The International Monetary Fund (IMF) has proposed higher energy taxes to reduce emissions from crypto miners and artificial intelligence (AI) data centers, according to an August 15 report.

The IMF argues that these sectors consume 2% of the world’s electricity and generate nearly 1% of global emissions. The financial regulator claims that one Bitcoin transaction consumes as much electricity as an average person in Ghana or Pakistan would use in three years.

Furthermore, it is argued that a ChatGPT query consumes ten times more power than a Google search due to the energy-intensive nature of AI data centers.

The IMF estimates that energy consumption in these sectors could rise to 3.5 percent in three years, which would be equivalent to the current electricity consumption of Japan, the fifth largest in the world.

Increase in energy taxes

To address this problem, the IMF recommends a significant increase in energy taxes. It suggests that governments increase electricity taxes on crypto miners by 85%, which equates to $0.047 per kilowatt hour, or $0.089 when air pollution costs are included. This measure could reportedly raise $5.2 billion annually and reduce emissions by 100 million tons, roughly equivalent to Belgium’s current emissions.

Similarly, the IMF recommends taxing data centers at $0.032 per kilowatt hour. With the cost of air pollution, the tax rises to $0.052. This could help governments raise $18 billion each year. They argue that data centers consume less energy and are often located in areas with Green electricity and would therefore be subject to lower taxes than crypto miners.

However, the IMF stresses that implementing these taxes would require international cooperation to prevent miners and data centers from moving to regions with cheaper energy prices.

The IMF also proposes targeted measures to encourage energy-efficient practices among crypto miners and data centers. These could include incentivizing the use of more efficient equipment, adopting less energy-intensive mining methods, and supplementing taxes with credits for zero-emission electricity contracts or renewable energy certificates.

The report was written by Shafik Hebous, deputy director of the IMF’s Financial Affairs Department, and Nate Vernon-Lin, an economist in the Climate Policy Department.

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