China's war against crypto ramped up this summer as the Chinese Communist Party (CCP) purged mining operations from the country to preserve their digital yuan's rollout and conserve energy amid a power crisis heading into the winter season. Miners have left the country and are headed elsewhere - some are shipping operations to natural gas-rich U.S. states to unlock cheap energy supplies.
Before the latest round of CCP's crackdown on cryptocurrency began in June, we noted months earlier that one way to curb carbon emissions from gas flaring was to use methane, a byproduct of fracked shale production, as an energy source to mine crypto, instead of releasing the gas into the atmosphere and or burning it.
According to BloombergNEF's Amanda Ahl, "miners have been flocking to the U.S. Natural gas-rich states have proved particularly attractive because the gas that would otherwise be flared can be used to power crypto mining." She said this reduces methane emissions for gas companies and benefits miners with low-cost energy, an ESG solution for the energy-intensive industry.
North Dakota and Wyoming have proposed tax incentives for prospective miners to set up shop and use flared gas as power. Other states are passing restrictions to limit flaring, which would incentivize energy companies to either build out their own crypto mining facilities powered with flared gas or offer a new source of cheap energy to third-party miners.
Crusoe Energy is another company using flared gas to power 40 data centers to mine crypto and plans to expand to 100 centers next year. The company is tackling two dilemmas facing the planet today - the increasing energy footprint of the tech industry and carbon emissions associated with the fossil fuel industry.
CCP's war against crypto has resulted in the global share of Bitcoin mining in China falling from 65% in 2020 to 46% this year. Meanwhile, the U.S. experienced a surge in mining from 7% to 17%.
Another round of crackdowns in China is expected to begin in October when CCP plans on implementing tools to monitor and follow computing activities to ensure that mining isn't taking place. This will only increase the share of U.S. mining operations.
Besides flared gas, another true ESG option for mining operations is the adoption of nuclear. We have constantly pointed out here on Zero Hedge our bullish views on uranium. A coupling between crypto mining and nuclear could be incredibly bullish for uranium should crypto reach peak adoption.
So, for now, flared gas could be miners' solution to an ESG friendly energy source, but on a longer timeframe, we believe nuclear will be the cleanest and best energy source.