(NEW YORK) — The price of Bitcoin nosedived after Tesla CEO Elon Musk announced his company would no longer be accepting the cryptocurrency as payment due to its ties to fossil fuels in a tweet that sparked a heated debate on the digital currency’s environmental impact.
“Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” Musk wrote in a tweet Wednesday evening. “Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at a great cost to the environment.”
The electric vehicle company chief executive added that Tesla will not be selling any of the Bitcoin it currently holds — which amounts to some $1.5 billion, according to a February SEC filing — but will use it for transactions “as soon as mining transitions to more sustainable energy.”
In a follow-up tweet on Thursday, Musk added, “To be clear, I strongly believe in crypto, but it can’t drive a massive increase in fossil fuel use, especially coal.”
Bitcoin is made through a process called mining, which involves verifying Blockchain transactions using high-powered computers that solve complex mathematical equations. The specialized computer servers required to mine Bitcoin consume immense amounts of electricity, which in China and other Bitcoin-mining hubs often relies on energy from fossil fuels.
Bitcoin accounts for 0.69% of the world’s total electricity consumption, according to researchers at the University of Cambridge Centre for Alternative Finance (CCAF).
Annually, this would mean that Bitcoin mining and transactions consume more energy than the entire nation of Sweden or the Netherlands did in 2019, the researchers noted.
Bitcoin evangelists are quick to point out, however, that many of the headlines on crypto mining’s energy consumption often leaves out the energy sources. For example, the environmental impact would be vastly different if the computers were powered by renewable energy.
A 2020 study from the CCAF said that 76% of cryptocurrency miners use renewable energy as part of their energy mix. The same researchers said, however, that only 39% of crypto mining’s total energy consumption comes from renewables.
A separate study on Bitcoin’s environmental impact published in the peer-reviewed journal Nature Communications in April said that China accounts for more than 75% of Bitcoin mining operations around the world, largely due to its relatively cheap electricity costs and easier access to some of the hardware needed for the computers.
The study estimated that carbon emissions from Bitcoin blockchain operations in China are expected to peak in 2024 and generate more than 130.5 million metric tons of carbon emissions that year alone. This emission output would exceed the total annualized greenhouse gas emission output of the Czech Republic and Qatar, the researchers said.
Musk’s decision to hold onto rather than sell the company’s Bitcoin investments — as well as a recent tweet from Musk that seemed to endorse Bitcoin’s positive environmental impact — has sowed confusion on the motives for his sudden reversal.
A white paper released last month by Square, the financial services company founded by Twitter CEO Jack Dorsey, argued that Bitcoin mining could actually encourage investments in solar and other forms of renewable energy.
Dorsey tweeted the research just a few weeks ago, captioning it, “#bitcoin incentivizes renewable energy.” At the time, Musk replied to the tweet with: “True.”
Industry analyst Dan Ives, managing director of equity research at Wedbush Securities, on Thursday called Musk’s “major U-turn” on crypto a “head-scratching move.”
“Musk is now concerned about the use of fossil fuels in Bitcoin mining and transactions, yet the nature of Bitcoin mining has not changed in the last three months, which speaks to why backtracking on the crypto transaction three months later is a very surprising and confusing move to both Tesla and crypto investors,” Ives wrote in a note sent to ABC News.
The price of Bitcoin has plunged more than 9% since Musk’s tweet.
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