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Musk's Bitcoin push clashes with his clean energy Tesla story
Read more on - Polity | Economy | Schemes | S&T | Environment
- Black Bitcoin: When it comes to innovation and maverick entrepreneurship, few come close to Tesla boss Elon Musk. And, he is also a poster child of low-carbon technology. Yet the electric carmaker’s backing of bitcoin in Feb 2021 could push more intense global use of a currency that’s estimated to cause more pollution than a small country every year.
- What's the problem: Bitcoin is a virtual currency token that needs to be "mined" online using large no. of computers ("mining process"), something that generates huge pollution due to intense energy use. There are estimates that it is responsible for carbon dioxide emissions estimated to be equivalent to a small country. At current rates, such bitcoin “mining” devours about the same amount of energy annually as the Netherlands did in 2019, as per some estimates.
- Back story: Tesla Inc had revealed on 08-02-2021 it had bought $1.5 billion of bitcoin and would soon accept it as payment for cars, sending the price of the cryptocurrency though the roof. Bitcoin’s virtual, so it’s not like it’s made from paper or plastic, or even metal. As said, this digital currency is created when high-powered computers compete against other machines to solve complex mathematical puzzles, an energy-intensive process that currently often relies on fossil fuels, particularly coal, the dirtiest of them all.
- How bad: Bitcoin production is estimated to generate between 22 and 22.9 metric tons of carbon dioxide emissions a year, or between the levels produced by Jordan and Sri Lanka, according to a 2019 study. The landmark inclusion of the cryptocurrency in Tesla’s investment portfolio could complicate the company’s zero-emissions ethos, according to some investors, at a time when ESG - environmental, social and governance — considerations have become a major factor for global investors.
- Analysts take a shot: Some said "We hope that when Tesla’s bitcoin ventures are over, they will concentrate on measuring and disclosing to their market their full suite of environmental factors, and if they continue to buy or indeed start mining bitcoin, that they include the relevant energy consumption data in these disclosures.” Tesla did not respond to such comments.
- Ray of hope: Still, all is not eco-doom and gloom, and Tesla’s bet on bitcoin comes amid growing attempts in the cryptocurrency industry to mitigate the environmental harm of mining. This movement could be advanced by billionaire entrepreneur Musk, who this week separately offered $100 million for inventions that could pull carbon dioxide from the atmosphere or oceans. The entrance of big corporations into the crypto market could also boost incentives to produce “green bitcoin” using renewable energy, some sustainability experts say. They add that companies could buy carbon credits to compensate too.
- Green BTC: Estimates on bitcoin’s reliance on fossil fuels versus renewables vary, with detailed data on the bitcoin mining industry’s energy mix hard to come by. Projects from Canada to Siberia are striving for ways to wean bitcoin mining away from fossil fuels, or at least to reduce its carbon footprint, and make the currency more palatable to mainstream investors. Projects aimed at reducing bitcoin’s carbon impact include that run by an arm of Russian gas producer Gazprom in the Khanty-Mansi region of Siberia.
- Siberian attempt: There, power generated by flare gas — a by-product from oil extraction usually burned off — is used for cryptocurrency mining. The process leaves a lower carbon footprint than coal power, said Gazprom Neft, the unit behind the project. In theory, blockchain analysis firms say, it is possible to track the source of bitcoin, raising the possibility that a premium could be charged for green bitcoin. Stronger climate change policies by governments around the world might also help.
- No quick solutions: Some industry players and academics warn that the dominance of Chinese miners and lack of motivation to swap cheap fossil fuels for more expensive renewables means there are few quick fixes to the emissions problem. Chinese miners account for about 70 per cent of bitcoin production, data from the University of Cambridge’s Centre for Alternative Finance shows. They tend to use renewable energy — mostly hydropower — during the rainy summer months but fossil fuels — primarily coal — for the rest of the year. Every miner’s objective is making a profit, so they don’t care about what kind of energy they use.
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