The surge in carbon emissions from artificial intelligence (AI) and cryptocurrency operations has raised concerns about the environmental impact of these power-hungry activities. A recent report by the International Monetary Fund (IMF) highlighted the growing electricity demand from crypto assets and AI, which is driving up emissions worldwide.
According to the IMF, the electricity consumption associated with crypto mining and AI data centers accounted for 2% of global electricity demand in 2022. This figure is projected to rise to 3.5% in the next three years, equivalent to the current electricity consumption of Japan, the world’s fifth-largest electricity user.
The environmental implications of these activities are significant, with crypto mining alone projected to generate 0.7% of global carbon dioxide emissions by 2027. When considering data centers as well, their carbon emissions could reach 450 million tonnes by 2027, representing 1.2% of the world’s total emissions.
To address these issues, the IMF suggests implementing a direct tax on electricity consumption to incentivize crypto miners and data centers to reduce their emissions. The proposed tax rates of $0.047 per kilowatt-hour for crypto mining and $0.032 per kilowatt-hour for data centers could help curb emissions in line with global climate goals.
Furthermore, policymakers are encouraged to consider a broad carbon pricing mechanism to reduce fossil fuel consumption, promote cleaner energy sources, and improve energy efficiency. In the absence of a global carbon price, targeted measures such as electricity taxes, renewable energy incentives, and energy-efficient equipment credits could help mitigate emissions from crypto mining and data centers.
As the world grapples with the urgent need to address climate change, it is crucial to adopt sustainable practices in the technology sector. By implementing effective tax policies and incentivizing energy efficiency, countries can work towards reducing emissions from AI and cryptocurrency operations while promoting environmental sustainability.
