What is the CO₂ footprint of a Bitcoin ETF or a crypto exchange? The Frankfurt School Blockchain Center and INTAS.tech are jointly developing a method to answer questions like these in the future.
The newly developed method is called Bitcoin Carbon Neutrality Investment Standard (BCNIS) and thus meets the ravages of time. Due to inflation expectations, more and more people are shifting their purchasing power towards the crypto sector. At the same time, the world is facing a climate catastrophe due to the high CO₂ emissions. Because of the ever stricter regulations and the newly emerging production factor “climate friendliness”, more and more companies are forced to develop products that are as climate-neutral as possible. This is often more difficult for the financial sector due to the lack of transparency in the data, but also because of the (un) clear areas of responsibility. However, those involved in the study are firmly convinced that the expansion of the ESG criteria (Environmental Social Governance Investment Criteria) will also apply to listed corporations and the crypto sector:
We firmly assume … that without transparent evidence that such countermeasures can be initiated … makes investing in Bitcoins, but also other asset classes, more difficult [werden]. We want to bring this topic … onto a dashboard that gives investors an automated opportunity [bietet,] to calculate these CO₂ footprints in order to comply with regulations [zu zeigen]to do something.
Volker Braunberger, CEO intas.tech GmbH
To this end, the project is already in discussion with IBM.
The Frankfurt School Blockchain Center (FSBC), together with the spin-off project INTAS.tech, has dared to precisely meet the interface of these needs. How can Bitcoin transactions, exchanges and ETFs remain relevant for interested parties? The practical answer was: By offsetting the CO₂ generated by the transferred Bitcoin. The advantage: With Bitcoin, the data can be collected better due to the blockchain technology.
Standard of calculation for investors
In the study “The Carbon Emissions of Bitcoin From an Investor Perspective” the FSBC developed a two-stage approach. Depending on the business model, this should offer two different calculation standards for the emitted CO₂ emissions. A distinction is made between “Transaction-Based-Network-Usage” (TBNU) and “Ownership-Based-Network-Usage” (OBNU). TBNU is a model that primarily involves Bitcoin transactions, while OBNV focuses on owning (holding) Bitcoin. Paypal would have to determine its CO₂ price according to the TBNU, while Tesla should follow the calculation basis in OBNV.
Assuming that Bitcoin transactions between September 1, 2020 and August 31, 2021 have a total of 91 terawatt hours of energy worldwide, the following prices result:
- This year, the TBNU emitted 369 kilograms of carbon dioxide equivalents (kgCO₂eq). As a result, actors with this business model would have to pay US $ 18.47 as compensation.
- In the OBNU, 2.044 kgCO₂eq were emitted for one Bitcoin this year. It follows that those involved in this business model would have to pay US $ 102.20 as CO₂ pricing.
What does the CO₂ compensation for Bitcoin look like in practice?
This method is already being used in a joint project with Iconic Holdings GmbH, an institutional crypto asset management company. For the Exchange Traded Node product, a CO₂ price of 37.60 US dollars was calculated using the model in the second quarter (from April to June).
The aim of the application is to use the opportunities of the crypto market without making profits at the expense of climate change, despite the lack of unequivocal official regulations. As Dominic Poiger, Head of Product Management at Iconic Holding, says, “Responsible investing starts with product design”. With the help of the calculation method, the investor should be given a tool to initiate the CO₂ prices and the necessary compensations.
Iconic Holdings GmbH, according to Poiger, would already be involved in the project to compensate Envira Amazonia deposit. The aim is to save 200,000 hectares of the Amazon from deforestation – and preserve biological diversity. Poiger emphasizes that his company only looks at “certified and impact-oriented projects”. Iconic would not only buy CO₂ certificates, but actually remove them from the certificate trade.
Bitcoin ≠ climate killer
In this way, the authors of the study and contributors counter the prejudice that Bitcoin is a climate killer. Prof. Dr. According to Philipp Sandner, Bitcoin was responsible for 0.08 percent of global CO₂eq emissions in the period mentioned above. According to Sandner in his presentation, around 56 percent of Bitcoin mining would already come from “green” energies. In comparison, Germany gets only 48.9 percent of its energy consumption from “green sources”. Benjamin Schaub, Senior Consultant at INTAS.tech, adds that digital assets could play a pioneering role. Because, the “pressure for Bitcoin [ist] big ”, but the same applies equally to other industries (keyword: gold).
In addition, the use of cryptocurrencies, as the example of El Salvador shows, is of great importance, said Sandner. In this country only 29 percent have a bank account, but now around 46 percent have a Bitcoin wallet. Hundreds of thousands who previously had no way of making digital payments or storing digital values could be financially included. Speaking of El Salvador: BTC-ECHO is currently in El Salvador to take a closer look at the effects of the Bitcoin law. You can read more about this in the above article – and in the upcoming edition of the Kryptokompass.