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Bitcoin investments and climate change: A financial and carbon intensity perspective

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  • Baur, Dirk G.
  • Oll, Josua

Abstract

Climate-related criticism of Bitcoin is primarily based on the network's absolute carbon emissions, without considering its market value. Taking a relative emission perspective and utilizing the mean–variance portfolio optimization framework, we study the financial and carbon-related implications of Bitcoin investments. The results of our in-sample analysis show that adding Bitcoin to a diversified equity portfolio can both enhance the risk–return relationship of the portfolio and reduce the portfolio's aggregate carbon emissions. This finding persists under various assumptions regarding Bitcoin prices, carbon emission estimates, and carbon prices.

Suggested Citation

  • Baur, Dirk G. & Oll, Josua, 2022. "Bitcoin investments and climate change: A financial and carbon intensity perspective," Finance Research Letters, Elsevier, vol. 47(PA).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005262
    DOI: 10.1016/j.frl.2021.102575
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    Cited by:

    1. Qin, Meng & Su, Chi-Wei & Lobonţ, Oana-Ramona & Umar, Muhammad, 2023. "Blockchain: A carbon-neutral facilitator or an environmental destroyer?," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 604-615.
    2. Yerushalmi, Erez & Paladini, Stefania, 2023. "Blockchain in Financial Intermediation and Beyond: What are the Main Barriers for Widespread Adoption?," CAFE Working Papers 22, Centre for Accountancy, Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University.
    3. Anatolyy Dzyuba & Irina Solovyeva & Dmitry Konopelko, 2023. "Managing Electricity Costs in Industrial Mining and Cryptocurrency Data Centers," International Journal of Energy Economics and Policy, Econjournals, vol. 13(4), pages 76-90, July.
    4. Zhang, Dongna & Chen, Xihui Haviour & Lau, Chi Keung Marco & Xu, Bing, 2023. "Implications of cryptocurrency energy usage on climate change," Technological Forecasting and Social Change, Elsevier, vol. 187(C).
    5. Ndubuisi, Gideon & Urom, Christian, 2023. "Dependence and risk spillovers among clean cryptocurrencies prices and media environmental attention," Research in International Business and Finance, Elsevier, vol. 65(C).
    6. Long, Suwan(Cheng) & Lucey, Brian & Zhang, Dayong & Zhang, Zhiwei, 2023. "Negative elements of cryptocurrencies: Exploring the drivers of Bitcoin carbon footprints," Finance Research Letters, Elsevier, vol. 58(PA).
    7. Yeguan Yu, 2023. "The Impact of Financial System on Carbon Intensity: From the Perspective of Digitalization," Sustainability, MDPI, vol. 15(2), pages 1-22, January.
    8. Chi-Wei Su & Yuru Song & Hsu-Ling Chang & Weike Zhang & Meng Qin, 2023. "Could Cryptocurrency Policy Uncertainty Facilitate U.S. Carbon Neutrality?," Sustainability, MDPI, vol. 15(9), pages 1-15, May.
    9. Abakah, Emmanuel Joel Aikins & Hossain, Sahib & Abdullah, Mohammad & Goodell, John W., 2024. "Global uncertainty factors and price connectedness between US electricity and blockchain markets: Findings from an R-square connectedness approach," Finance Research Letters, Elsevier, vol. 59(C).

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    More about this item

    Keywords

    Cryptocurrencies; Bitcoin; Carbon emissions; Climate change; Carbon intensity; Mean–variance analysis;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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