On March 25, 2022, the White House’s Office of Science and Technology Policy (“OSTP”) published a request for information on the energy and climate implications of digital assets (the “RFI”).1 The RFI is part of President Biden’s recent executive order on digital assets and will form part of a report that OSTP will issue on the potential for digital assets to impede or advance efforts to tackle climate change and the transition to a clean and reliable electricity grid.
The OSTP report must be issued by September 2022, and the period to submit information in response to the RFI ends on May 9, 2022, which leaves little time for market participants to develop comment letters. Further, OSTP limits the length of comments to 10 pages, exclusive of supporting data, which puts a premium on incisive and concise comments. In this Legal Update, we summarize the content of the RFI and provide our initial thoughts.
On March 9, 2022, President Biden signed an executive order titled “Ensuring Responsible Development of Digital Assets” (the “Order”). The Order directed a broad range of federal agencies to recommend legislative and regulatory proposals to foster the development of, and address the risks presented by, digital assets and a central bank digital currency. One provision of the order directed OSTP to submit a report to the president that addresses:
- The connections between distributed ledger technology and short-, medium- and long-term economic and energy transitions;
- The potential for these technologies to impede or advance efforts to tackle climate change at home and abroad;
- The impacts these technologies have on the environment;
- The effect of cryptocurrencies’ consensus mechanisms on energy usage, including research into potential mitigating measures and alternative mechanisms of consensus and the
- design tradeoffs those may entail;
- Potential uses of blockchain that could support monitoring or mitigating technologies to climate impacts, such as exchanging of liabilities for greenhouse gas emissions, water and other natural or environmental assets; and
- Implications for energy policy, including as it relates to grid management and reliability, energy efficiency incentives and standards, and sources of energy supply.
OSTP is required to submit the report within 180 days (i.e., September 2022) and then update it in September 2023. OSTP must consult with the secretary of the treasury, the secretary of energy, the administrator of the Environmental Protection Agency, the chair of the Council of Economic Advisers, the assistant to the president and national climate advisor, and the heads of other relevant agencies in drafting the report.
Request for Information
The RFI describes climate change as “one of the most pressing problems confronting our nation and our world” and describes some of the Biden administration’s climate goals. It goes on to explain that the “explosive growth of the digital asset ecosystem may contribute to greater energy use and negatively impact the climate,” although it also notes that there may be positive climate consequences from the growth of digital assets.
The RFI then lists nine topics on which OSTP would like more information to better understand the climate impacts of digital assets. These are:
- Protocols: Climate impacts of the protocols used by digital assets
- Hardware: Climate impacts from the physical components that run the protocols for digital assets
- Resources: Resources used to sustain and power digital assets
- Economics: How the energy use of digital assets is affected by the value of, demand for and supply of particular digital assets or their underlying infrastructure
- Past or ongoing mitigation attempts: Past or ongoing attempts to mitigate negative climate impacts of digital assets
- Potential energy or climate benefits: How digital assets can potentially yield positive energy or climate impacts
- Likely future developments or industry trajectories: Likely developments or industry trajectories that would have implications for the future climate impacts of digital assets
- Implications for US policy: How the climate impacts of digital assets might have implications for US policy
- Other information: Any other information, not covered above, that is relevant for understanding the climate impacts of digital assets
It is important to remember that while OSTP does not have rulemaking authority, White House reports often inform future legislative and regulatory efforts. This is particularly true when the reports are subject to the public comment, as is being done with the RFI, because the report is likely to cite comments as evidence that supports its findings. Given the aggressive positions taken regarding digital assets by many federal regulators, such as the US Securities and Exchange Commission, it will be important for the industry to use the RFI to build a firm base of evidence to support more supportive and innovative actions in the future.
1 87 Fed. Reg. 17,105 (Mar. 25, 2022), https://www.federalregister.gov/documents/2022/03/25/2022-06284/request-for-information-on-the-energy-and-climate-implications-of-digital-assets.