IMF proposes 85% power tax hike on crypto and AI data centers

The International Monetary Fund (IMF) has proposed higher energy taxes to reduce emissions from crypto miners and artificial intelligence (AI) data centers, according to an Aug. 15 report.

Daniel Batten, the Managing Partner at CH4Capital, has issued a strong rebuttal to the report on his X (formerly Twitter) account, stating,

“Bitcoin mining has significant environmental benefits, those who stand to lose most from mainstream adoption of Bitcoin (IMF, Central Banks) are needing to resort to direct attack-pieces.”

The IMF argues that these sectors consume 2% of the world’s electricity and contribute nearly 1% of global emissions. The financial regulator claimed that one Bitcoin transaction uses the same electricity that an average person in Ghana or Pakistan would use in three years.

Additionally, it argues a ChatGPT query consumes ten times more electricity than a Google search due to the energy-intensive nature of AI data centers.

The IMF projects that energy consumption from these sectors in three years could rise to 3.5%, matching Japan’s current electricity use, which is the fifth-largest in the world.

Increase energy taxes

To address this, the IMF recommends a significant increase in energy taxes. It suggests governments impose an 85% hike in electricity taxes for crypto miners, equating to $0.047 per kilowatt hour or $0.089 when including air pollution costs. This measure could allegedly generate $5.2 billion annually and cut emissions by 100 million tons, roughly equal to Belgium’s current emissions.

Similarly, the IMF advises taxing data centers at $0.032 per kilowatt hour, rising to $0.052 with air pollution costs. This could help governments collect $18 billion each year. They argue that data centers use less energy and often operate in areas with greener electricity and would thus face lower taxes than crypto miners.

However, the IMF stresses that implementing these taxes would require international cooperation to prevent miners and data centers from moving to regions with cheaper energy rates.

The IMF also suggests targeted measures to promote energy-efficient practices among crypto miners and data centers. These could include incentives for using more efficient equipment, adopting less energy-intensive mining methods, and complementing taxes with credits for zero-emission power agreements or renewable energy certificates.

Shafik Hebous, the deputy division chief of the IMF Fiscal Affairs Department, and Nate Vernon-Lin, an economist in the climate policy division, authored the report.

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