The environmental impact of cryptomining has been well documented over the years, with the energy consumption of the activity likened to that of a small country. New research from Berkeley Haas explores what impact this has on the local energy markets of the places where miners carry out their activities.
The paper estimates that the cryptomining operations in New York are enough to elevate the annual electricity bills of local businesses by around $165 million and for individuals by $79 million, all while providing minimal economic benefits to the local region.
“Small businesses operate on very thin margins, so I don’t think they’d be happy paying for the energy that cryptominers are using,” the researchers say. “And the profits do not stay local: Bitcoin mining profits can be moved from upstate New York to Italy or Colombia or China in a second.”
Economic impact
The environmental impact of cryptomining has been well documented, but this is the first paper to explore the economic impact on the communities housing the miners. Such operations typically employ just a handful of people but consume huge amounts of electricity.
Miners commonly locate themselves in cooler, often northern, locations where it’s easier to keep the servers they use cool. If the region also has cheap energy then it’s doubly attractive.
The upstate New York area ticks both boxes, with hydropower from Niagra Falls providing inexpensive energy to the region. The researchers say that rural communities, like Plattsburgh, are popular homes for cryptomining operations as former industrial sites are cheaply available. The analysis found that cryptomining pushed up the monthly energy bills of individuals by around $8 and small businesses by around $12.
“That adds up to $250 million just for upstate New York for a year, and if you think of scaling that up for the U.S., we estimated it’s about $1 billion per year—many times that globally,” the researchers say. “These are warehouses full of computers and they only require one or two IT people to run the whole operation, so it’s unlikely that it brings jobs or stimulates the economy.”
The only real benefit of the miners presence was the real estate tax revenues that local governments were able to capture, which amounted to around $40 million per year. The researchers believe this perhaps explains why many local authorities are encouraged to provide miners with discounted power.
Despite this, however, the local tax revenues only covered about 15% of the additional costs passed on to local residents in higher energy costs. It’s a situation the researchers believe may also have similar implications for data centers, which are also proliferating in similar locations for similar reasons. It suggests that local authorities may need to rethink how they tax such entities to ensure that local residents are not economically harmed by their presence.
