Last Updated: 9 December 2022
Fabio Panette, a key executive at the European Central Bank (ECB), wants to ban bitcoin mining in the Eurozone. The reason, of course, is the hackneyed climate argument that can be refuted with many interesting applications in the meantime.
ECB-bestuurder Fabio Panetta wil bitcoin mining verbieden https://t.co/CIjYUh0MR6
— CryptoJournaal (@CryptoJournaal) December 8, 2022
Ban on bitcoin mining
At the London Business School’s Insight Summit on 7 December, Panetta called out the following: “tokens with an excessive carbon footprint should be banned”. Clearly, the ECB executive is referring to bitcoin by this.
What Panetta thereby forgets is that over 50 per cent of the entire Bitcoin network runs on the renewable energy so beloved by European politicians. In addition, we see many parties from the oil and gas industry discovering that they can emit a lot less CO2 thanks to bitcoin.
Take ExxonMobil, for example, which uses bitcoin mining to avoid having to flare their excess gas production. Flaring gas literally means they torch it for nothing because there are no economically interesting alternatives.
Bitcoin mining allows the oil and gas industry to sell those excess gases while emitting less CO2 in processing them. In fact, bitcoin mining reduces CO2 emissions compared to simply flaring the gases.
Finally, we return to renewable energy. Should you be an advocate for the transition to renewable energy, it would also make sense to be an advocate of bitcoin mining.
This is because one of the problems with renewable energy is that it is unpredictable. After all, renewable energy depends on the whims of nature. Does it blow a lot? Then the windmills generate a lot of energy.
Incidentally, that does not mean that the power grid can use all that energy. Some of the energy from wind turbines is lost for that reason, simply because the demand is not there and it is practically impossible to store that energy for a long time.
This means the producer has to throw that energy away. Unless he connects bitcoin miners to his wind farm, because then he can use that overproduction to mine bitcoin. Then the energy does not go to waste and the margins of renewable energy producers go up.
Bitcoin thus makes renewable energy more profitable and thus has the potential to be a catalyst for investment in renewable energy. It can make investment in renewable energy just a little more attractive.