A new report by the Global Solidarity Levies taskforce proposes a novel solution to fund climate action: taxing high-carbon industries, including cryptocurrency mining.
The publication was prepared in time for the COP29, the international meeting between world leaders to discuss what their countries can do as the climate crisis intensifies.
This innovative approach is part of a broader effort to find $1 trillion to finance climate action, and a crypto tax has emerged as one that could range a big chunk of the amount.
Other proposed levies include taxes on plastic production, frequent flyer programs, and luxury goods.
The rise of crypto
2024 has been an excellent year for cryptocurrency values. Already in popular use in everything from crypto-friendly flight providers to crypto casinos, virtual coins enjoyed another boom following the re-election of Donald Trump, a known crypto enthusiast who has promised to resist regulation.
Already most experts predict Bitcoin to break the $100,000 barrier in 2025 with possible further increases in store.
Yet for all of crypto’s success, there has also been an enormous push back from powerful nations like China.
The Chinese government has been particularly aggressive in its attempts to regulate cryptocurrency, banning initial coin offerings (ICOs) and shutting down cryptocurrency exchanges in recent years.
The European Union, too, has also taken steps to regulate cryptocurrency, although their approaches have been less restrictive until now.
However, the COP29 saw a change in mindset indicated by many nations. The groundbreaking proposal, labeled a global “solidarity levy” on cryptocurrency aims to tap into the expanding crypto market to fund crucial climate action initiatives.
There were several reasons for this. First is the fact that many cryptocurrencies, particularly Bitcoin, rely on energy-intensive mining processes that contribute to greenhouse gas emissions.
Crypto is also seen as an untapped revenue source, following its explosive growth, yet it often operates outside traditional tax frameworks. A global levy would unlock significant revenue via this channel.
Raising these funds, leaders say, would be an act of global solidarity and would direct funds toward climate adaptation and mitigation efforts in vulnerable countries.
How the levy would work
So how would such a crypto tariff work?
Well, the specifics of the levy are still being debated, but potential mechanisms could include:
- A transaction tax, which would be a small percentage of every crypto transaction.
- A mining tax on the energy consumed by mining operations.
- A capital gains tax on profits from crypto trading.
The above are all intriguing proposals, but there will be some big challenges along the way.
For one, the highly volatile nature of the crypto market could make revenue projections uncertain. Governments would be unable to rely on a set amount of income which would make planning very difficult.
Also, introducing a global tax on a decentralized asset like cryptocurrency would require international cooperation to form a global framework. Any disagreement could cause months of delays as members try to find a compromise.
Some in the crypto sector will also argue that taxes could stifle innovation in the crypto sector, which has the potential to drive economic growth and technological advancements.
Yet despite these obstacles, a well-designed crypto levy has the potential to give the fight against climate change a boost, at a time when changing weather patterns are already starting to severely affect the planet.
The future of a crypto-funded climate fight
The future of a crypto-funded climate fight is a fascinating prospect. The power of blockchain technology coupled with the wealth generated by the cryptocurrency market could transform environmental action.
If a levy is passed, it could open the door to a world where smart contracts automate the disbursement of funds to renewable energy projects.
Blockchain-based carbon credits, too, might be another incentive for people to follow sustainable practices and would make it easier for the authorities to track and verify emissions reductions.
However, all these benefits don’t mean that the downsides of crypto can be ignored.
The energy-intensive nature of some mining needs to be addressed, with funding provided for greener methods. There also needs to be some safety barriers to deal with the crypto market’s unpredictability.
If these problems can be dealt with, then humankind can take some huge steps toward limiting future damage to the environment.
The COVID-19 pandemic showed just how powerful a united front can be against a global problem: if the planet can do it again, with the help of Bitcoin and co, then climate change may not be as drastic as scientists fear.
