* Production of bitcoin uses large amounts of energy
* CO2 emissions estimated to be equivalent to a smallcountry
* Could complicate companies and investors’ ESG pledges
* Projects aim to create ‘green bitcoin’ from renewables
* Could entrepreneur Musk and Tesla electrify this drive?
By Anna Irrera and Tom Wilson
LONDON, Feb 10 (Reuters) – Tesla boss Elon Musk is a posterchild of low-carbon technology. Yet the electric carmaker’sbacking of bitcoin this week could turbo-charge global use of acurrency that’s estimated to cause more pollution than a smallcountry every year.
Tesla Inc revealed on Monday it had bought $1.5billion of bitcoin and would soon accept it as payment for cars,sending the price of the cryptocurrency though the roof.
So what’s the problem, you may ask? Bitcoin’s virtual, soit’s not like it’s made from paper or plastic, or even metal.
The digital currency is created when high-powered computerscompete against other machines to solve complex mathematicalpuzzles, an energy-intensive process that currently often relieson fossil fuels, particularly coal, the dirtiest of them all.
At current rates, such bitcoin “mining” devours about thesame amount of energy annually as the Netherlands did in 2019,the latest available data from the University of Cambridge andthe International Energy Agency shows.
Bitcoin production is estimated to generate between 22 and22.9 metric tons of carbon dioxide emissions a year, or betweenthe levels produced by Jordan and Sri Lanka, according to a 2019study in scientific journal Joule.
The landmark inclusion of the cryptocurrency in Tesla’sinvestment portfolio could complicate the company’szero-emissions ethos, according to some investors, at a timewhen ESG – environmental, social and governance – considerationshave become a major factor for global investors.
“We are of course very concerned about the level of carbondioxide emissions generated from bitcoin mining,” said Ben Dear,CEO of Osmosis Investment Management, a sustainable investormanaging around $2.2 billion in assets that holds Tesla stock inseveral portfolios.
“We hope that when Tesla’s bitcoin ventures are over, theywill concentrate on measuring and disclosing to their markettheir full suite of environmental factors, and if they continueto buy or indeed start mining bitcoin, that they include therelevant energy consumption data in these disclosures.”
Tesla did not respond to a request for comment.
Still, it’s not all eco-doom and gloom, and Tesla’s bet onbitcoin comes amid growing attempts in the cryptocurrencyindustry to mitigate the environmental harm of mining. Thismovement could be advanced by billionaire entrepreneur Musk, whothis week separately offered $100 million for inventions thatcould pull carbon dioxide from the atmosphere or oceans.
The entrance of big corporations into the crypto marketcould also boost incentives to produce “green bitcoin” usingrenewable energy, some sustainability experts say. They add thatcompanies could buy carbon credits to compensate too.
Yet in the shorter term, Tesla’s disclosure of its bitcoininvestment, made in a securities filing, could indirectly serveto exacerbate the environmental costs of mining.
Other companies are likely to follow its lead by buying intothe currency, investors and industry experts say. Greaterdemand, and higher prices, lead to more miners competing tosolve puzzles in the fastest time to win coin, usingincreasingly powerful computers that need more energy.
“It’s (bitcoin) not a sustainable investment and it’s hardto make it sustainable with the kind of system it is built on,”said Sanna Setterwall, a consultant at corporate sustainabilityadvisory South Pole.
CAN TESLA TURN BITCOIN GREEN?
Estimates on bitcoin’s reliance on fossil fuels versusrenewables vary, with detailed data on the bitcoin miningindustry’s energy mix hard to come by.
Projects from Canada to Siberia are striving for ways towean bitcoin mining away from fossil fuels, or at least toreduce its carbon footprint, and make the currency morepalatable to mainstream investors.
SJ Oh, a former bitcoin trader based in Hong Kong and aself-professed “tree-hugger”, was aware that his passion for theenvironment was somewhat at odds with his day job. So a year agohe co-founded Pow.re, a firm that runs green bitcoin miningoperations in the Canadian subarctic.
Located in Labrador, Pow.re’s machines run on hydropower,with plans to repurpose the heat generated by the mining toserve local agriculture, heating and other needs, he said.
“Overwhelmingly, I do think there will be a concerted effortby the bitcoin industry to be environmentally friendly,” saidOh, who believes Musk and his company can come up with bettermethods.
“Tesla is one of the greenest companies on the planet so I’msure they’ll figure it out.”
Other projects aimed at reducing bitcoin’s carbon impactinclude that run by an arm of Russian gas producer Gazpromin the Khanty-Mansi region of Siberia.
There, power generated by flare gas – a by-product from oilextraction usually burned off – is used for cryptocurrencymining. The process leaves a lower carbon footprint than coalpower, said Gazprom Neft, the unit behind the project.
In theory, blockchain analysis firms say, it is possible totrack the source of bitcoin, raising the possibility that apremium could be charged for green bitcoin. Stronger climatechange policies by governments around the world might also help.
“It’s not so much bitcoin that is the problem.” said YvesBennaim, the founder of 2B4CH, a Switzerland-basedcryptocurrency think-tank.
“People are saying it’s energy intensive therefore it’spolluting, but that is just the nature of the energy we areusing today. As bitcoin goes up there will be more incentive tomake investments in renewable sources of energy.”
Some bitcoin proponents note, meanwhile, that the existingfinancial system with its millions of employees and computers inair-conditioned offices uses large amounts of energy too.
‘OBJECTIVE IS MAKING PROFIT’
However it is early days for such green projects, and someESG experts say bitcoin could have a tough task being acceptedby mainstream investors en masse in the foreseeable future.
“I still think the big players will refrain from bitcoin forthese particular reasons – one being very a negative climateangle to it, given the way it’s mined, and two, the complianceand ethical issues related to it,” said Sasja Beslik, head ofsustainable business development at Bank J. Safra Sarasin inZurich.
Some industry players and academics warn that the dominanceof Chinese miners and lack of motivation to swap cheap fossilfuels for more expensive renewables means there are few quickfixes to the emissions problem.
Chinese miners account for about 70% of bitcoin production,data from the University of Cambridge’s Centre for AlternativeFinance shows. They tend to use renewable energy – mostlyhydropower – 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’tcare about what kind of energy they use, if it is generated byhydro, wind, solar or burning coal,” said Jack Liao, CEO ofChinese mining firm LightningAsic, adding that governmentincentives for miners to favor renewable energy might help.
Others are less optimistic that significant change is on thehorizon.
“Production of renewables is extremely volatile, it’s notideal as a consistent form of power,” said Alex De Vries, thefounder of research platform Digiconomist.
“The problem is that the miners that will last the longestwill be the ones using cheap fossil fuels, simply because it isthe cheapest and more stable source.”
(Reporting by Anna Irrera and Tom Wilson in London; Editing byPravin Char)
