top of page

Win-Win Environmental Regulations for Crypto Mining: Developing a Regulatory Program That Reduces Environmental Harm and Promotes Innovation and Competition

Reference Type: 

Preprint

Finney, Bradley R. 2023. “Win-Win Environmental Regulations for Crypto Mining: Developing a Regulatory Program That Reduces Environmental Harm and Promotes Innovation and Competition.” SSRN Scholarly Paper. Rochester, NY. https://papers.ssrn.com/abstract=4554735.

Cryptocurrency is a rapidly growing industry with a rapidly growing carbon footprint. The industry’s growing energy use has sparked a vigorous debate over whether and how best to regulate crypto mining’s environmental effects. The Biden administration and many members of Congress have studied the industry’s environmental impact and concluded that there should be environmental regulations for the industry. However, regulation faces an obstacle in the form of concerns that it not unduly stifle innovation and competition within the industry, which are a major reason why Congress has yet to enact environmental regulations for crypto mining. This Article proposes a win-win regulatory approach that would reduce crypto mining’s environmental harms while also promoting competition and innovation instead of stifling it. The Article proposes applying the Porter Hypothesis, a well-known economic theory in environmental-law scholarship, to the problem of environmental harm caused by crypto mining. The Porter Hypothesis calls for a consultative, flexible approach to environmental regulation that involves the industry, focuses on reducing pollution at its source instead of mitigating its effects after the fact, and provides the industry flexibility by setting emission limits and using market incentives but not prescribing the technological means to meet them. Applied to crypto mining, the Porter Hypothesis suggests regulations that use a market incentive—like a pollution tax or a cap-and-trade program—to encourage crypto miners to reduce their pollution at its source, without mandating the use of a particular technology. The program should also provide funding for pilot projects, use phase-in periods and realistic deadlines, as well as require policymakers to monitor and publish data about individual miners’ energy usage and greenhouse gas emissions. This Article is the first to propose a regulatory program of environmental regulations for the industry, the first to apply the Porter Hypothesis to crypto mining, and the first to propose a regulatory approach that offers a win-win way to overcome political opposition to regulating the environmental harms of crypto mining.

Download Reference:

Search for the Publication In:

Formatted Reference:

bottom of page