Innovation is a powerful driver of progress. We can’t address the challenges of climate change without it. However, not all innovations serve the public good. The right incentives matter.
Take Bitcoin as an example. Bitcoin is a wildly successful currency innovation that allows payments directly from one party to another without going through a financial institution. Transactions are vetted by a decentralized digital ledger that gobbles energy.
Thousands of computers compete computationally for each Bitcoin transaction. One computer wins, earning money for its owner. The other 99.99% of computational energy is wasted. The computations get progressively more complicated as more miners enter this lucrative business. According to Digiconomist, a single 10-minute Bitcoin transaction uses as much power as the average US household does over 74 days. If Bitcoin were a country, it would rank in the top 30 worldwide for energy use.
Because Bitcoin’s currency rules are explicitly designed to waste energy, miners migrate to the cheapest source. In China, the primary home for Bitcoin miners until 2021, that was hydropower in the rainy season and coal during the rest of the year. China outlawed Bitcoin mining last year on environmental grounds.
Bitcoin miners shifted to other countries, including the United States where companies are buying and reviving shuttered coal plants and setting up mobile server farms in oil fields to use flare gas. Innovation in the currency sector sparked innovation in the energy waste sector, but one that may have a high environmental cost.
The right incentives matter. Repurposing old coal plants to power crypto mines makes financial sense as long as there’s no charge for emitting carbon pollution. Climate damage doesn’t figure into the balance sheet of the Bitcoin miners or the companies that provide them energy. The rest of us bear those costs.
Some Bitcoin miners say they plan to eventually clean up their energy sourcing, but without a price on carbon pollution, there’s no market incentive to capture and sequester the emissions.
Less energy-intensive cryptocurrency models exist, but Bitcoin’s market dominance and decentralization will make it difficult to change the rules. According to Forbes, “someone would have to convince the majority of miners to agree to the new system, a tough ask when billions are at stake and the existing system works, if slowly and electrically inefficiently.”
The earth is warming, the climate is changing, and our human inventiveness is responsible for a big part of that. We’ve all participated in the fossil fuel boom, over many generations. Now we need to fix the problems it created before the worst effects are baked in for our children and grandchildren.
Western Colorado, where I live, is warming twice as fast as the global average. Our forests form the headwaters of the Colorado River system, critical infrastructure sustaining 40 million Americans and driving $1.4 trillion in economic activity. River flows are down 20% since 2000, with half the decrease attributed to climate change. You can’t drink Bitcoin and you can’t grow crops from it, but fossil emissions produced through its wasteful algorithm are helping to dry up the Mountain West.
Our actions today will determine how much water Americans have in the coming years, how many crops we can grow, how much of our beautiful forests remain. The sooner we scale up effective climate policy, the better our future will be.
To reduce emissions, we need to align our market incentives so they favor a low-carbon energy mix. Phasing in a fee on carbon pollution would give businesses and consumers a gentle, predictable on-ramp to shift investments and buying behavior toward cleaner power sources. Recycling the revenue back to citizens through per capita monthly dividends makes the transition affordable for low- and middle-income families. Add a border carbon adjustment to keep U.S. industry competitive and pressure trading partners like China to price their own pollution.
Businesses will innovate a better future for us if we set the right incentives for them. Demand a better future. Call or email your members of Congress. Ask them to enact market incentives that drive innovation toward a livable, prosperous, low-carbon future.
Powering Forward 
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