An analysis of the relationship between cryptocurrency, energy consumption and carbon emissions

This study aims to analyze the relationship between cryptocurrency mining energy consumption and carbon emissions within a temporal and causal framework. It is widely emphasized in the literature that cryptocurrencies—especially those operating with the "Proof of Work" (PoW) consensus mechanism—lead to high levels of energy consumption, posing serious challenges for environmental sustainability. However, existing studies mostly rely on static models and overlook the time-frequency variations and the effects of external risk factors on this relationship. In this context, the thesis is structured to address these methodological gaps and provide a deeper understanding of the subject. The research utilizes a comprehensive dataset consisting of daily frequency variables from 2010 to 2021, including Bitcoin energy consumption, carbon emissions, hash rate, cryptocurrency prices, market volatility (VIX), geopolitical risk index (GPR), economic uncertainty index (EPU), and physical climate risk (PRI). To capture the time-frequency dependencies, the Wavelet Transform Coherence (WTC) method is employed, while the Nonlinear Autoregressive Model with Exogenous Inputs (NARX) is used to estimate the effects of multiple exogenous variables on energy consumption. The findings reveal a significant and positive long-term relationship between energy consumption and carbon emissions. Additionally, it is determined that geopolitical and economic risk indicators, along with climate risk, have meaningful impacts on energy consumption and periodically shape the energy-emission relationship. These results indicate that environmental impact analysis should be conducted not only from a technical standpoint but also from economic and political perspectives. Through its use of multivariate and time-sensitive models, this thesis makes an original contribution to the academic literature and provides a comprehensive framework for assessing the environmental implications of cryptocurrency technologies in the context of sustainability policies.