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.