Biden administration proposes 30% tax on electricity used for cryptocurrency mining

CEA under President Joe Biden proposed including in the federal budget a 30% tax on electricity used in cryptocurrency mining. The initiative aims to minimize the climate impact, Yahoo reports.

“High energy consumption by miners negatively affects the environment, quality of life, and the electric grids where these firms are located across the country,” the statement said.

In the forthcoming publication, the Council will present arguments in favour of the excise tax Digital Asset Mining Energy (DAME).

The CEA noted that its introduction would force firms to pay closer attention to the harm “they inflict on society.” Currently, their costs do not internalize “environmental pollution, higher fuel costs, and the impact of rising greenhouse gas emissions on the climate.”

Tom Maps, Director of Energy Policy at the Chamber of Digital Commerce, sees in the administration’s moves an attempt to “target an industry they do not support.”

“This clearly shows that they do not like this industry. They are seeking ways to restrict it,” he explained.

According to the White House budget report, cryptocurrency mining consumes more energy than Australia as a whole. In the United States, which accounts for about a third of all mining, this activity accounts for between 0.9% and 1.7% of total costs.

According to The New York Times , 34 largest firms use as much electricity as nearly 3 million households. Ten Texas-based companies have caused higher prices for all consumers after their demand created blackout risks.

The CEA cited the need for federal regulation that accounts for the social costs of cryptocurrency mining.

Experts proposed phasing in the tax over three years, beginning next year at 10%, followed by 20% and 30%.

According to estimates, DAME would raise $3.5 billion over ten years.

In an interview with Forbes, economist James Broughel told Forbes that it would be more sensible to tax not electricity consumption but greenhouse gas emissions. The current proposal “punishes” companies that use “clean fuels,” he added.

White House officials say there is no societal benefit to mining.

“It is not yet clear what the economic benefits of this activity are. There are concerns about risks to financial stability and, of course, environmental issues,” the advisers commented.

Maps disagreed with that argument. According to the expert, the White House is selective in picking winners and losers among industries.

Cryptocurrency circles criticized the NYT article on Bitcoin mining.

In March 2023 the CEA issued a report that states digital assets do not conform to their stated use-case scenarios. The experts also pointed to the risks of digital assets for investors and financial stability more broadly.