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

Dirk G. Baur; Josua Oll

doi:10.1016/j.frl.2021.102575

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

Dirk G. Baur, Josua Oll

Accounting and Finance

Research output: Contribution to journal › Article › peer-review

38 Citations (Scopus)

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.

Original language	English
Article number	102575
Journal	Finance Research Letters
Volume	47
Early online date	20 Nov 2021
DOIs	https://doi.org/10.1016/j.frl.2021.102575
Publication status	Published - Jun 2022

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10.1016/j.frl.2021.102575

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title = "Bitcoin investments and climate change: A financial and carbon intensity perspective",

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.",

keywords = "Bitcoin, Carbon emissions, Carbon intensity, Climate change, Cryptocurrencies, Mean–variance analysis",

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T2 - A financial and carbon intensity perspective

AU - Baur, Dirk G.

AU - Oll, Josua

PY - 2022/6

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N2 - 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.

AB - 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.

KW - Bitcoin

KW - Carbon emissions

KW - Carbon intensity

KW - Climate change

KW - Cryptocurrencies

KW - Mean–variance analysis

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U2 - 10.1016/j.frl.2021.102575

DO - 10.1016/j.frl.2021.102575

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SN - 1544-6123

VL - 47

JO - Finance Research Letters

JF - Finance Research Letters

M1 - 102575

ER -

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

Abstract

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