LONDON, February 10 (Reuters) – Tesla CEO Elon Musk is a figurehead for low-carbon technology. However, the electric automaker’s support for Bitcoin this week could accelerate global use of a currency that is estimated to cause more pollution each year than a small country.
Tesla Inc (TSLA.O) announced Monday that it had bought $ 1.5 billion worth of Bitcoin and would soon accept it as payment for cars, causing the price of the cryptocurrency to skyrocket.
What’s the problem, you may be wondering? Bitcoin is virtual, so it’s not like it’s made out of paper or plastic or even metal.
The digital currency is created when high-performance computers pit against other machines to solve complex mathematical puzzles, an energy-intensive process that currently often relies on fossil fuels, especially coal, the dirtiest of them all.
At current rates, Bitcoin mining like this consumes about the same amount of energy annually as the Netherlands did in 2019, according to the latest available data from Cambridge University and the International Energy Agency.
According to a 2019 study by the scientific journal Joule, Bitcoin production is estimated to generate between 22 and 22.9 tons of carbon dioxide emissions per year, or between the levels produced by Jordan and Sri Lanka.
The pioneering addition of cryptocurrency to Tesla’s investment portfolio could complicate the company’s zero-emissions ethos at a time when ESG considerations – environmental, social and governance – have become a major factor for global investors, according to some investors.
“We are, of course, very concerned about the amount of carbon dioxide emissions from Bitcoin mining,” said Ben Dear, CEO of Osmosis Investment Management, a sustainable investor that manages approximately $ 2.2 billion in assets and holds Tesla stock in multiple portfolios.
“We hope that after the Bitcoin ventures are complete, Tesla will focus on measuring their full range of environmental factors and exposing them to their market, and if they continue to buy Bitcoin or actually start mining, that they incorporate the relevant energy usage data into it.” Disclosure. “
Tesla did not respond to a request for comment.
Still, it’s not all eco-doom and darkness, and Tesla’s bet on Bitcoin comes amid growing attempts in the cryptocurrency industry to mitigate the environmental damage caused by mining. That move could be fueled by billionaire Musk, who this week separately offered $ 100 million for inventions that could pull carbon dioxide from the atmosphere or oceans.
The entry of large corporations into the crypto market could also increase incentives to produce “green Bitcoin” with renewable energy, say some sustainability experts. They add that companies could also buy carbon credits to offset this.
In the short term, however, Tesla’s disclosure of its Bitcoin investment in a security filing could indirectly serve to exacerbate the environmental costs of mining.
Other companies are likely to follow suit by investing in the currency, say investors and industry experts. Greater demand and higher prices mean more miners compete to solve puzzles in the fastest time to mine coins, using increasingly powerful computers that require more power.
“It is (Bitcoin) not a sustainable investment and it is difficult to make it sustainable with the system on which it is built,” said Sanna Setterwall, consultant at sustainability consultancy South Pole.
CAN TESLA BITCOIN GO GREEN?
Estimates of Bitcoin’s reliance on fossil fuels versus renewables vary, with detailed data on the bitcoin mining industry’s energy mix being difficult to come by.
Projects from Canada to Siberia are looking for ways to wean Bitcoin mining from fossil fuels, or at least reduce its carbon footprint, and make the currency more palatable to mainstream investors.
SJ Oh, a former Hong Kong-based Bitcoin trader and a self-proclaimed “tree hugger”, knew that his passion for the environment was somewhat at odds with his day-to-day job. A year ago he co-founded Pow.re, a company that conducts green bitcoin mining operations in the Canadian subarctic.
Pow.re’s machines in Labrador run on hydropower, with plans to reuse the heat generated by the mining for local farming, heating and other needs, he said.
“Overwhelmingly, I think the bitcoin industry will make a concerted effort to be environmentally friendly,” said Oh, who believes Musk and his company can come up with better methods.
“Tesla is one of the greenest companies in the world so I’m sure they will find out.”
Other projects aimed at reducing Bitcoin’s carbon footprint are those of a branch of Russian gas producer Gazprom (GAZP.MM) in the Khanty-Mansi region of Siberia.
There, electricity from flare gas – a by-product of oil production that is usually burned – is used for cryptocurrency mining. The process leaves a smaller carbon footprint than coal power, said Gazprom Neft, the unit behind the project.
In theory, according to blockchain analytics firms, it is possible to track the source of bitcoin, which increases the possibility that a premium could be levied on green bitcoin. Stronger climate policies from governments around the world could also help.
“It’s not that much bitcoin that’s the problem.” said Yves Bennaim, the founder of 2B4CH, a Switzerland-based think tank for cryptocurrencies.
“People say it’s energy intensive and therefore polluting, but that’s just the nature of the energy we use today. As Bitcoin goes up, there will be more incentives to invest in renewable energy sources.”
Meanwhile, some Bitcoin proponents note that the existing financial system, with its millions of employees and computers in air-conditioned offices, also consumes a lot of energy.
“AIM IS TO MAKE PROFIT”
It is still in its infancy for such green projects, however, and some ESG experts say that Bitcoin could have a tough job anytime soon, gaining mass acceptance by mainstream investors.
“I still think that the big players will refrain from Bitcoin for these particular reasons – firstly because of the way in which it is mined, the very negative climate factor and secondly because of the compliance and ethical problems associated with it,” said Sasja Beslik , Head of Sustainable Business Development at Bank J. Safra Sarasin in Zurich.
Some industry players and academics warn that the dominance of Chinese miners and the lack of motivation to swap cheap fossil fuels for more expensive renewables means that there are few quick solutions to the emissions problem.
Chinese miners make up about 70% of Bitcoin production, data from the University of Cambridge’s Center for Alternative Finance shows. They tend to use renewable energy – mostly hydropower – during the rainy summer months, while fossil fuels – mainly coal – are used for the rest of the year.
“Every miner’s goal is to make a profit, so they don’t care what kind of energy they use, whether it’s hydro, wind, solar or coal,” said Jack Liao, CEO of Chinese mining company LightningAsic, and added that government incentives for miners to prefer renewable energy could help.
Others are less optimistic that significant changes are on the horizon.
“The generation of renewable energies is extremely volatile; it is not ideal as a consistent form of energy,” said Alex De Vries, founder of the Digiconomist research platform.
“The problem is, the miners who use cheap fossil fuel will last the longest, simply because it’s the cheapest and more stable source.”
Reporting by Anna Irrera and Tom Wilson in London; Editing by Pravin Char
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