypto miners and AI data centers to adopt more energy-efficient technologies. However, they emphasise the need for global coordination to prevent operations from simply relocating to areas with lower standards.

Comparative Emissions and Global Responses

Despite these concerns, there is debate about the relative impact of crypto mining emissions compared to other sectors. For example, Amazon’s carbon footprint in 2021 was reported at 71.54 million metric tons, surpassing Bitcoin’s estimated 65.4 million metric tons.

Some countries, like Venezuela and Iran, have taken drastic measures against crypto mining due to its strain on power grids. Venezuela has banned the practice, while Iran offers a $24 reward for reporting illegal miners, especially as the country faces a severe heatwave.