Assessing the carbon footprint of cryptoassets: Evidence from a bivariate VAR model

Hany Fahmy was granted Research and Professional Development funds for a study on the energy consumption of Bitcoin mining activities and its environmental impact.

Bitcoin’s energy hunger has recently triggered a heated debate in academic literature about its massive energy consumption and its carbon footprint. The objective of this study is to provide a sensible economic approximation of the carbon footprint of bitcoin mining. We test the directional causality from the currency’ trading volume to the network’s energy consumption using a bivariate vector autoregression framework. We then execute an impulse-response analysis to estimate the impact of one standard deviation shock in trading volume on the network’s energy consumption. Finally, we use these results to predict the total carbon emissions of the network’s mining activities.