Elon Musk is by nature an iconoclast, a disrupter, an upsetter of applecarts and a slayer of sacred cows, so his long-standing interest in bitcoin, which has been described as “a techno-anarchist project” and “a way to separate money from the state,” is not at all surprising. Now Tesla has purchased $1.5 billion worth of bitcoin as an investment, and announced that it will accept the currency as payment for its products and services.
“We expect to begin accepting bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt,” the company said in its recent annual report.
Bitcoin’s price took off like a rocket on the news, setting a new all-time high. Analysts saw the vote of confidence from Tesla as a major milestone for bitcoin, and most expect the value of the currency to continue to rise and become more stable. Other companies are expected to follow Tesla’s lead and begin accepting bitcoin as legal tender.
“If any lesser mortals had made the decision to put part of their balance sheet in Bitcoin, I don’t think it would have been taken seriously,” said Thomas Hayes of Great Hill Capital. “But when the richest man in the world does it, everyone has to take a second look.”
While many see Tesla’s embrace of bitcoin as an extension of the company’s disruptive ethos, others are puzzled that a company with a mission to clean up the environment would promote a technology that, by all accounts, consumes massive amounts of energy. Unlike coal mining, bitcoin “mining” doesn’t destroy mountaintops or pollute rivers, but it does require amazing amounts of computing power, and thus gargantuan gobs of electricity.
A 2019 report entitled The Carbon Footprint of Bitcoin, published in the journal Joule, estimated that bitcoin’s annual electricity consumption (as of November 2018) amounted to 45.8 TWh, with corresponding annual emissions of at least 22 megatons of carbon dioxide.
“Participation in the Bitcoin blockchain validation process requires specialized hardware and vast amounts of electricity, which translates into a significant carbon footprint,” write the report’s authors. They estimate that the emissions produced by bitcoin are equivalent to the levels produced by the nations of Jordan and Sri Lanka.
Another study, also from 2019, suggested that the climate change impact of the cryptocurrency isn’t quite that bad—only on par with the carbon emissions of Estonia. Life Cycle Assessment of Bitcoin Mining, published in Environmental Science and Technology, found that earlier estimates had assumed that carbon emissions from electricity generation were uniform across China, where it’s estimated that half of all bitcoin mining takes place. Breaking down the emissions to take account of regional differences in the cleanliness of the Chinese electrical grid, the researchers came up with a global footprint for the cryptocurrency of 17.29 megatons of CO2 in 2018.
A more recent study (November 2020) from Cornell University noted that “the future carbon footprint of bitcoin strongly depends on the decarbonization pathway of the electricity sector,” and estimated that in the “business-as-usual scenario,” electricity consumption could exceed 100 TWh in 2021, resulting in cumulative CO2 emissions of over 5 gigatons by 2100.
A December 2020 study published in Energy Research & Social Science estimated annual consumption at 87.1 TWh as of 2019, equal to that of Belgium.
Digiconomist’s Bitcoin Energy Consumption Index aims to track bitcoin’s energy consumption and carbon emissions over time. Its latest estimate is 78 TWh of electricity and 37 megatons of CO2, comparable to that of Chile.
Whatever country you compare it to, it’s plain that bitcoin’s carbon footprint is significant, and that making its energy consumption more sustainable would be a major undertaking. As Barclays Private Bank’s Gerald Moser told Bloomberg, “Buying bitcoin pretty clearly makes an investment portfolio less green.”
Sources: Reuters, Electrek, Science Direct, NewScientist