Bitcoin and the environment: Weighing crypto’s impact on ESG investing
Why has Bitcoin been criticized for its environmental impact?
Bitcoin relies on a process called proof-of-work mining, where powerful computers compete to verify transactions and secure the network. This system uses large amounts of electricity—more than many other technologies or entire countries. Critics point to the resulting carbon emissions in regions that depend heavily on fossil fuels, while others note that the impact varies by location, energy source, and whether miners use renewable or waste energy.How did Ethereum cut its energy use so dramatically?
In 2022, Ethereum switched from proof-of-work to proof-of-stake, a system that validates transactions without mining. The result was a more than 99% drop in energy consumption, a shift widely cited in discussions about crypto’s environmental impact.What factors determine a blockchain’s environmental footprint?
A network’s impact depends on the consensus mechanism (proof-of-work vs. proof-of-stake), the energy sources used (renewables vs. fossil fuels), the efficiency of hardware involved, and the economic incentives driving network activity and energy demand.Are you worried about climate change, but also have some crypto coins jingling in your digital wallet? Might seem a bit weird, right? Like your financial and moral compasses are giving you contradictory readings.
It’s true that, in the past, Bitcoin has gotten a bad rap for using a lot of energy—on par with many countries. But Bitcoin mining today is generally cleaner than in its early years; for example, the 2025 Cambridge Digital Mining Industry Report estimates that about 52% of Bitcoin’s electricity now comes from renewable or low-carbon sources, although fossil fuels still supply a substantial share.
The truth about cryptocurrency energy usage is more nuanced than you might think; you can invest in crypto responsibly without creating a gigantic carbon footprint. In other words, crypto can be part of an ESG-friendly portfolio.
Key Points
- Cryptocurrency has a reputation for being an energy hog.
- Bitcoin and other proof-of-work blockchains emit more carbon than proof-of-stake networks like Ethereum.
- Other energy considerations include transaction volume, hash rates, mining difficulty, and cooling requirements.
Let’s take a look at the intersection of digital assets and environmental, social, and governance investing.
What is ESG investing, and how can crypto fit in?
ESG investing refers to the practice of investing in companies or assets that have a positive impact on the environment, society, or governance. Crypto investors can consider blockchain projects that seek to minimize their carbon footprint, have positive social impact, or practice especially good governance.
- Investing in crypto for environmental impact means choosing energy-efficient cryptocurrencies, understanding how much energy is used by a cryptocurrency’s mining practices, and supporting eco-friendly blockchain projects.
- Crypto investing for social impact means supporting blockchain projects that foster financial inclusion or support ethical working conditions.
- Cryptocurrency investing for governance aligns with principles of decentralization and autonomy. Crypto holders can use governance tokens to actively participate in decision-making concerning a blockchain project—similar to shareholders voting their proxy cards.
What determines cryptocurrency energy use?
Every blockchain or cryptocurrency network requires energy, although how the energy is used (and how much is used) can differ significantly across blockchains.
Consensus mechanism. The consensus mechanism used by a blockchain, either proof-of-stake or proof-of-work, is the most important factor in determining its energy consumption. A blockchain network’s consensus mechanism simply dictates how the network operates. It can enable competition among network participants based on computing power or token holdings.
A cryptocurrency that uses the proof-of-work protocol requires miners to compete for crypto rewards by amassing computing resources. A blockchain that uses proof-of-stake obligates validators to stake—that is, agree not to trade or sell—their cryptocurrency.
Crypto mining is highly energy intensive, while staking generally is not. The choice of consensus mechanism is the biggest driver of a blockchain’s energy use.
Transaction volume and hash rate. While energy use isn’t determined directly by the number of transactions, heavy activity on proof-of-work networks often increases miner competition. Higher demand can push up fees, which encourages miners to commit more computing power. This raises the overall hash rate—the speed of calculations across the network—and with it, energy consumption.
Mining difficulty. Proof-of-work blockchains with high mining difficulty—those that require significant computing power to successfully mine a block of transactions—use the most energy. Blockchains with many competing miners in the network have the greatest mining difficulty.
Cooling requirements. Proof-of-work mining systems generate heat, and while cooling does add to energy use, some operations now recycle that heat, reducing the environmental impact in certain cases.
Bitcoin, a proof-of-work blockchain, still uses the most energy of any cryptocurrency network, according to estimates from the Cambridge Bitcoin Electricity Consumption Index, widely considered the most authoritative source on crypto energy use. However, Cambridge’s 2025 report also notes that about 52% of that electricity now comes from renewable or low-carbon sources, reflecting some efficiency gains and shifts in energy mix.
By contrast, Ethereum, a major cryptocurrency network, cut its energy use by more than 99% in 2022 by switching its consensus protocol from proof-of-work to proof-of-stake.
What drives a blockchain’s environmental impact?
Energy use may be the biggest factor contributing to cryptocurrencies’ environmental impact, but it’s not the only one. The source of that energy, its carbon intensity, and even how flexibly it can be used also matter. In some cases, Bitcoin mining has been linked to projects that capture methane or provide demand that supports renewable energy grids, although, as of 2025, these efforts remain relatively small in scale.
- Energy sources. A blockchain that gets most of its energy from renewable or alternative sources has less environmental impact than a blockchain that runs on fossil-based fuels.
- Energy prices. Cheap energy can have an adverse impact, as miners may find it economically viable to consume inexpensive electricity with little or no regard for conservation or efficiency.
- Hardware efficiency. Proof-of-work miners using energy-efficient hardware can reduce the carbon emissions of a blockchain network without sacrificing computing power.
- Cryptocurrency prices. An attractive cryptocurrency price can boost the number of active miners. More miners on a proof-of-work blockchain generally results in more carbon emissions.
- Block rewards. Just like high token prices, attractive block rewards can increase the environmental impact of a cryptocurrency network, as more miners compete to earn them.
The bottom line
The big takeaway here is that you can be a responsible investor and own cryptocurrency. Just do your research and choose the digital assets that are best aligned with your ESG values. The types of digital assets in your portfolio, and what you do with them, are key factors.
Mining practices and energy sources continue to evolve, and newer data suggest portions of the network now rely on cleaner energy—even as environmental concerns remain.
References
- Cambridge Bitcoin Electricity Consumption Index | ccaf.io
- [PDF] How Does the Ethereum Merge Help the Real and Virtual World Save Energy? | ey.com
- Cambridge Study: Sustainable Energy Rising in Bitcoin Mining | jbs.cam.ac.uk