Earlier this month, Elon Musk offered $ 100m to fund a competition to find new ways to remove carbon dioxide from the air or water.
To win a slice of available money, competitors must “create and demonstrate a solution that can extract carbon dioxide directly from the atmosphere or oceans and lock it off permanently in an environmentally sound way”.
The move helped burn Musk’s green credentials, no doubt appealing to those buyers of its Tesla electric cars who are proud to do their part for the environment. But before they swallow this green image, they and Tesla shareholders might be wise to take a closer look at how the company is spending their money.
Last week, Tesla announced that it had invested $ 1.5bn of its investments in bitcoin and announced plans to accept payments in the cryptocurrency for its electric cars, even though they were “Initially on a limited basis”.
Cue a lot of cheering from bitcoin mavens and other lurch up in its value to over $ 48,000 – up two – thirds so far this year. There was also talk of Tesla selling more cars by tapping into the pool of bitcoin-rich speculators who like the head of the company talking their money up.
There is only one lump: this newfound commitment to crypto is difficult to confuse with environmentalism. For bitcoin it’s not environmentally neutral – it’s idiocy carbon-tastic. And the cheerleading of Musk certainly makes it worse.
Critics dismiss bitcoin as useless, saying it lacks revenue and convenience. But this punter’s play has a negative environmental impact. Bitcoin “mining” – the process by which the supply of coins is increased – requires large-scale electricity to run the computers involved. According to Dutch economist Alex de Vries, it sinks by about 78 terawatt hours (TWh) per year worldwide – equivalent to the consumption of Chile, a 20m country. Each bitcoin transaction uses the same amount of power as 436,000 through the Visa payment system.
And this is not particularly clean power. As de Vries points out, bitcoin miners are not interested in interim renewable energy. Needing to run their machines 24/7, many locate their work in places with coal-free electricity, such as Iran, the Xinjiang region of China and Kazakhstan. In one case last autumn, the U.S. bitcoin mining group even struck a deal to save a coal shutdown station in Montana.
This fossil fuel arrangement leads to a low carbon footprint. According to a 2019 paper, the bitcoin network was estimated to have a carbon intensity of 480-500g of CO2 per kilowatt hour (KWh). A comparable figure for the UK power network would be around 250g CO2 / KWh.
Tesla’s intervention is likely to exacerbate those numbers. Higher bitcoin prices encourage more miners to step up to the network. The Cambridge University Business Judge School monitors bitcoin energy usage. In the last few days, this has risen to levels equivalent to an annual consumption of 121TWh – or about the size of the total Dutch economy.
Of course, bitcoin isn’t the only digital service chewing through electricity like crazy. Silicon Valley is also a big consumer. World data centers destroyed some 200TWh in 2019, according to IEA data.
True, U.S. tech giants are now trying to reduce the emissions associated with them by increasing the purchase of renewable energy. But as big technology carves more of the available green energy, others will be pushed back to the dirtier stuff.
Musk’s espousal of bitcoin exhibits very dubious criticism. It’s hard to see how shares in Tesla can stay in any green package while the company invests in bitcoin. However, it currently has an ESG “A” rating from the MSCI index.
In general, the rise of crypto reflects the difficulty of hitting a net zero when tech companies have such incentives to develop new applications with power (consider Zoom or Netflix, for example). Silicon Valley hopes to address this annoyance with unproven technical solutions such as direct air capture. (Musk has even sent humans to Mars as a sort of earth insurance policy.) Perhaps the real solution though is a bit more global. It could be lying in governments taxing externally to stop an urgent request.