UPDATE: Most NFTs are built on the Ethereum blockchain. Ethereum used to have a very high energy footprint, but on 15th September 2022 it switched from the energy-intensive Proof-of-Work mechanism to the much more efficient Proof-of-Stake mechanism. This means that most NFTs now have a minimal energy cost attached to their creation and exchange. The advice below has been updated to reflect this.
- While there may be benefits to artists and arts organisations from selling NFTs in the short-term, these should be carefully balanced against longer-term risks – as well as considering the environmental impacts of your specific NFTs.
- Check that your NFTs are based on a “Proof-of-stake” (PoS) not a “Proof-of-work” (PoW) blockchain, as there is a huge difference in energy consumption between these two mechanisms. Since September 2022, Ethereum has been using the low-energy PoS mechanism, while Bitcoin still uses the highly energy-intensive PoW method.
- If thinking about using bitcoins and NFTs, then proceed cautiously and follow GCC advice outlined below.
- If you do decide to carry out any transactions using a high-energy PoW blockchain such as Bitcoin, make sure you include them in your carbon calculations as they will likely make up a significant part of your carbon footprint. To put it into context, every transaction on the Bitcoin blockchain produces a carbon footprint similar to a flight from Los Angeles to New York.
- If you created or traded any NFTs on the Ethereum blockchain before September 15th 2022, you should include them in your carbon footprint for that year as they will have had a significant climate impact (around 145 kg of CO2e per transaction).
What is Blockchain?
The blockchain is a system that allows you to store transactions in a way that is impossible to hack. It is decentralised and transparent.
Blockchain technology has great potential for use in the art world, for, among other things, securely and reliably storing proofs of transactions ranging from authenticity and provenance, to condition reports.
Unfortunately, blockchain technology has been problematic from a sustainability and energy-consumption perspective, and urgent attempts have been underway to fix this.
If you’re interested in choosing a blockchain app, ask the developers which blockchain it uses.
What are NFTs?
The blockchain also forms a critical backbone of another fast-evolving trend, NFTs (Non-fungible tokens), most of which live on the Ethereum blockchain (which fortunately, since September 2022, is now one of the more climate-friendly ones).
In the form of “crypto collectibles,” NFTs, which are generally traded on specific platforms, can be considered at once a new form of medium or “artwork type,” a rights-management mechanism, and digital assets in and of themselves (though the assets may be stored elsewhere) that revolve around a value model based on verifiable scarcity.
NFTs offer new and interesting opportunities to artists, especially those who work mainly in the digital space, not least because artist resale rights are baked into the technology.
If you decide to explore NFTs, GCC advice is to proceed cautiously and follow the steps outlined below.
GCC Guidance on NFTs
1. Think carefully about the risks
In addition to their climate impacts, NFTs have come under fire for other reasons too. There are numerous instances of people attaching NFTs to images that they did not create, and the market seems to be dominated by a few inside players. There is also concern around turbulent prices and the possibility that NFTs may be a fashionable bubble that will eventually burst.
The fact that NFTs aren’t actually a solid proof of ownership, but simply a kind of “digital certificate” that only has the value that people choose to associate with it, means that they carry no guarantee of being worth anything in the long term. Selling NFTs therefore comes with a reputational risk: if the market eventually crashes, then the people who sold NFTs could well come under fire for helping to inflate it. Even attempts to use NFTs to fund good causes have been known to spectacularly backfire, as with WWF’s “conservation NFTs” earlier this year. This was partly linked to the climate impact of the specific NFTs that WWF was selling, but people were also upset that the charity was helping to legitimise and promote NFTs and blockchains in general, encouraging the growth of a sector that still, as a whole, has a large environmental impact.
2. If you do go ahead with NFTs, then choose a low-carbon blockchain
Many cryptocurrencies – including Bitcoin are built on a highly energy-intensive blockchain methodology called “proof of work”, which requires huge numbers of computer processors to be whirring away all over the world, burning up large amounts of energy and fossil fuels. The global energy consumption of Bitcoin is currently estimated at around 131 Terawatt hours per year (ie larger than the electricity use of most countries), producing over 70 million tonnes of CO2e. This gives every transaction on the Bitcoin blockchain a carbon footprint similar to a flight from Los Angeles to New York.
However, most NFTs are built on Ethereum, which no longer uses the same high-energy PoW mechanism as Bitcoin. On September 15th 2022, following mounting pressure, Ethereum switched to a different methodology called “Proof-of-stake” (PoS), that that requires only a tiny amount of energy use per transaction. This reduced the energy use of Ethereum by over 99%.
Other blockchains also use the lower-energy proof-of-stake mechanism, such as Tezos, Cardano and Kusama (based on the Polkadot currency). If you are thinking of creating or trading NFTs, ensure your provider is using Ethereum or another PoS blockchain, not a PoW platform.
3. Check if you need to include your NFTs or cryptocurrency transactions in your annual carbon footprint
Some up-to-date estimates of the carbon footprint of each transaction on the Ethereum blockchain can be seen here. As you can see, each transaction on the Ethereum blockchain is responsible for around 0.01 kg of CO2e – so if you’re using Ethereum or another proof-of-stake blockchain, the total footprint is likely to be very small, and probably not worth including in your annual footprint.
However, if you created and/or sold any NFTs that were based on Ethereum before 15th September 2022, you’ll need to include their impact in your annual carbon reporting. We are planning to add NFTs into our online carbon calculator next time we update it, but in the meantime it’s not too difficult to calculate yourself. Add up the number of blockchain transactions that were required to create and sell NFTs in your chosen reporting year, and multiply by 145 to get the approximate carbon footprint in kg (you can divide by 1000 to turn it into tonnes of CO2e)*. Add this into your carbon footprint for the year.
If you carried out any transactions using Bitcoin, you can check the current average footprint per transaction here (at the time of writing, it’s around 780 kg per transaction).
4. Remember that offsetting won’t remove the impact of NFTs
As explained in our online offsetting report, purchasing carbon offsets won’t make the impact of your NFTs disappear. The best option is to make sure that any NFTs you are responsible for are created using a proof-of-stake blockchain to minimise their impact on the climate. However, if you have sold any Ethereum-based NFTs before September 15th 2022 and wish to take responsibility for their emissions, you could donate to one of our recommended Strategic Climate Funds. This won’t make your NFT emissions vanish, but it will support meaningful and strategic action to help the world halve its emissions by the urgent 2030 deadline.
*Before September 15th 2022, Ethereum transactions had an average carbon footprint of around 145 kg CO2e each.
- Understand and evaluate the environmental impact of your blockchain activities.
- Opt for low-carbon alternatives that use “proof-of-stake” blockchains (which use a different methodology that requires only a tiny amount of energy use per transaction).
- If you created or traded any Ethereum-based NFTs before 15th September 2022 – or if you are planning to trade any PoW-based NFTs in the future - include them in your carbon calculations as this will likely make up a significant part of your carbon footprint.
NFTs: The Environmental Cost
Ethereum Energy Consumption Index
Bitcoin Energy Consumption Index
Measuring the Climate Change Impact of Blockchain and Non-Fungible Tokens (NFTs)