Tesla stops taking bitcoin, cites fossil fuel use in ‘mining’ cybercurrency
PALO ALTO: Tesla has suspended the use of bitcoin to purchase its vehicles because of climate concerns, chief executive officer Elon Musk said in a tweet on Wednesday, reversing the company’s stance in the face of an outcry from some environmentalists and investors.
Bitcoin, the world’s biggest digital currency, fell more than 7% after the tweet and was trading at $52,669. Tesla revealed in February it had bought $1.5 billion of bitcoin, before it began accepting it as payment for cars in March, driving a roughly 20% surge in the world’s most widely held cryptocurrency.
Musk on Wednesday said Tesla would not sell any bitcoin, and intends to use bitcoin for transactions as soon as mining transitions to more sustainable energy.
“We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” Musk wrote.
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 electricity generated with fossil fuels, particularly coal.
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.
Some investors cast doubt on the use of bitcoin for Tesla purchases months ago.
“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 in February, shortly after Tesla’s bitcoing holdings became public. Osmosis is a sustainable investor managing around $2.2 billion in assets that holds Tesla stock in several portfolios.
On Wednesday, Edward Moya, a senior market analyst at currency trading firm OANDA, said that Musk was getting ahead of investors focused on sustainability.
“The environmental impact from mining bitcoins was one of the biggest risks for the entire crypto market,” Moya said. “Over the past couple of months, everyone disregarded news that Bitcoin uses more electricity than Argentina and Norway.”
Chris Weston, head of research at broker Pepperstone in Melbourne, said Musk’s reaction was a blow to bitcoin but an acknowledgement of the currency’s carbon footprint.
“Tesla has got an image of being environmentally friendly and bitcoin clearly is the opposite of that,” Weston said.
Musk himself is a strong believer in digital currencies, but also advocates for clean technology.
“Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment,” Musk said. “We are also looking at other cryptocurrencies that use <1% of bitcoin's energy/transaction."
The dominance of Chinese bitcoin miners and lack of motivation to swap cheap fossil fuels for more expensive renewables could mean there are few quick fixes to the emissions problem.
Chinese miners account for about 70% of bitcoin production, data from the University of Cambridge’s Centre for Alternative Finance shows. They tend to use renewable energy – mostly hydropower – during the rainy summer months, but fossil fuels – primarily coal – for the rest of the year.
In theory, blockchain analysis firms say, it is possible to track the source of bitcoin, raising the possibility that a premium could be charged for green bitcoin. Stronger climate change policies by governments around the world might also help.
Some bitcoin proponents note that the existing financial system – with its millions of employees and computers in air-conditioned offices – uses large amounts of energy too.
Musk has been a fan of other cryptocurrencies, firing off tweets this year that have made the once-obscure digital currency dogecoin well known. Musk said on Sunday that his commercial rocket company SpaceX will be accepting the meme-inspired cryptocurrency as payment to launch a lunar mission next year.