Tesla drops Bitcoin as payment for EVs as carbon concerns drive home

Tesla will no longer accept payment for its electric cars using Bitcoin, reversing a decision made in March to accept the cryptocurrency due to concerns about the carbon emissions associated with its mining.

Tesla CEO and co-founder Elon Musk tweeted a screenshot of the company’s reasons behind the decision on Thursday morning (Australia time) which states: “Tesla has suspended vehicle purchases using Bitcoin. We are concerned about the rapidly increasing use of fossil fuels for Bitcoin mining and transaction, especially coal, which has the worst emissions of any fuel.

“Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment.”

The decision to accept Bitcoin as payment in March was made just weeks after the company revealed via an SEC filing that it has purchased $A2 billion worth of Bitcoin, and the ever-eccentric Musk pronounced himself “Technoking” of Tesla and his CFO “Master of Coin”.

But the decision to accept Bitcoin as payment was met with concern from various quarters, including that of John Hawkins, a senior lecturer for politics, economics and society at the University of Canberra.

In a Conversation article, Hawkins wrote that “The generation of Bitcoins (known as “mining”) uses vast amounts of energy to power specialised computers solving complex but useless mathematical problems.

“Estimates vary as to how much energy they waste. Some studies suggest Bitcoin production uses more electricity than the whole of Argentina, Poland, Norway, or Switzerland.”

Speaking with The Driven, Hawkins notes that it is not so much the use of Bitcoin as payment that will increase carbon emissions, but that Tesla’s decision to accept Bitcoin would create more demand for it as it enforced the digital currency’s credentials.

“The energy-intensive bit is creating the Bitcoin,” Hawkins tells The Driven.

“Tesla can’t affect that, but saying they would accept it bumped up its price and it would encourage more people to mine, which is energy-intensive.”

Hawkins also points out the effect that Tesla’s decision to invest in Bitcoin, and then announce its acceptance as a currency, had on the coin’s value.

It is a historically volatile currency, having exploded in value in December 2017 to a peak of $A24,000 before dropping to just $A10,000 within three months.

After Tesla announced its decision to accept it as a currency, its value surged again by 9% to approximately $A55,000.

By the time Tesla’s Q1 2021 earnings call came around, the company had reported a $A130 million “positive impact” to the company’s profitability during the period thanks to Bitcoin sales.

In Hawkins view though, Tesla is playing a dangerous game. He has concerns not just about the environmental impact of Bitcoin, but also its alleged use for illegal transactions, particularly on the so-called “dark web”.

“It makes Tesla’s balance sheet riskier,” he says. “It also means if you’re a fan of electric cars, you’re now exposed to Bitcoin risk which you may not want.”

Tesla, for its part, says it “will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy,” and that it will also look at using other cryptocurrencies with under 1% of the energy-intensity of mining Bitcoin.