IMF proposes energy taxes for crypto miners, data centers to curb carbon emissions

IMF proposes taxes to increase electricity costs for miners, data centers Higher energy costs drive the industry towards increased efficiency. Cross-border coordination is important for energy taxes, IMF says.

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Higher energy taxes to increase the cost of electricity used by crypto miners and artificial intelligence data centers will help curb carbon emissions in the future. the paper Written by two IMF economists.

For crypto mining alone, raising the price of electricity by 85% would increase annual government revenue by $5.2 billion worldwide and reduce annual carbon emissions by about 100 million tons, the paper said, which is Belgium's current level.

One Bitcoin mining transaction requires the same amount of electricity as the average person in Ghana or Pakistan consumes in three years, and because of the electricity consumed by AI data centers, a ChatGPT query requires 10 times more energy than a Google search, according to IMF economists. Shafiq Hebus and Nate Vernon-Lynn.

They argue that crypto mining and data centers together account for 2 percent of global electricity demand in 2022 and are expected to grow 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 by 2027, or 1.2 percent of the world's total.

To address this, the IMF recommends increasing fuel taxes to drive companies to curb emissions.

For data centers, the targeted tax on their electricity consumption is slightly lower than that of crypto miners because data centers are located in green electricity locations. However, it can raise up to $18 billion a year.

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

The actual situation today is very different.

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Many data centers and crypto miners enjoy generous tax breaks and incentives on income, consumption and property. Considering the environmental damage, significant job losses, and stress on the electrical grid, the paper notes, the net benefits of these special tax policies are unclear at best.

However, cross-border coordination is important for energy taxes, as strict measures in one place may encourage shifting to jurisdictions with lower standards.