A proposed climate tax on crypto mining is gaining momentum, with a new report suggesting that a levy on energy-hungry crypto mining could raise billions of dollars for climate action. The idea, which was floated during a United Nations climate conference, aims to reduce emissions by incentivizing mining firms to clean up their operations and provide desperately needed funding to help less affluent nations transition to renewable energy and adapt to the effects of climate change.

The report, released by the Global Solidarity Levies Task Force, estimates that a levy of $0.045 per kilowatt-hour (kWh) of electricity used could generate $5.2 billion in revenue annually. This amount is based on the consequences of the greenhouse gas emissions causing climate change and exacerbating disasters including storms, droughts, and wildfires. The task force, led by Kenya, Barbados, and France, was formed last year to consider potential levies on heavily polluting industries as a way to fund action on climate change.

The Bitcoin network is estimated to use more electricity annually than a majority of the world's countries do individually. Authenticating a single Bitcoin transaction requires as much electricity as a person in Ghana might use over three years or a person in Germany might burn through in three months. The hope is that placing a tax on that electricity consumption could incentivize crypto miners to use more efficient hardware or even persuade the Bitcoin network to turn to a less energy-intensive method for validating transactions, much like Ethereum.

By charging more for dirty sources of energy, the levy could also push miners to use more renewable energy. The report cites research by the International Monetary Fund (IMF) that settles on $0.045 per kWh as the amount needed for a corrective tax to make up for the impact crypto mining has on the climate. Taking into account other kinds of air pollution from burning fossil fuels, that tax rises to $0.085 per kWh.

The task force's plan is to present concrete proposals at the spring meetings of the IMF and World Bank in April of next year. From there, they'd have to garner enough support for the levies to push for their implementation during the next major UN climate summit in Brazil in November 2025. Kazakhstan, a big hub for Bitcoin mining, implemented a tax on crypto miners' electricity use in 2022 and collected around $7 million from it that year. In the US, where more Bitcoin mining takes place than any other country, the Biden administration has proposed a 30 percent tax on crypto miners' electricity consumption.

However, the proposal's fate is uncertain, especially with President-elect Donald Trump, whose campaign was boosted by prominent crypto investor donors, unlikely to support a climate levy. The price of Bitcoin has soared to astonishing heights since Trump's election, surging on expectations that his administration will be supportive of the industry. A higher price typically incentivizes more mining, which means more energy consumption and greenhouse gas emissions.

The report's release during climate negotiations at the UN summit in Baku, Azerbaijan, highlighted the need for financing to support climate action. Delegates from nearly 200 countries were wrangling over how much money wealthy nations, including countries like the US that have caused the most climate change with their greenhouse gas emissions, should contribute in aid to poorer countries most vulnerable to global warming.

Laurence Tubiana, co-lead of the Global Solidarity Levies Task Force Secretariat and CEO of the European Climate Foundation, emphasized the importance of fiscal justice in achieving climate justice. "There can be no climate justice without fiscal justice, as all countries are facing the same challenge: how to fund the transition while ensuring that those with the greatest means and the highest emissions pay their fair share," she said in a press release with the report launch.

The proposed climate tax on crypto mining is a significant step towards addressing the environmental impact of the industry and providing much-needed funding for climate action. As the world continues to grapple with the challenges of climate change, innovative solutions like this one will be crucial in achieving a more sustainable future.