Go green or die? Bitcoin miners are aiming for carbon neutrality by mining near data centers

Bitcoin (BTC) mining has always been a controversial topic. However, Bitcoin’s proof-of-work (PoW) model has reached a new level of concern as senior decision-makers and investors pay more attention to environmental, social, and governance factors.

Therefore, many crypto miners highlight green practices by purchasing carbon offsets. However, some would argue that this is not enough to guarantee green bitcoin mining. Other risk factors may also be associated with carbon credits.

For example, Kevin O’Leary – the Canadian entrepreneur better known as “Mr. Wonderful” for his role in Shark Tank – told Cointelegraph that it typically indexes public mining companies like Marathon Digital Holdings, Riot Blockchain Inc., and others. However, O’Leary pointed out that once these companies claimed carbon neutrality through carbon offsetting, their stocks fell drastically. O’Leary believes this is because the United States Securities and Exchange Commission (SEC) may soon be planning to audit carbon credits. O’Leary expressed his concern, stating:

“CO2 compensations are not verifiable. So indexers like me sold these stocks — we had to sell them. The only way institutions are now investing in bitcoin mining is for these companies to claim there is no carbon involved at all.”

Bitcoin mining and data centers

To ensure zero-carbon mining, O’Leary stated that bitcoin miners should build alongside data centers. This would then allow mining companies to efficiently use excess energy lost from data centers to mine Bitcoin, resulting in “zero-carbon displacement,” a process that produces zero-carbon emissions.

Bitcoin mining company Bitzero started implementing such a model in Norway two years ago. Akbar Shamji, Bitzero’s CEO and founder, told Cointelegraph that the company first established an infrastructure partnership with Norway’s local government two years ago, which prompted the region to free up unused hydroelectric power generation for bitcoin mining:

“It was the perfect opportunity for us to test this idea. At the same time, big data companies started using renewable energy sources in places like Norway, but it wasn’t profitable for the region. We built a long-term, low-cost, 100% zero-carbon displacement power source to have an edge over the market. We made revenue when we mined our first bitcoin in December 2021.”

Aware of the huge demand for data storage today, Shamji further explained that the power generated by data centers should be used properly. “We call this the ‘Norway model’. The power generation is there but is stuck on high voltage. So we made the electrical step from high voltage to low voltage transformers and substations, which allows us to efficiently drive containers full of ASIC miners,” he noted.

In other words, Bitzero draws electricity directly from the excess capacity of local hydroelectric power plants, resulting in zero-carbon displacement. At the same time, Shamji explained that Bitzero delivers fixed data centers made of sustainable and local materials made of heat separation technology.

“When mining bitcoin, when electricity flows through these computers, the PoW algorithm does not require much energy to generate. If this weren’t implemented, the heat generated by these computers would go back into the air and be lost entirely,” he said. Though a zero-carbon displacement model isn’t widely deployed yet, Shamji said Bitzero typically mines 129 bitcoins per month and consumes 40 megawatts of power. He added that this will eventually grow to 110 megawatts.

Crypto mining company Argo Blockchain also plans to open a data center in West Texas to conduct mining operations. While Argo does not have a zero-carbon displacement approach, Argo CEO Peter Wall told Cointelegraph that the company is aiming to become carbon neutral:

“There is a tremendous amount of renewable energy in West Texas, and Argo’s mission is to mine bitcoin in the most environmentally friendly way. We chose Dickens County primarily because of the substation adjacent to the property we selected for the construction of Helios, our new flagship mine facility.”

Like Shamji, Wall is aware that clean power flowing through the substation in Dickens County, Texas, is stranded and unused. “There isn’t much local demand or local load to use this power, so we thought this was a good opportunity to help stabilize the grid,” he noted.

Interestingly, energy and gas companies are also locating in areas where energy is emitted. For example, Alex Tapscott, author and co-founder of the Toronto-based Blockchain Research Institute, told Cointelegraph that energy producer ExxonMobil has been quietly mining Bitcoin in the Bakken region of North Dakota for a year as part of a plan to curb flared emissions gas .

“The pilot was so successful that the company plans to roll it out on a much broader basis. ConocoPhillips is reportedly working on a similar project,” Tapscott said. Additionally, energy company Grid Share recently announced plans to open a bitcoin mining data center next to a hydroelectric power station in New Zealand’s South Island to support 100% renewable energy in the region.

According to Tapscott, these initiatives may come as a surprise to many who believe Bitcoin mining is carbon-intensive. He explained that such models can be helpful in reducing the carbon footprint:

“A typical Bakken well produces oil, but also natural gas that is burned or flared into the atmosphere. This is a significant source of carbon entering the atmosphere. Rather than flare the gas, Exxon has partnered with Denver-based Crusoe Energy to capture gas and divert it to generators where it mines Bitcoin.”

Tapscott added that Crusoe found that Bitcoin mining reduces the world’s carbon footprint by up to 63%. “Gas that had no way of getting to market and would have instead been burned directly into the atmosphere is given a useful purpose as fuel to mint new bitcoin.”

Zero CO2 emissions

While green bitcoin mining has always been a “buzzword,” some would argue that these initiatives, along with zero-carbon displacement, have become critical for miners looking to stay in business.

For example, lawmakers are attempting to pass legislation to outright ban non-green crypto mining operations. This was recently demonstrated by New York State as lawmakers aim to restrict bitcoin mining operations with a bill currently making its way through the state capital in Albany.

Meanwhile, the government of Kazakhstan recently proposed that operators of cryptocurrency mines must report power consumption and “technical specifications” for connection to the electricity grid before operation.

Although initiatives such as the Crypto Climate Accord aim to achieve net-zero emissions from the electricity use of the participating companies by 2025, it also raises concerns about how this can be achieved. Tapscott pointed out:

“This is a laudable goal as long as it doesn’t force Bitcoin to be something it isn’t. Namely, some have suggested changing Bitcoin’s underlying code to use the less power-intensive proof-of-stake consensus mechanism. This would be a mistake. Proof-of-work is a capability that brings resilience and strength to the network.”

From an investor perspective, O’Leary added that he will only invest in bitcoin mining companies and data centers that can prove to be a sustainable energy source for the future:

“Private capital must comply with environmental, social and governance factors. ESG was once a marketing term, but now it’s a real thing. I can’t take an SEC audit and I can’t find an auditor to sign these statements anyway. The crypto industry is at an interesting tipping point.”

According to O’Leary, Bitcoin miners are indeed at a turning point, but regulatory clarity remains questionable. Bill Tapscott, CEO of CarbonX — a fintech carbon trading company — told Cointelegraph that the SEC’s proposed disclosures are similar to those many companies are already providing based on widely accepted disclosure frameworks such as the Task Force on Climate-Related Financial Disclosures and the Greenhouse gas log. He stated:

“Disclosure provides a foundation from which the next step for a government or regulator is to implement a carbon tax or emissions cap and trading scheme, such as the ARB’s California Quebec Market or RGGI. Emission certificates are part of these programs and have been ‘audited’ for years.”

With that in mind, Tapscott explained that mining operators must report their emissions, which are likely to be high if the energy comes from fossil fuels, even flare gases, or low if it comes from green sources like hydroelectric power. “Nevertheless, these companies can mitigate the risk of future carbon costs by investing in carbon credits for the long term,” he said.