This study empirically investigates the effects of crypto-currencies trading on the energy consumption as an important consequence of blockchain technology on climate change. In this article, we use the data of Bitcoin trading volume as well as all crypto-currencies trading volumes for the period going from 2014M1 to 2017M12 to investigate the effects on the primary energy consumption. Our empirical results show a positive correlation between crypto-currencies trading volumes and the energy consumption. Moreover, the crypto-currencies trading volume has a granger-causality to energy consumption in the period of study indicating that these two variables have a long-run co-integration. In other words, our findings show a significant positive (and increasing) influence of cryptocurrency activities on the energy consumption in both short-run and long-run. This study investigates one step further in examining the effects of residuals of the crypto-currencies trading volume on the residuals in energy consumption to confirm that a higher trading volume in cryptocurrencies might cause a higher energy consumption. Our findings show a negative influence of the trading of crypto-currencies - precisely, the higher the crypto-currency activities are, the higher the energy consumption is, affecting therefore the environment.Keywords: Crypto-currencies, Environment, Energy consumption, Innovation
Maximum rank 0 1 0 1 X does not granger-cause Elecpro Z-bar 7.343*** 4.135** P-value 0.007 0.042 Elecpro does not Granger-cause X P-value 0.774 0.875 Z-bar 0.082 0.024 Trace statistics 22.15** 1.112 18.38** 0.364 Cointergation test of Elecpro with X Max statistic 21.04** 1.112 18.02** 0.364 5% critical value 15.41 3.76 15.41 3.76 5% critical value 14.07 3.76 14.07 3.76 , **, *** are significant levels at 10%, 5%, and 1%, respectively International Journal of Energy Economics and Policy | Vol 10 Issue 3 2020 359
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The Table 6 below describes the correlations and the unit root test for residuals of energy consumption, all cryptocurrencies trading volume, and Bitcoin trading volume. It shows that the unexplained evolution of all crypto-currencies trading volume have a significant positive correlation with the unexplained evolution of the energy consumption while the unexplained evolutions in Bitcoin trading volume have an insignificant positive correlation. Such results confirm the positive correlation between cryptocurrencies trading volume with energy consumption not only in levels but also in terms of unexplained evolutions. The Figure 2 below shows the unexplained evolutions in energy consumption, all crypto-currencies trading volume, and bitcoin trading volume.
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The LM ARCH test of Engle (1982) is then used to examine the ARCH disturbance for each variable. The Table 7 below shows the results of structural tests and ARCH disturbance test showing no evidence of structural break and no ARCH disturbance. Therefore, we can finally estimate the effect of the unexplained evolution of cryptocurrencies trading volume on the unexplained evolution of the energy consumption through the following equation: EnergyR t = + VoCryR 1 0 t + t (5) It is worth noticing that the fluctuations in unexplained evolution of the energy consumption around 2015M1 and 2017M1 are in line with high fluctuations in cryptocurrencies trading volume. We then examine possible structural break for each residual using the Wald test
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Figure 2: Cryptocurrency market and Energy consumption: the residuals in the two Table 5: Estimations for each variable to extract the residuals (the unexplained evolutions) (1) Model: OLS estimation Dep. Var: L.Energy (2) (3) Energy 0.355** [0.143] Elecpro VoCry (4) VoBit L.Elecpro 0.348** [0.139] L.VoCry 0.933*** [0.101] L.VoBit T (monthly) Constant
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