The upcoming Bitcoin halving could lead to a greener Bitcoin (BTC) mining network with more sustainable energy sources.

With Bitcoin block rewards set to cut from 6.25 BTC to 3.125 BTC, paired with a continually increasing Bitcoin hash rate, the profitability of mining firms could take a hit.

In turn, this could lead miners to search for greater capital efficiency via sustainable energy sources, according to Matteo Greco, research analyst, at Fineqia International. Greco wrote:

“This dynamic compels mining companies to optimize capital efficiency and seek cheaper electricity sources, leading to an increasing use of renewable energy in BTC mining.”

Bitcoin has often been criticized for its high energy consumption and reliance on fossil fuels. Yet, over 54.5% of the Bitcoin network’s energy consumption is powered by renewable energy sources by the end of January 2024, according to the Bitcoin ESG Forecast, a monthly research report written by Daniel Batten, the managing partner of CH4 Capital.

Bitcoin mining mechanics are also incentivizing greater efficiency, which could be among the main reasons for the network becoming increasingly more sustainable. Greco added:

“The BTC mining rewards mechanism inherently drives greater efficiency with each step, enhancing network security, reducing carbon emissions, and promoting research into sustainable block confirmation methods.”

Related: With 10 days to the halving, analysts predict $150K Bitcoin top

Chinese Bitcoin mining: Greener after mining ban

Despite a ban on Bitcoin mining, China currently accounts for around 15% of the global Bitcoin hash rate, according to the April 5 issue of Batten’s Bitcoin ESG Forecast.

“No off-grid coal-based mining occurs anymore. It’s too easy to spot, it competes for baseload energy and interferes with the central government’s emission targets. This has caused a significant reduction of the emission intensity of the Chinese mining post-ban.”

Instead, miners in mainland China mainly rely on hydroelectric power, which is abundantly cheap during the wet months in the four regions of Xi’an, Wuhan, Bejing, and Xining, noted Batten, referencing the below chart.

Lastly, Batten noted that a significant amount of retail participants are mining Bitcoin at a loss, mainly to have an exit from the Chinese financial system. He said:

“They convert Chinese yuan for ASICS and electricity which creates BTC, which gets converted into USD. Many retail miners are happy to take the profitability hit simply to have a way to convert Yuan to USD.”

Related: 10 days until halving: Bitcoin mining profitability won’t necessarily fall