Computation-intensive digital industries are expanding rapidly, raising new challenges for energy and climate policy. ACI’s seminar, “The Challenge of Regulating Dirty Digital Industries: Evidence from Cryptocurrency Mining,” held on 9 September 2026, examines the effectiveness of two policy options through the case of cryptocurrency mining—China’s cryptocurrency mining ban and Ethereum’s transition from energy-intensive Proof-of-Work to cleaner Proof-of-Stake—and their broader implications for carbon regulation in digital sectors. The findings show that both state-led regulation and cleaner production technology can reduce electricity use where they are implemented, but part of these gains may be offset when mining activity relocates across regions or existing hardware is redeployed to other Proof-of-Work cryptocurrencies. The regulatory challenge extends to AI and data centres, where workloads can shift across locations and hardware can be redeployed across tasks. Effective carbon regulation therefore requires coordinated emissions disclosure and carbon pricing across the global digital sector.

Key Highlights:

1. Both China’s mining ban and Ethereum’s transition reduce energy use, but carbon leakage limits their global effectiveness. China’s ban relocated physical capital and energy demand to other mining hubs, while Ethereum’s transition allowed specialised computing hardware to be redeployed to other PoW cryptocurrencies. Effective decarbonisation therefore requires coordination across jurisdictions and digital sectors.

2. Cryptocurrency mining is marginally powered by fossil fuels, even in regions with renewable-rich regions. The additional electricity demand of cryptocurrency mining was met by fossil-fuel generation, reflecting the importance of dispatchable power in meeting additional round-the-clock electricity demand. Energy-intensive digital users should therefore face prices that reflect the social marginal cost of the electricity they consume.

3. Digitalisation can reverse the traditional geography of dirty-industry relocation. China’s mining ban triggered an unusual “South-to-North” relocation of an energy-intensive industry, with mining activity and equipment relocating from China to United States. Unlike traditional manufacturing, highly mobile digital capital can relocate rapidly in response to regulatory environment, reversing the conventional pollution-haven pattern.

By HAN, Zhihao