Lawrence Damilola
The International Monetary Fund (IMF) has recommended energy tax increases targeting the crypto mining and artificial intelligence data center sectors, pointing out that they guzzle power and have a negative impact on the environment.
In a Thursday report, the fund said these industries collectively consumed 2% of global electricity in 2022, which could rise to 3.5% within three years based on projections from the International Energy Agency (IEA).
The report revealed that one Bitcoin transaction consumes as much electricity as an average person in Ghana or Pakistan would use in three years. Additionally, AI data centers are reported to require 10 times more energy than a standard Google search due to their high computational needs.
To address these energy demands, the IMF suggests imposing a tax of $0.047 per kilowatt hour for crypto miners. Including the costs of air pollution, this rate would rise to $0.089. The IMF projects that such a measure could generate $5.2 billion annually and cut carbon emissions by 100 million tons, a figure comparable to Belgium’s total emissions.
For AI data centers, the IMF recommends a slightly lower energy tax of $0.032 per kilowatt hour, or $0.052 when accounting for air pollution. The tax rate for data centers is lower because many operate in regions with more renewable energy sources. The proposed taxes could raise $18 billion annually.
“On the flip side, AI applications could lead to smarter and more efficient power use, which some have posited could help ease electricity demand. The right policies can still incentivize developing AI applications with positive societal spillovers while addressing the environmental damage,” the report reads.
The IMF points out that many crypto miners and data centers benefit from tax exemptions and income, property, and consumption incentives. The report questions the value of such benefits, considering the environmental damage and minimal employment these industries provide. It also revealed that the increased energy consumption strains electrical grids, potentially driving up costs for other consumers, including households.
Furthermore, the IMF suggests targeted measures to promote energy efficiency in these industries to encourage more sustainable practices. The organization stated in the report that these measures could include incentives for adopting more energy-efficient equipment, switching to less resource-intensive crypto-mining methods, and offering credits for zero-emission power agreements and renewable energy certificates.
The report also emphasized the importance of cross-border coordination to ensure these industries do not simply relocate to regions with cheaper energy and less stringent regulations.
The crypto space has reacted to this new proposal. Daniel Batten, the managing partner at CH4Capital, issued a strong rebuttal to the report on his official page on X. He said: “Firstly, Bitcion advocates everywhere should pause to reflect on the significance of this moment. With the scientific consensus (9 of the last 10 peer-reviewed articles) and mainstream journalism now concluding that Bitcoin mining has significant environmental benefits, those who stand to lose most from mainstream adoption of Bitcoin (IMF, central banks) are needing to resort to direct attack-pieces.”
Meanwhile, some countries, including Venezuela, have prohibited cryptocurrency mining because of the pressure it places on their electrical networks. Likewise, Iran has implemented a policy of offering a $24 incentive to individuals who report unauthorized crypto mining activities, especially as the country’s power system is burdened with an intense heatwave.
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Lawrence does not hold any crypto asset. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.
