Tesla Inc revealed on Monday it had bought $1.5 billion of bitcoin and would soon accept it as payment for cars, sending the price of the cryptocurrency though the roof.
So what’s the problem, you may ask? Bitcoin’s virtual, so it’s not like it’s made from paper or plastic, or even metal.
The digital currency is created when high-powered computers compete against other machines to solve complex mathematical puzzles, an energy-intensive process that currently often relies on fossil fuels, particularly coal, the dirtiest of them all.
At current rates, such bitcoin “mining” devours about the same amount of energy annually as the Netherlands did in 2019, the latest available data from the University of Cambridge and the International Energy Agency shows.
Bitcoin production is estimated to generate between 22 and 22.9 metric tons of carbon dioxide emissions a year, or between the levels produced by Jordan and Sri Lanka, according to a 2019 study in scientific journal Joule.
The landmark inclusion of the cryptocurrency in Tesla’s investment portfolio could complicate the company’s zero-emissions ethos, according to some investors, at a time when ESG - environmental, social and governance - considerations have become a major factor for global investors.
“We are of course very concerned about the level of carbon dioxide emissions generated from bitcoin mining,” said Ben Dear, CEO of Osmosis Investment Management, a sustainable investor managing around $2.2 billion in assets that holds Tesla stock in several portfolios.
Tesla boss Elon Musk is a poster child of low-carbon technology. Yet the electric carmaker’s backing of bitcoin this week could turbo-charge global use of a currency that’s estimated to cause more pollution than a small country every year.“We hope that when Tesla’s bitcoin ventures are over, they will concentrate on measuring and disclosing to their market their full suite of environmental factors, and if they continue to buy or indeed start mining bitcoin, that they include the relevant energy consumption data in these disclosures.”
Tesla did not respond to a request for comment.
Still, it’s not all eco-doom and gloom, and Tesla’s bet on bitcoin comes amid growing attempts in the cryptocurrency industry to mitigate the environmental harm of mining. This movement could be advanced by billionaire entrepreneur Musk, who this week separately offered $100 million for inventions that could pull carbon dioxide from the atmosphere or oceans.
The entrance of big corporations into the crypto market could also boost incentives to produce “green bitcoin” using renewable energy, some sustainability experts say. They add that companies could buy carbon credits to compensate too.
Yet in the shorter term, Tesla’s disclosure of its bitcoin investment, made in a securities filing, could indirectly serve to exacerbate the environmental costs of mining.
Other companies are likely to follow its lead by buying into the currency, investors and industry experts say. Greater demand, and higher prices, lead to more miners competing to solve puzzles in the fastest time to win coin, using increasingly powerful computers that need more energy.
“It’s (bitcoin) not a sustainable investment and it’s hard to make it sustainable with the kind of system it is built on,” said Sanna Setterwall, a consultant at corporate sustainability advisory South Pole. (reuters)
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