Higher energy taxes to increase electricity costs for crypto miners and artificial intelligence data centers would help curb future carbon dioxide emissions, according to a paper by two IMF economists.

For crypto mining alone, a tax that increases the price of electricity by 85 percent would increase annual government revenue worldwide to $5.2 billion and reduce annual CO2 emissions by about 100 million tons, equivalent to Belgium’s current levels, the newspaper said.

A Bitcoin mining transaction requires about the same amount of electricity that an average person in Ghana or Pakistan uses in three years, and a ChatGPT query requires ten times more power than a Google search due to the power consumption of AI data centers, according to IMF economists Shafik Hebous and Nate Vernon-Lin.

They argue that crypto mining and data centers together accounted for 2 percent of global electricity demand in 2022 and are likely to rise to 3.5 percent in three years, equivalent to the current consumption of Japan, the world’s fifth-largest electricity consumer. This means their carbon emissions could reach 450 million tons, or 1.2 percent of the global total, by 2027.

To address this problem, the IMF recommends higher energy taxes to encourage companies to reduce their emissions.

For data centers, a targeted tax on their electricity consumption would be slightly lower than for crypto miners, since data centers are usually located in locations with more environmentally friendly electricity. Nevertheless, it could generate up to $18 billion annually.

Such targeted measures could encourage crypto miners and data centers to use more energy-efficient equipment and potentially promote the adoption of less energy-intensive crypto mining. Credits for zero-emission and renewable energy certificates would also help, the IMF noted.

The actual situation today is quite different.

Many data centers and crypto miners benefit from generous tax exemptions and incentives for income, consumption and property. Given the environmental damage, lack of meaningful jobs and strain on the power grid, the net benefits of these special tax regimes are unclear at best, the paper says.

However, she added that cross-border coordination of energy taxation was important, as stricter measures in one location could only encourage relocation to countries with lower standards.

Crypto market drivers

• The Bitcoin price rose 0.62% to USD 59,559.20 today.
• Ethereum is up 0.24% today to $2,606.96.

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