Calculating Holding Emissions Footprint
CCRI Methodology
The CCRI methodology, as outlined in recent frameworks, provides a structured approach to assessing the greenhouse gas (GHG) emissions attributed to Bitcoin holdings. It establishes allocation principles based on both the total network emissions and individual responsibility among holders. This section summarizes the key concepts of the methodology as they apply to Bitcoin holding emissions within the context of a market-based Scope 3 GHG framework.
Overview of Holding-Based Emissions Attribution
Cryptocurrency holdings contribute to network emissions by implicitly supporting the ongoing consensus operations, incentivizing miners, and maintaining network security. Emissions from holding Bitcoin, a Proof-of-Work (PoW) network, can be significant due to the high electricity demands of mining operations. According to CCRI, the holding-based methodology aligns with established Scope 3 GHG Protocol principles, assigning emissions based on an entity’s proportional share of the total network value.
Calculating Holding Emissions
Total Network Emissions Assessment: The first step involves determining the total emissions of the Bitcoin network. This includes assessing the network’s electricity consumption, typically measured over a year, and converting this consumption into CO₂e based on the electricity generation mix within major mining regions.
Ownership Share Calculation: Emissions are then allocated to holders based on their share of the total Bitcoin network value. For instance, an entity holding 1% of the network value would be attributed 1% of the network’s annual GHG emissions. This value-based approach is consistent with other holding-based allocation methodologies in carbon accounting, providing a fair and proportionate measure of responsibility.
Incentive and Impact Considerations: As per CCRI’s guidance, Bitcoin’s block rewards—an essential driver of miner incentives—are largely influenced by the aggregate demand and value of Bitcoin holdings. Holders contribute to the economic incentive structure that maintains the PoW system, as increases in the asset’s value often lead to more mining activities and consequently higher emissions. Therefore, the holding-based approach reflects not only ownership but also indirect contributions to emissions growth through value appreciation.
Advantages and Considerations
This methodology ensures that all Bitcoin holders bear some responsibility for the emissions of the network, acknowledging their indirect role in sustaining the system’s emissions profile. By integrating this approach into Bitcoin Emissions Certificates (BECs), organizations can more accurately reflect the carbon footprint associated with holding Bitcoin assets, aiding in transparent and effective Scope 3 emissions reporting for market-based GHG accounting(Accounting for Cryptocu…).
Example Calculation for a Bitcoin ETF
Assuming a Bitcoin user holds 40,000 BTC over a one-year period, we can estimate the user's holding-based emissions responsibility following the CCRI methodology. For this calculation, let’s assume the following:
Total Bitcoin Network Emissions for the Year: 59.1 million metric tons of CO₂e (based on recent CCRI estimates for Bitcoin's network-wide emissions.
Total Bitcoin Supply: Approximately 19 million BTC in circulation.
Step-by-Step Calculation
Determine the User's Share of Total Network Value: The user holds 40,000 BTC out of the total 19 million BTC supply.
Calculate the User’s Emissions Responsibility: Multiply the user’s ownership share by the total network emissions to determine the user's allocated emissions for the year.
Interpretation
This user, holding 40,000 BTC, would be responsible for 124,110 metric tons of CO₂e for the year. This allocation reflects the user's indirect contribution to the network's emissions by holding a significant share of Bitcoin, thereby supporting the network's ongoing energy consumption and miner incentives through the value of their holdings. This emission figure can be used in the user’s Scope 3 GHG reporting under a market-based approach, providing a more accurate picture of their cryptocurrency-related carbon footprint.
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