The Biden administration is pushing for a tax on crypto mining. (Photo illustration: Kelli R. Grant/Yahoo News; photos: Leah Millis/Reuters, Elijah Nouvelage/Bloomberg via Getty Images, Getty Images) The Biden administration is pushing for a tax on crypto mining. (Photo illustration: Kelli R. Grant/Yahoo News; photos: Leah Millis/Reuters, Elijah Nouvelage/Bloomberg via Getty Images, Getty Images) The White House is trying to persuade Congress to pass a 30% tax on the electricity used in cryptocurrency mining in the next federal budget in order to minimize the nascent industry’s impact on climate change.

“Cryptominers’ high-energy consumption has negative spillovers on the environment, quality of life, and electricity grids where these firms locate across the country,” the president’s Council of Economic Advisers (CEA) argues in a blog post that will appear on the White House website on Tuesday, to which Yahoo News gained advance access. The post will lay out the case for the Digital Asset Mining Energy (DAME) excise tax, which the CEA writes is an “example of the Administration’s efforts to fight climate change and reduce energy prices.”

"Currently, cryptomining firms do not have to pay for the full cost they impose on others, in the form of local environmental pollution, higher energy prices, and the impacts of increased greenhouse gas emissions on the climate,” the CEA writes in its post. “The DAME tax encourages firms to start taking better account of the harms they impose on society.”

Burning fossil fuels to create electricity accounts for 25% of annual U.S. greenhouse gas emissions and releases harmful air pollutants such as nitrogen oxides and particulate matter.

Critics of the proposed tax say the crypto mining industry is being unfairly targeted. “This puts a clear line in the sand that they do not like the industry. They are looking for ways to hamstring it,” Tom Mapes, director of energy policy at the Chamber of Digital Commerce, told Yahoo News. “This is just a way to go after the industry which they do not support.”

In “proof-of-work” cryptocurrency mining — the most energy-intensive approach to mining, and the one used by bitcoin, by far the largest cryptocurrency — massive supercomputers compete to be the first to solve a mathematical puzzle. This process requires massive amounts of electricity. According to a White House report from last September, cryptocurrency mining consumes more power than the entire country of Australia. In the U.S., which is home to roughly one-third of crypto mining operations, it accounts for an estimated 0.9% to 1.7% of all the country’s electricity use.

That energy use is growing rapidly as the crypto industry expands. In the United States, the world’s leader in cryptocurrency mining, 34 large-scale bitcoin mines collectively use as much electricity as nearly 3 million U.S. households, the New York Times reported. Ten of those mines are connected to the energy grid in Texas, and those mines’ demand for electricity has led the state grid operators to charge higher prices for all customers to make sure supply and demand are in balance and to avoid blackouts.

In New York, where one crypto mining company bought and reactivated a decommissioned natural-gas-fired power plant to power its operation, Gov. Kathy Hochul, a Democrat, signed a bill late last year that would put a moratorium on licensing for any more fossil-fuel-powered crypto mining facilities.

State or local regulation might just lead the industry to move elsewhere, the White House says, so it believes that the federal government needs to step in and provide some national regulation that reflects the social cost of crypto mining. The tax would be phased in over three years, starting at 10% next year, then rising to 20% and finally 30%.

“Where we see the strains emerging are in these places that are drawing off the grid, where this starts getting noticed at the level that communities are pushing back and are experiencing consequences of it,” an economist on the CEA who spoke on the condition of anonymity told Yahoo News. “Localities are dealing with it, and they’re struggling to come up with solutions on their own.”

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