Earlier this month, Elon Musk offered $ 100 million to fund a competition to find new ways to remove carbon dioxide from the air or water.
To earn a slice of the money on offer, competitors have to “create and demonstrate a solution that can remove carbon dioxide directly from the atmosphere or the oceans and permanently block it in an environmentally benign way”.
The move helped polish Musk’s green credentials, no doubt appealing to all buyers of his Tesla electric cars who pride themselves on doing their part for the environment. However, before swallowing that green image, they and Tesla’s shareholders may be wise to take a closer look at how the company is actually spending its money.
Last week, Tesla said it had invested $ 1.5 billion of its reserves in bitcoin and revealed plans to accept cryptocurrency payments for its electric cars, although “initially on a limited basis”.
Lots of applause from bitcoin experts and another rise in value to more than $ 48,000 – two-thirds above so far this year. There was also talk of Tesla selling more cars through the pool of wealthy bitcoin speculators who like the head of the company to increase its currency.
There is only one obstacle: it is difficult to reconcile this new enthusiasm for cryptography with environmentalism. For bitcoin is not environmentally neutral – it’s carbon-tastic idiocy. And Musk’s fans really make it worse.
Critics consider bitcoin useless, saying it lacks revenue and utility. However, the gambler’s toy has serious environmental consequences. The “mining” bitcoin – the process by which the supply of coins is increased – requires large-scale electricity to operate the computers involved. According to Dutch economist Alex de Vries, he chews about 78 terawatts an hour (TWh) a year in the world – equivalent to the consumption of Chile, a country of 20 million. Each bitcoin transaction uses the same amount of energy as 436,000 through the Visa payment system.
Nor is it especially clean energy. As de Vries points out, bitcoin miners are not interested in intermittent renewable energy. Needing to operate their machines 24 hours a day, 7 days a week, many have their operations in locations with cheap coal-fired electricity, such as Iran, China’s Xinjiang province and Kazakhstan. In one case last fall, an American bitcoin mining group came to a deal to rescue a coal station in Montana that was closing.
This fossil fuel fixation leads to a huge carbon footprint. According to a 2019 article, the bitcoin network was estimated to have a carbon intensity of 480-500g CO2 per kilowatt-hour (KWh) of electricity. A comparable value for the UK grid would be around 250g CO2 / KWh.
Tesla’s intervention is likely to make those numbers worse. Higher bitcoin prices encourage more miners to connect to the network. The Judge Business School at the University of Cambridge monitors the use of bitcoin energy. In the past few days, this has increased to levels equivalent to the annual consumption of 121TWh – or roughly the size of the entire Dutch economy.
Of course, bitcoin is not the only digital service chewing on electricity like crazy. Silicon Valley is also a big user. The world’s data centers consumed around 200TWh in 2019, according to IEA data.
It is true that the technology giants of the United States are now trying to contain their associated emissions by increasing purchases of renewable energy. But as big technology grabs more available green energy, others will be pushed back to the dirtiest things.
Musk’s adoption of bitcoin displays a very questionable judgment. It is difficult to see how Tesla’s shares can stay in any green portfolio while the company is investing in bitcoin. However, it currently has an ESG “A” rating from the MSCI index compiler.
More broadly, the emergence of cryptography illustrates the difficulty of reaching zero network when technology companies have such incentives to develop new applications that consume a lot of energy (think Zoom or Netflix, for example). Silicon Valley hopes to resolve this contradiction with untested technical solutions, such as direct air capture. (Musk even considered sending people to Mars as a kind of terrestrial insurance policy.) The real solution, however, may be much more restricted to Earth. It may be in governments taxing externalities to contain rampant demand.