Calculating Transaction Emissions Footprint

Reporting Transaction Emissions

To account for GHG emissions associated with Bitcoin transactions, the CCRI methodology allocates emissions based on a user's transaction activity on the network. Unlike holding-based emissions, transaction-based emissions reflect the direct influence of user transactions in driving network activity and incentivizing miners through transaction fees. This section explains how transaction-based emissions are calculated for Bitcoin users to enable more accurate Scope 3 GHG reporting.

Overview of Transaction-Based Emissions Attribution

In Bitcoin’s Proof-of-Work (PoW) network, each transaction incurs a fee paid by users, which serves as a financial incentive for miners to validate and include transactions in the blockchain. This validation requires significant computational effort and, thus, substantial electricity consumption, leading to GHG emissions. The CCRI methodology assigns a portion of the total network emissions to each user based on their proportional share of transaction fees, ensuring that transaction-driven network impacts are accurately reflected in GHG accounting.

Calculating Transaction-Based Emissions

1. Total Network Emissions and Transaction Fee Proportion: Calculate the total emissions for the Bitcoin network for a given reporting period, such as a year, and determine the percentage of miner rewards derived from transaction fees versus block rewards.

2. User’s Share of Total Transaction Fees: Determine the user’s transaction fee contributions relative to the total transaction fees on the network during the reporting period. For example, if a user’s transactions contributed 0.5% of the total transaction fees, they would be allocated 0.5% of the transaction-fee-driven emissions.

3. Allocation of Emissions Based on Fees: The user’s share of total transaction fees is multiplied by the emissions attributable to transaction fees within the network’s total GHG emissions. This calculation reflects the user's influence on network activity and electricity use directly associated with transaction fees.

Example Calculation

Assume the following data for the Bitcoin network:

• Total Network Emissions: 59.1 million metric tons of CO₂e for the year.

• Transaction Fee Proportion of Miner Rewards: 6%.

• Total Transaction Fees: $600 million in fees for the year.

• User’s Transaction Fees: $3 million in fees paid over the year.

1. Calculate Transaction-Based Emissions Proportion:

$$\text{Transaction Emissions} = 59,100,000 \times 0.06 = 3,546,000 \, \text{mt CO₂e}$$

1. Calculate User’s Share of Transaction-Based Emissions:

$$\text{User’s Emissions Responsibility} = \frac{3,000,000}{600,000,000} \times 3,546,000 = 17,730 \, \text{mt CO₂e}$$

Interpretation

For the year, this user would be responsible for 17,730 metric tons of CO₂e from Bitcoin transaction-based emissions. This allocation highlights the emissions linked to their network activity and incentivization of miners, enabling accurate Scope 3 GHG reporting for Bitcoin transactions. This transaction-based approach, combined with the holding-based allocation, offers a comprehensive emissions profile for Bitcoin users engaging in both holding and transactional activities.