Tesla CEO Elon Musk says the company will no longer accept payment of vehicle purchases using Bitcoin. This is due to concerns over climate change.
Following Mr Musk’s Tweet, Tesla’s shares dipped, and Bitcoin fell by over 10%.
In February, the electric carmaker revealed it bought $1.5bn (£1bn) of the biggest digital currency in the world. The news in March that they would accept the cryptocurrency was met with outcry from some environmentalists and investors.
Today the company backtracked on previous comments, saying they are concerned by the rapid increase in fossil fuel use for Bitcoin mining and transactions. They are especially worried about coal, which has the worst emissions of any fuel. In general, cryptocurrency is a good idea, but cannot come at the expense of the environment, says Mr Musk.
In addition, the carmaker will not sell any of its Bitcoin, and intends to use it for transactions as soon as mining uses more sustainable energy. People see the move by Tesla as a way of the company pleasing investors who focus on climate change and sustainability. As a company focusing on clean energy, Tesla need to work better with all environmental issues. Especially since Environmental, Social and Corporate Governance (ESG) issues are now such a big motivation for a lot of investors.
However, some cynics suggest it is just another move by Elon Musk to influence the cryptocurrency market, as done previously. He is no stranger to technology and the environment, and previously spoke passionately about Tesla’s mission to make transport sustainable in the fight against threats of climate change. His knowledge on the subject means he must have already been aware that Bitcoin is not very green.
The problem with Bitcoin
The process of mining Bitcoin involves using vast amounts of computer processing power, which uses more electricity every year than some entire countries consume. Although some insist mining uses mainly renewable energy sources, the truth is that miners use whatever is cheapest. In places like China, where 75% of the world’s mining is based, the cheapest energy is often generated by coal.
When Mr Musk first announced his cryptocurrency plans he sparked a surge in the value of Bitcoin, but now the latest news has caused a fall in prices. People are angry and disappointed, and accuse their former hero of betrayal.
Mr Musk was one of the world’s most high profile backers of cryptocurrencies, and the move in February was a signal that Bitcoin was going mainstream. Instead it has now ended up showing just how volatile the cryptocurrency can be.
At $438m, Tesla’s profits for the first three months of the year were up from $16m last year. This boost was aided by sales of Bitcoin and environmental credits.
Bitcoin is created by miners using high-powered computers to compete against each other, making it an energy-intensive process. It often relies on electricity generated with fossil fuels, mainly coal, for most of the year. This means the cryptocurrency’s carbon footprint is huge. There is a lack motivation to switch from cheap fossil fuels to more expensive renewable energy sources. Although there is sometimes a shift to using renewable energy, such as hydropower, during the rainy months.
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