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IMF economists propose tax to cut crypto and AI environmental impact

IMF economists propose tax to cut crypto and AI environmental impact

GrafaGrafa2024/08/19 06:45
By:Mahathir Bayena

Economists from the International Monetary Fund (IMF) have proposed an electricity tax to address the environmental impact of crypto mining and artificial intelligence (AI) data centers. 

These sectors currently account for 2% of global electricity consumption, a figure expected to rise to 3.5% by 2027. 

This increase could result in carbon emissions from crypto mining alone reaching 0.7% of the global total, with combined emissions from crypto and AI data centers potentially amounting to 450 million tons, or 1.2% of the world’s total emissions.

IMF economists Shafik Hebous and Nate Vernon-Lin suggest that a direct electricity tax could effectively curb these emissions. 

For crypto mining, they recommend a tax of $0.047 per kilowatt-hour to incentivise the industry to reduce its environmental footprint. 

If the impact of air pollution on local health is also considered, the tax could rise to $0.089 per kilowatt-hour. 

This measure could potentially increase the average electricity price for miners by 85%, generate $5.2 billion in annual revenue, and reduce global emissions by 100 million tons, equivalent to the current emissions of Belgium.

For AI data centers, the proposed tax would be slightly lower, set at $0.032 per kilowatt-hour, or $0.052 when accounting for air pollution. 

This tax could raise up to $18 billion annually, reflecting the greener energy sources typically used by data centers.

However, the proposal has faced criticism, with some arguing that such taxes could stifle the growth of the crypto industry. 

There are also debates about whether the environmental impact of crypto mining is significant compared to other industries, such as e-commerce or traditional finance.

Despite these concerns, the IMF’s proposal underscores the growing need to address the environmental implications of rapidly expanding digital technologies.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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