Driving Climate Change: Tesla Suspends Sales Using Bitcoin Amidst Carbon Footprint Concerns
May 28, 2021
3 min read
What's going on here?
Elon Musk tweeted that Tesla will no longer be accepting Bitcoin as tender following concerns over the carbon footprint surrounding the mining of Bitcoin.
What does this mean?
Tesla’s chief executive has recently tweeted that it has suspended sales using Bitcoin over concerns of the “rapidly increasing use of fossil fuels for Bitcoin mining and transactions”. Following the recent announcement, the ever-volatile value of Bitcoin fell by 10%. This came just three months after Tesla bought $1.5bn worth of Bitcoin and announced they were taking steps to accept Bitcoin as tender. As a result of this purchase, the value of Bitcoin soared 14%. Tesla later sold $300m to boost profits.
Since the announcement and the subsequent drop in the value of Bitcoin, Tesla claims that it is not planning on selling anymore Bitcoin, but is instead waiting to be able to use it when the mining is more environmentally friendly. In a later tweet, Musk confirmed his approval of cryptocurrency but stated that it “cannot come at great cost to the environment”. Furthermore, Musk has been criticised for manipulating this volatility, using his reputation as a cryptocurrency authority to influence the value of Bitcoin, strengthening his own position.
What's the big picture effect?
Last month, Tesla reported profits of $438m, up from the $16m last year. This is no easy feat given the current pandemic and can in part be attributed to the sales of Bitcoin. This could be why Tesla has been accused of manipulating the changing value of the cryptocurrency. However, we understand that Tesla still owns a substantial amount of Bitcoin, which has just depleted in value, affecting Tesla’s own assets.
Musk explains that he made his decision because he “can’t drive a massive increase in fossil fuel use”. This falls in line with Tesla’s mission statement, which is to “accelerate the world’s transition to sustainable energy”. He has never been silent regarding his opinions on non-renewable energy, going as far as to say that “it’s high time there was a carbon tax!”. It comes as a surprise then, that he overlooked the high carbon footprint associated with Bitcoin mining. It is worth noting that the mainstream financial system has a much higher carbon footprint than that of cryptocurrency. The attacks on Tesla’s support of Bitcoin may then have been narrow-minded, as surely favouring cryptocurrency is the lesser of two evils. Julia Lee from Burman Invest explains that “Environmental Social and Corporate Governance (ESG) issues are now a major motivation for many investors”. Perhaps Tesla’s motivations were not merely environmental, but also were taking into account the opinions and motivations of its investors.
Mining Bitcoin currently uses more non-renewable energy per year than Sweden, with 75% of the world’s Bitcoin miners being based in China. Rural China is particularly attractive to Bitcoin miners because of its low energy costs and vast undeveloped land which provides ample room to accommodate servers. This has an impact on China itself who wants to be carbon neutral by 2060. It remains to be seen what steps they are taking to offset this high energy usage but with the rise in concern over ESG issues, it would be fair to say that a change is inevitable.
Report written by Lauren Kent
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