Elon Musk has been the talk of the town after he hosted Saturday Night Live. More recently however he has made more news after announcing in a tweet that Tesla would no longer accept Bitcoins as a form of payment. This quickly resulted in a 10% drop in the price of Bitcoin.
Tesla had announced in March that it would accept the cryptocurrency and this did not go well with some environmentalists. The company then revealed that it had already bought Bitcoins worth $1.5 billion in February.
Elon Musk is also a well-known proponent of digital currencies. He is in fact the biggest and most popular fan of Dogecoin even going as far as promising to put a physical Dogecoin on the moon. The announcement was thus a surprise to many Bitcoin investors and Tesla fans. Tesla even made quite a profit (about $ 16m) based on the acquisition of such a huge number of Bitcoins.
However, a closer look at Elon Musk as a person might reveal an environmentalist at heart. He is after all spearheading an electric car revolution that will help reduce the world’s reliance of fossil fuels for transport. In interviews he has constantly talked of the “existential threat” of climate change, citing this as the major reason for acquiring Tesla.
With this in mind it is thus important to assess the true level of threat posed by Bitcoin. So big that it would make perhaps the world’s most famous crypto-enthusiast change his mind about it.
Bitcoin’s Climate Impact
Bitcoin is mined using high-powered computers that compete against each other to solve very complex mathematic puzzles. This is an intensive process that involves a rather high consumption of energy. A Bitcoin Electricity Consumption Index run by Cambridge University’s Centre for Alternative Finance shows that mining Bitcoin consumes more energy than Malaysia or Sweden.
The more pressing concern is less with the amount of energy used and more with the type of energy. You see Chinese make up to 75 % of the world’s global miners. And as you may be well aware, the country produces much of its energy from coal.
This makes Bitcoin mining a particularly harmful endeavor as far as climate is concerned. In fact, a study found that crypto currency’s carbon footprint matches ten of China’s largest cities. Miner’s in China are said to be dependent on energy from coal only switching to renewables like hydropower during rainy seasons.
Critics however point to the mainstream financial market i.e. banks and wall street who also use a lot of energy to run their computers and air-conditioned offices.
Some analysts have however been quick to
the move as merely an ‘attempt by Tesla to assuage the concerns of investors who are focused on climate change and sustainability.’
In an interview with the BBC Julia Lee from Burman Invest said, “Environmental, Social and Corporate Governance (ESG) issues are now a major motivation for many investors. Tesla, being a clean energy-focused company, might want to work better in the environmental area of ESG.”
She added that ”…a cynic might suggest that this is just another move by Elon Musk to influence the cryptocurrency market, as he has done on so many other occasions.”