The Sustainable Bitcoin Protocol (SBP) has started a pilot with waste gas crypto miner Crusoe Energy to refine a methodology to ascertain the environmental impact of such operations.
"Utilizing a third-party audit, SBP will verify that Crusoe's waste gas procurement and technology meets a standard that is verifiably reducing greenhouse gas emissions and additive to the clean energy transition," the companies said in a press release on Thursday. SBP worked with Crusoe and other parties to create a methodology, they told CoinDesk.
SBP is a startup looking to create a market-based mechanism that incentivizes bitcoin (BTC) miners to make their operations more sustainable. They work with third parties to audit miners' operations and, if they meet their standards, clear them for the issuance of Sustainable Bitcoin Certificates (SBC). One on-chain SBC asset is issued for every bitcoin mined sustainably and can be traded. Investors could buy these to make ESG claims about their bitcoin holdings.
Crusoe and other crypto miners work on oil and natural gas wells where excess gas is released into the atmosphere, or flared. If this occurs, it adds carbon dioxide equivalents, and particularly methane, to the atmosphere. Crusoe instead sets up power generators that burn the gas, extracting energy and putting it into bitcoin mining.
This process still emits greenhouse gases but avoids methane emissions, a gas which contributes as much as 80 times more potent than carbon dioxide, and instead puts the gas to use. Crusoe claims that in 2022 it captured over 4 billion cubic feet of gas, avoiding about 509,000 metric tons of carbon dioxide equivalents emissions.
Ensuring that this gas would otherwise be flared, adding onto greenhouse gases, is key to the methodology. SBP wants to "ensure that using this waste gas is not perpetuating the problem," while "recognizing that oil and gas will be used for many years to come," said Brad van Voorhees, co-founder and CEO of SBP. "When done responsibly, utilizing this waste gas is actually really the ideal sort of energy transition process," he said.
If the oil and gas producer could find a pipeline that would transport it somewhere else to be sold, they'd prefer that from an ESG perspective, said Chase Lochmiller, Crusoe's CEO. If the producer can get market price elsewhere, the gas is not wasted, he said.
In February, the first transaction of SBC was completed, when Georgia miner CleanSpark (CLSK) sold SBC to digital asset investment firm Melanion Capital.
Unlike other environmental assets like carbon and renewable energy credits, SBCs are fungible. They do not represent a specific bitcoin that was mined using sustainable practices, but rather ownership of all the climate-friendly that are part of the protocol, van Voorhees explained.
"SBP has really created a mechanism to make the claims around how that [mining] process is done," ensuring it is in rigorously audited with a third-party mechanism, and making the claim "independently tradable from the actual underlying bitcoin commodity," which ensures that the mined bitcoin remains perfectly fungible, said Lochmiller.
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