Bitcoin Emissions Certificates (BEC) Issuance
Introduction
This methodology outlines the issuance process for Bitcoin Emissions Certificates (BECs), which represent the carbon emissions associated with holding Bitcoin (BTC) on a daily basis. Each BEC accounts for the emissions linked to the proportion of the Bitcoin supply mined by a specific miner on a given day, enabling investors and businesses to offset their Scope 3 emissions from Bitcoin holdings.
This daily issuance model leverages each miner's share of network activity based on their hashrate, enabling precise allocation of emissions certificates. Investors seeking to report carbon emissions for Bitcoin held over longer periods can acquire multiple BECs, with one BEC representing one day of holding emissions for one Bitcoin.
Key Definitions
Bitcoin Emissions Certificate (BEC): A certificate representing the daily carbon emissions associated with holding one Bitcoin, issued based on a miner’s contribution to the total circulating Bitcoin supply on that day.
Supplier-Specific Emissions Factor: The emissions factor (tons of CO₂ per Bitcoin) specific to each miner, calculated based on the miner's share of network hashrate and energy consumption.
Scope 3 Emissions: Indirect greenhouse gas emissions from activities in the company’s value chain, as defined by the Greenhouse Gas (GHG) Protocol, applicable here to emissions from holding Bitcoin.
Overview of the BEC Issuance Process
Audit Bitcoin Data Center According to GHG Protocol
Collect Daily Average Hashrate Submitted to Mining Pool
Calculate Miner’s Proportion of Network Hashrate
Calculate Daily Bitcoin Supply Allocation
Determine Supplier-Specific Emissions Factor
Issue Daily Bitcoin Emissions Certificates (BECs)
Reporting and Offsetting for Bitcoin Holdings
Step-by-Step Process
Step 1: Audit Bitcoin Data Center According to GHG Protocol
To ensure the accuracy of emissions data, each participating Bitcoin mining operation undergoes an audit in line with the Greenhouse Gas (GHG) Protocol. This audit assesses the miner’s total carbon footprint, accounting for all relevant emissions sources.
Audit Scope:
Scope 1: Direct emissions, including on-site fuel combustion (e.g., for backup generators).
Scope 2: Indirect emissions from purchased electricity used to power mining equipment.
Scope 3: Optional, covering upstream and downstream emissions related to mining operations, such as equipment manufacturing.
The audit provides verifiable emissions data specific to each miner, establishing a foundation for calculating emissions factors accurately.
Step 2: Collect Daily Average Hashrate Submitted to Mining Pool
Each miner’s daily average hashrate is gathered from their mining pool. This metric is essential to determine the miner’s proportional contribution to the total Bitcoin network activity.
Data Collection:
The miner’s daily hashrate is tracked through reliable mining pool data sources to ensure transparency.
The mining pool must provide accurate hashrate data that reflects the individual miner’s contributions.
Step 3: Calculate Miner’s Proportion of Network Hashrate
The miner’s share of network activity is calculated by dividing the miner’s daily average hashrate by the total network hashrate for that day.
Formula:
This proportion reflects the miner’s contribution to the Bitcoin network for a given day and is used to allocate their share of the total Bitcoin supply circulating each day.
Step 4: Calculate Daily Bitcoin Supply Allocation
Each day, the miner’s share of network hashrate is applied to the daily circulating Bitcoin supply to calculate the portion of Bitcoin supply that can be attributed to the miner’s activity.
Formula:
This allocation reflects the total Bitcoins associated with the miner’s activity for that day. For example, if the circulating supply is 19 million BTC, and a miner’s share of network hashrate is 2%, then 380,000 BTC are associated with that miner for the day.
Step 5: Determine Supplier-Specific Emissions Factor
The total emissions from each miner, derived from the audit, are divided by their daily Bitcoin supply allocation to establish the supplier-specific emissions factor for each BEC. This emissions factor represents the CO₂ emissions associated with each Bitcoin attributed to that miner for one day.
Formula:
This emissions factor provides a miner-specific CO₂ impact per Bitcoin for a single day of holding.
Step 6: Issue Daily Bitcoin Emissions Certificates (BECs)
Based on the supplier-specific emissions factor, daily Bitcoin Emissions Certificates (BECs) are issued to represent the emissions associated with holding Bitcoin for one day.
Issuance:
1 BEC is equivalent to 1 day’s emissions for holding 1 Bitcoin based on the miner’s energy use and emissions factor.
Each day, a corresponding number of BECs is issued in line with the miner’s daily Bitcoin supply allocation.
Retirement:
BECs are retired once acquired for carbon offsetting purposes, ensuring each certificate can only be used once in emissions reporting.
Certificates are tracked and retired in a publicly accessible registry, ensuring transparency and verifiability.
Step 7: Reporting and Offsetting for Bitcoin Holdings
Investors and businesses holding Bitcoin can use BECs to report and offset emissions from their Bitcoin holdings. Each BEC offsets one day of emissions for one Bitcoin, allowing organizations to account for the carbon impact of holding Bitcoin over time.
Annual Offsetting Requirement:
For an investor holding 1 Bitcoin for a full year, 365 BECs are required to fully offset their Scope 3 emissions associated with holding the asset.
Businesses can adjust their offset requirements based on the amount of Bitcoin held and the duration of holding.
Formula for Annual Emissions Offsetting:
Example: If an investor holds 10 BTC for 30 days, they would need 300 BECs to fully offset their emissions for that holding period.
5. Registry and Verification
All BECs issued are recorded in a publicly verifiable registry to maintain transparency and ensure that certificates are used only once for emissions reporting. Each certificate is traceable to a specific miner and daily audit period, allowing for full transparency in tracking the origin and retirement status of BECs.
Third-Party Verification: A third-party verification service audits the registry, ensuring that BEC issuance and retirement adhere to the outlined methodology and that emissions data are accurate.
6. Conclusion
The BEC registry provides a transparent and verifiable means for businesses and investors to account for and offset emissions from holding Bitcoin. By basing emissions factors on each miner’s share of network hashrate and aligning with daily Bitcoin supply, BECs enable more accurate Scope 3 emissions reporting for Bitcoin holdings.
This methodology aligns with the GHG Protocol, offering investors and businesses a robust tool for carbon accounting while promoting sustainability within the Bitcoin ecosystem.
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