Is Bitcoin ESG-Compliant? A Sober Look

Much of the media focus surrounding Bitcoin has been on the “E” (environmental) element of the ESG investing approach. Given the amount of electricity consumed by Bitcoin mining, and the resulting large carbon emissions, it has been subject to substantial criticism due to its overly negative environmental impact. This one-sided discussion, however, ignores the “S” (social) and “G” (governance) elements almost entirely. To remedy that, this article first estimates Bitcoin’s current mining-related energy consumption and resulting related carbon emissions in order to gauge its impact on “E” more fully. Building on the status quo, we use Monte Carlo simulations, vector autoregression (VAR), and vector error correction (VEC) models to forecast the realistic environmental impact of Bitcoin mining over the next ten years. We also explore Bitcoin’s positive impact on the “S” (e.g., savings on bank fees, negating financial borders), and “G” (e.g., transparency, trust, security)