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

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.