The Green Bitcoin — CO2 Compensation for the World’s Largest Cryptocurrency

Stricter Sustainability Regulations

Bitcoin investors, who either invest directly through a crypto exchange or gain exposure to this crypto asset indirectly through financial products such as funds or exchange traded notes (ETNs), may come under pressure in the future as new regulations include much stricter sustainability rules and disclosure requirements. The European Union’s Sustainable Finance Disclosure Regulation (SFDR), which has been in effect since March 10, 2021, requires asset managers and financial market participants to disclose ESG-related information and categorize their products according to certain sustainability criteria. In this context, the EU wants to increase transparency with regard to sustainability risks and negative sustainability impacts through financial products. Information on this will become mandatory for financial market players from July 2022 (so-called “Level 2” disclosures). Therefore, the companies concerned will have to collect and disclose corresponding data on their products.

Figure 1: Comparing Carbon Emissions of Bitcoin, Gold Mining and Flights

Bitcoin’s Power Consumption — Boon or Bane?

First, it is important to note that the energy issue cannot be generally attributed to blockchain technology and cryptocurrencies. On the contrary, blockchain solutions can also provide energy savings in certain processes. Blockchains with a proof-of-work (PoW) consensus mechanism, such as Bitcoin, on the other hand, do indeed consume a lot of power. This consensus mechanism serves two important functions: first, transactions are verified immutably and stored securely in the blockchain. Second, in the case of Bitcoin, new Bitcoins are “generated” until all 21 million Bitcoins are, approximately around the year 2140, in circulation. The latter function is often compared to gold mining since resources are invested in finding new gold — not in “maintaining” gold or “enabling” gold transactions. Thus, the high power consumption ensures the maintenance of Bitcoin’s monetary system and the integrity of the network. To some extent, one could say that Bitcoin is secured by the electricity it consumes. This aspect is extremely important: the PoW consensus mechanism protects the Bitcoin network from cyberattacks and is therefore an essential part of its security architecture. The resulting extremely high level of security is the basis for Bitcoin’s survival.

Transaction-Based Network Usage

Based on the above explanations, a more realistic approach involves determining proportional accountability for Bitcoin’s CO2eq footprint based on the utility stakeholders enjoy. Since, as mentioned earlier, Bitcoin mining has the function of adding new transactions to the blockchain, a quantifiable method is needed to calculate the CO2eq emissions of transactions. The most accurate approach is therefore to determine the proportion of storage used within the blockchain relative to the total growth of the Bitcoin blockchain during a given period. This proportion is finally multiplied by the CO2eq emissions resulting from the electricity mix consumption of the entire Bitcoin network during this period.

Figure 2: Two-Pronged Flexible Carbon Footprint Calculation Model

Ownership-Based Approach

The transaction-based approach generally excludes parties who do not have access to their transaction-related data. In addition, a significant portion of Bitcoin’s utility is derived from its long-term macroeconomic model: the store of value. Given these facts, we propose a computational model that focuses on the proportion of Bitcoins held relative to Bitcoins in circulation for a given period. Figure 2 illustrates our two-pronged flexible approach to calculate the carbon emissions of a Bitcoin portfolio.

What Could a CO2 Offset Cost?

Companies could apply the above approaches to transactions and ownership of Bitcoins to calculate their carbon footprint, which they should then offset. Below are example results from our study, covering the analyzed period from September 1, 2020 to August 31, 2021:

Comparing Bitcoin’s CO2 Emissions

As shown in Figure 1, a flight from London to Dubai causes about 894 kgCO2eq. Mining an equivalent amount of gold at a Bitcoin price of $50,000 equates to a carbon footprint of over 13 tCO2eq. The most recent estimate of the world’s total annual CO2 emissions is 45,874 MtCO2eq. Thus, Bitcoin has a total footprint of 0.08% of the world’s CO2eq.


It is important not to take these results out of context in any way. They are best-guess estimates. Exact electricity consumption cannot be determined at this time due to several factors. For an accurate calculation of an investor’s carbon footprint, the situation must be considered individually depending on the company’s business approach (i.e., simple investing, asset management, crypto exchanges, or custodians). It is expected that the results of such calculations will need to be verified and audited by specialized service providers in the future.

About the Study

The study comprises 34 pages and can be downloaded here (780 kB, direct link to PDF).


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Philipp Sandner

Philipp Sandner


Professor | Lecturer | Author | Investor | Frankfurt School Blockchain Center