Another day, another controversial statement from Tesla and SpaceX CEO, Elon Musk.
Musk tweeted “when there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions.”
In mid-May 2021, Tesla stopped accepting Bitcoin for car purchases due to environmental concerns. Tesla owned roughly US$1.5 billion on February 8, 2021. However, Musk said that “Tesla sold ~10% of [Bitcoin] holdings to confirm BTC could be liquidated easily without moving [the] market.”
It’s not a perfect science, but generally speaking as the price of Bitcoin rises, so too does the computing power needed to mine additional supply. Higher difficulty means higher electricity demand and costs, which in turn leads to a larger carbon footprint. Around 75% of Bitcoin is mined in China, mostly using cheap electricity supplied by coal.
A recent study by Bank of America Global Research estimates that a US$1 billion inflow of cash into Bitcoin would raise its price by 11%, causing the carbon dioxide (CO2) footprint to rise by 5.4 million tons (4.9 million tonnes). According to the report, no other human activity results in as severe of emissions per dollar of investment as Bitcoin. In fact, Bitcoin emissions are now nearly as much as the US federal government’s, and around half as much as ExxonMobil’s emissions.
The Fahrenheit 2.7 column in the second quarter 2021 issue of ESG Review discussed the severity of Bitcoin mining on the environment. Strides are being made to mine Bitcoin using renewable energy sources, a common approach being to take excess solar and wind energy that can’t be stored and using it to power mining rigs. However, Bitcoin’s price appreciation continues to push electricity consumption to the limit.
For more information on Bitcoin dynamics, the environmental impacts of Bitcoin, how much computing power is needed to mine a block of Bitcoin, and why Bitcoin is emerging as a commodity, not a currency, be sure to check out “Bitcoin Is Becoming An Environmental Nightmare” and subscribe to ESG Review.