The proposed Digital Asset Mining Energy (DAME) excise tax in President Joe Biden’s budget for the fiscal year 2024 has stirred up quite a commotion within the crypto community. The tax, which could amount to 30% of electricity costs used by cryptocurrency miners in the United States, aims to reduce greenhouse gas emissions, electricity costs, and local environmental pollution. The Biden administration’s Council of Economic Advisors (CEA) believes the introduction of the DAME tax will encourage firms to better account for their environmental impact and is estimated to raise $3.5 billion in revenue over ten years.
Advocates for the tax claim crypto miners should pay their fair share for the harms they impose on local communities and the environment by utilizing electricity at such high rates. Substantial energy consumption, particularly from mining operations such as Bitcoin (BTC), drives up costs on consumers and intensifies reliance on dirtier sources of electricity. The DAME tax would theoretically reduce emissions in the U.S., following the same principles as carbon taxes.
Opponents of the DAME tax, however, argue it would only drive miners to countries with lower tax rates and more lenient environmental regulations—a situation known as “carbon leakage.” Relocation of mining operations would likely result in increased carbon dioxide emissions rather than an overall reduction. Critics like Coin Metrics co-founder Nic Carter emphasize that emissions may even increase when crypto miners move to countries with a lower proportion of renewable energy sources.
Another factor to consider is the relationship between renewable energy production and BTC mining operations. According to Marathon Digital Holdings CEO Fred Thiel, mining incentivizes renewable energy generation, as miners act as consistent base load energy consumers helping stabilize the grid, making green projects financially feasible. Thiel also highlights how Bitcoin miners in the U.S. are attracted to renewable energy sources because of the cheap, excess energy unable to be returned to the grid.
Critics have further questioned the motives behind the DAME tax, negating its relevance to the environmental agenda. Thiel claims that if the Biden administration genuinely wanted to reduce global emissions, the focus would be on the ways electricity is generated, not targeting specific industries like cryptocurrency mining. With regulatory uncertainty and potentially restricted access to banking services continuing to plague the crypto industry in the U.S., the approval of the DAME tax by Congress could further hinder its growth.
As global discussions surrounding crypto mining and environmental impact continue, it remains to be seen whether the DAME tax will provide a real solution to tackle concerns or simply serve as another barrier for the industry.