IMF Proposes 85% Electricity Tax Increase on Crypto Mining

In a recent post, two International Monetary Fund (IMF) economists proposed a steep electricity tax increase aimed at tackling the carbon emission impact of crypto mining and artificial intelligence data centers.

The IMF officials cited the recent projections from the International Energy Agency, which estimate that the global electricity consumption of these two industries will increase from 2% to 3.5% by 2027, equivalent to the current consumption level of Japan, which is the world’s fifth largest user of electricity.

If this projection becomes reality, carbon dioxide emissions from AI data centers and crypto mining combined could reach 1.2% of the world’s total in the next three years.

To address this growing issue, Shafik Hebous, who serves as the Deputy Division Chief in the IMF’s Fiscal Affairs Department, and fellow IMF economist Nate Vernon-Lin proposed a $0.047 per kilowatt hour tax on the electricity used by crypto miners. They also added that if the air pollution’s impact on local health was to be considered here, the crypto mining tax rate would rise to $0.089, which would amount to a sharp 85% increase compared to current rates.

The two economists estimate that such a move would reduce global carbon emissions by 100 million tons annually, or the equivalent to the carbon output of Belgium, while also generating around $5.2 billion in revenue.

The proposed tax for AI data centers is slightly lower, set at $0.032 per kilowatt hour, or $0.052 if the air pollution impact was accounted for, which could generate an additional $18 billion in revenue per year.

Hebous and Vernon-Lin acknowledged that such measures would require global coordination, and that they could be undermined by jurisdictional arbitrage, meaning that miners might simply move their mining operations to countries which have cheaper electricity or fewer regulations in order to avoid the tax.

Critics of the proposal argue that such sharper taxes could stifle the growth of the crypto industry, especially for smaller operations that are already having a hard time staying profitable, but despite these concerns, the IMF economists stress the importance of international cooperation that would ensure that these measures can meaningfully contribute to global climate goals.