Tesla CEO Elon Musk announced on Wednesday that Tesla would stop taking bitcoin as payment for the company’s electric vehicles. The change comes less than two months after the automaker began accepting the cryptocurrency. Why the about-face? Musk now says he has concerns over bitcoin’s carbon footprint.
Tesla’s purchase policy wasn’t the company’s only bitcoin-related announcement that has made waves. In February, the electric automaker disclosed that it had taken a $1.5 billion stake in the currency. Cryptocurrency promoters rejoiced at the string of announcements—Tesla’s moves had bolstered the currency’s legitimacy, and bitcoin’s price against the dollar surged over 15 percent in the wake of the disclosure.
But environmentalists despaired—the carbon footprint of purchasing a Tesla with bitcoin was so large that it swamped any emissions savings from driving it. Today, Musk appears to share that assessment. “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 in a tweet.
As mining effort has increased over the years, the electricity required to maintain and expand the bitcoin network has surged. Today, the network uses about the same amount of electricity per year as Egypt, or about 150 TWh. (In fact, its electricity requirements are so great that a private equity firm bought and revamped a power plant expressly to mine bitcoin.)
Tesla says it originally bought bitcoin as an alternative asset, and so far, the move has paid off. Bitcoin trading padded Tesla’s first-quarter earnings this year to the tune of $101 million as prices have risen.
Since Musk’s tweet yesterday evening, bitcoin prices are down about 10 percent as of publication, according to Coindesk.
Musk followed his tweet with a graph from the Cambridge Bitcoin Electricity Consumption Index pointing to the recent rise in annualized electricity consumption for the entire bitcoin network. The trend is certainly increasing, though it’s important to note that your perspective on the chart may change depending on whether you’re viewing it on a desktop or on mobile—mobile devices compress the x-axis, making the recent rise seem more precipitous.
Also, it’s unclear whether that change represents a meaningfully worse environmental impact today compared with March 24, when Tesla’s bitcoin purchase option was announced. When purchased using dollars, a new Tesla Model 3 made and operated in the US produces about 8.85 tonnes of carbon dioxide over its lifetime (assuming it’s driven about 94,000 miles). The price of the same car on March 24, when Musk announced the payment option, would have been around one bitcoin, and at the time, one bitcoin had an estimated footprint of around 400 tonnes.
Not only does one Tesla’s worth of bitcoin pollute significantly more than the car itself, including manufacturing, it also represents more than five times the carbon pollution of an average combustion-engined vehicle in the US. And that’s according to Tesla’s own estimate. Today, that same Model 3 bought with bitcoin would produce over 500 tonnes of carbon pollution.
So yes, bitcoin’s environmental impact has gotten worse, but it wasn’t exactly climate-friendly back on March 24.
Still, Musk left the door open to other cryptocurrencies with lower footprints. “We are also looking at other cryptocurrencies that use <1% of Bitcoin’s energy/transaction,” he wrote. He also appeared to be prodding the bitcoin world toward more climate-friendly operations. “Tesla will not be selling any bitcoin and we intend to use it for transactions as soon as mining transition to more sustainable energy.”
That’s a tall order for a decentralized currency that’s mostly mined in a handful of high-emission countries. Tesla’s shifting stance on bitcoin may have been able to move the cryptocurrency’s price, but it remains to be seen whether the company’s move can change the currency’s climate impact.