IMF Proposes Tax Hike on Crypto Mining and AI Data Centers

• IMF proposes electricity taxes on crypto miners and AI data centers, to reduce global emissions.
• Crypto-mining and AI data centers together account for 1% of global emissions.

On August 15, 2024, the International Monetary Fund (IMF) recommended a major increase in electricity taxes for cryptocurrency miners and AI data centers to address their carbon footprint.

The IMF’s proposal suggests raising the electricity cost for crypto miners by 85%. They propose a tax of $0.047 per kilowatt-hour, potentially reducing global emissions by 100M tons annually. The tax could rise to $0.089 per kWh when including health impacts from air pollution. This tax hike could generate $5.2 billion in extra government revenue globally.

Shafik Hebous, Deputy Director of the IMF’s Fiscal Affairs Department, and Nate Vernon-Lin, an economist in the Climate Policy Department noted that one Bitcoin transaction uses as much electricity as a typical Pakistani household consumes in three years. Whereas,  AI models like ChatGPT use ten times more energy than a Google search.

Cryptocurrency mining is highly energy-intensive. In addition, the IMF proposed a tax on electricity used by AI data centers. They suggested a rate of $0.032 per kWh, increasing to $0.052 per kWh when accounting for air pollution. This tax could potentially raise to $18 billion annually. Even with greener electricity, AI data centers have a significant environmental impact due to their high energy use.

Together, crypto mining and AI data centers are responsible for around 2% of global electricity use and nearly 1% of global carbon emissions. The IMF projects that crypto mining alone could contribute up to 0.7% of global carbon emissions by 2027. Including emissions from AI data centers raises the total to 1.2% or 450 million tons of emissions.

Debate on Crypto Emissions and Need for Global Action

On the other hand, there’s debate about crypto miners’ emissions compared to other sectors. Amazon’s 2021 carbon footprint was 71.54 million metric tons, more than Bitcoin’s 65.4 million metric tons. In response to power consumption, Venezuela has banned crypto mining, and Iran offers $24 rewards for reporting illegal miners during a heatwave.

Without international cooperation, businesses might relocate to countries with lower standards, undermining emission reduction efforts. The IMF’s proposed tax increases aim to significantly cut emissions and boost government revenue, but their success will depend on worldwide collaboration to achieve the intended goals.

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