Opinion: How does crypto fit within ESG? The answer is not simple


Ethan Lou‘s last book is Once a Bitcoin Miner: Scandal and Confusion in the Wild West of Cryptocurrencies

Author Ethan Lou’s latest book is Once a Bitcoin Miner: Scandal and Turmoil in the Cryptocurrency Wild West.K. Yan/Brochure

On Monday, the World Economic Forum lent its support to a rather far-fetched plan by a group that includes Greenpeace: to change bitcoin’s code to make it, in its view, greener.

The resistance of bitcoin’s peer-to-peer infrastructure to such external control is not only its entire value proposition, it is also a premise that has largely held true. People more beloved by the bitcoin world than the WEF have tried to make minor changes to the code. They have all failed.

That doesn’t mean this environmental conversation isn’t worth having, of course. The movement to prioritize ESG (environmental, social and governance) factors in investing is so hot these days that it’s even dominating the new season of the financial drama. Thousands of millions.

It’s just that ESG metrics themselves are already subjective and inconsistent. This is not a problem with a simple answer.

Consider that this environmental criticism of bitcoin and the world of cryptocurrencies in general is not really because they supposedly use a lot of electricity.

Electric cars also consume a lot of electricity, and are not only considered environmentally friendly, but even beneficial because they displace gasoline cars. The real environmental criticism of cryptocurrencies is what all their electricity is for: no good purpose.

But crypto advocates would counter that the industry’s electricity use pales in comparison to the traditional financial world and, like electric cars, seeks to displace an industry with a higher carbon footprint. Or that cryptocurrencies bring greater financial freedom and that their underlying technology can foster a more democratic Internet.

It’s like this new era of private space travel. What exactly are all those carbon emissions for? In a recent episode of the Globe’s Decibel podcast, science writer Ivan Semeniuk said of the proponents: “They just have a sense that the long game for humanity somehow involves investing in space.”

Maybe I won’t buy any of it. But how one makes that judgment, considering that certain industries are worthy of their electricity usage or carbon footprint and others are not, that’s always a personal and subjective opinion.

Consider why computer gamers have been particularly hostile to cryptocurrencies. Perhaps they are trying to divert attention from their own massive use of electricity for an activity whose purpose is even more subjective.

This is not an argument against games. A player might say that the activity relieves stress, builds community, and provides personal gratification. Who am I to say that it is not a proper use of electricity? However, in that same sense, who is someone to make the same value judgment about cryptocurrencies?

Of course, one could say that the point of ESG is to be subjective: to invest in a way that aligns with individual values. And maybe you just want to reduce energy consumption, period, from industries whose purpose and value you don’t personally get, because you want to see a low-carbon future.

Well, maybe cryptocurrencies can really help in that regard. Anyone who values ​​a low-carbon future is sure to be concerned about the environmental impact of the oil industry. And, in the United States, Exxon Mobil Corp. has said it would use crypto mining as a way of reduce their emissions.

Natural gas is a byproduct of drilling for oil, and companies often just burn that gas because, in the middle of nowhere, it’s too expensive to do other things with it, leading to carbon emissions. Exxon found that using flared gas to mine bitcoins is a self-financing or self-subsidizing way to reduce those emissions by 63 percent.

The strictest of ESG adherents would say, “Piss on all of that!” – Why reduce emissions from the oil industry when everything should be completely shut down yesterday?

But the idea of ​​a low-carbon future is a transition, not a switch that can be arbitrarily flipped. Even the United Nations climate envoy, Mark Carney, the de facto patron saint of ESG, recently said so.

Ultimately, this is how investors with an ESG mind should look at crypto. Just as ESG itself is complicated, how crypto fits within that framework is not a binary issue.

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