The consensus is that bitcoin mining consumes a lot of energy and you may well wonder how bitcoin’s intensive energy consumption can be reconciled with many investors’ aspirations to help tackle climate change through the power of their portfolios. I thought now would be a good time to investigate the cryptocurrency’s current green credentials (or lack thereof) and explore what the prospects are of bitcoin mining becoming more eco-friendly in the future.

It’s unclear exactly how much energy bitcoin mining uses. Cryptocurrencies are, after all, hard to track by design – and the studies that have attempted estimates have reached differing conclusions. The Cambridge Centre for Alternative Finance (CCAF), for example, found that bitcoin’s current energy consumption is somewhere between 40 and 475 terawatt hours per year (TWh), with a central estimate of about 140 TWh.

If bitcoin were a country, that would make it the 27th-most electricity-consuming one in the world. Tech news site Digiconomist’s closely tracked index, meanwhile – which puts consumption closer to 90 TWh – would still mean bitcoin uses more power than all of Finland.

Both CCAF and Digiconomist reckon about two thirds of the energy bitcoin consumes is generated by fossil fuels.

The flipside of this argument is that bitcoin’s climate footprint is still small compared to other digital industries or the banking sector. 

The big challenge with energy is getting it where it’s needed most. There are limits to how far you can transport electricity from both practical and economic points of view – but bitcoin mining could theoretically be located anywhere in the world, using energy sources that are simply going to waste today. 

More feasibly forward-thinking, however, is the project started in Sweden by cryptocurrency firm Genesis Mining. It’s trying to recycle the heat generated by its bitcoin-mining computers for use in greenhouses.

So what should you make of all of this? In my opinion, bitcoin mining remains pretty energy intensive and environmentally damaging, especially considering the cryptocurrency’s currently limited use in the real economy.