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Earlier this month, Elon Musk Free $ 100 million to fund a competition to find new ways to remove carbon dioxide from the air or water.
To earn a share of the money offered, competitors must “create and demonstrate a solution capable of extracting carbon dioxide directly from the atmosphere or oceans and permanently enclosing it in an environmentally friendly manner. ‘environment”.
The move helped strengthen Musk’s green credentials, undoubtedly attracting all buyers of his Tesla electric cars who take pride in doing their part for the environment. Yet before they swallow that green image, they and Tesla shareholders might be advised to take a closer look at how the company is actually spending their money.
Last week, Tesla revealed that it had invested $ 1.5 billion of its bitcoin reserves and revealed its intention to accept cryptocurrency payments for its electric cars, albeit “initially on a limited basis. “.
Cue a lot of cheers from the creators of bitcoin and another increase 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 wealthy Bitcoin speculators who like the head of the company talk about their currency.
There’s just one catch: it’s hard to reconcile this new enthusiasm for crypto with environmentalism. Because bitcoin is not neutral for the environment – it is carbon silliness. And Musk’s cheerleading makes matters worse.
Critics dismiss bitcoin as useless, claiming that it lacks revenue and utility. However, this bettor’s toy has serious consequences for the environment. 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 reaches around 78 terawatt hours (TWh) per year worldwide, equivalent to the consumption of Chile, a country of 20 million dollars. Each Bitcoin transaction uses the same amount of energy as 436,000 through the Visa payment system.
It is not particularly clean energy either. As de Vries points out, bitcoin miners are not interested in intermittent renewables. Needing to run their machines 24/7, many of them set up their operations in places where coal-fired electricity is cheap, such as Iran, Xinjiang province in China. and Kazakhstan. In one case last fall, a U.S. bitcoin mining group even struck a deal to save a shutdown coal-fired power plant in Montana.
This fixation of fossil fuels leads to a huge carbon footprint. According to a 2019 article, the Bitcoin network has a carbon intensity of 480-500g of CO2 per kilowatt hour (KWh) of electricity. A comparable figure for the UK electricity grid would be around 250g CO2 / KWh.
Tesla’s intervention is likely to worsen these numbers. Higher bitcoin prices encourage more miners to connect to the network. The Judge Business School at the University of Cambridge tracks the energy consumption of bitcoins. In recent days, this has reached levels equivalent to an annual consumption of 121 TWh – roughly the size of the entire Dutch economy.
Of course, Bitcoin isn’t the only digital service chewing electricity like crazy. Silicon Valley is also a huge user. The world’s data centers devoured some 200 TWh in 2019, according to IEA data.
To be sure, the US tech giants are now trying to reduce their associated emissions by increasing their purchases of renewable energy. But as big tech grabs more of the available green power, others will be pushed back into the dirtier things.
Musk’s membership in Bitcoin shows a highly questionable judgment. It’s hard to see how Tesla’s shares can stay in a green wallet as the company invests in bitcoin. Yet, at present, it has an ESG “A” rating from the MSCI index compiler.
More generally, the rise of cryptography illustrates the difficulty of reaching net zero when tech companies are encouraged to develop new energy-hungry applications (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 some sort of earthly insurance policy.) The real solution, however, may be a little more earthly. Governments may tax externalities to contain rampant demand.
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