2024-07-24
Bitcoin Global News

Bitcoin uses more renewable energy, but will Tesla accept it again?

Tesla removed Bitcoin payments citing environmental concerns, but Elon Musk pledged to reinstate them if renewable energy use on the network increased.

Four years have passed since Tesla stopped accepting Bitcoin, citing environmental concerns. While the Bitcoin mining industry has reportedly increased its share of renewable energy consumption, Tesla doesn’t appear ready to return to Bitcoin payments anytime soon.

On Feb. 8, 2021, Tesla disclosed a $1.5 billion investment in Bitcoin BTC $66,261 in a filing with the United States Securities and Exchange Commission (SEC).

Tesla CEO Elon Musk also decided to include the cryptocurrency in the company’s treasury and began accepting BTC as a form of payment for the company’s electric vehicles.

On May. 13, 2021, esla stopped accepting Bitcoin as a means of payment due to concerns over the rapid increase in the usage of fossil fuels, especially coal, for Bitcoin mining and transactions.

While Tesla stopped taking BTC, it said it would accept Bitcoin as soon as the cryptocurrency became more sustainable.

On June 13, 2021, Musk said that Tesla would allow BTC transactions once it could be sure that at least 50% of the energy used by miners was clean and had a positive future trend.

Since 2021, many dynamics of Bitcoin have changed. There has been indirect institutional adoption through spot Bitcoin exchange-traded funds (ETFs), acceptance as legal tender, technological advances in its protocol, and improvements in renewable energy usage rates for crypto mining.

According to the graph below, modeled by climate tech venture capitalist Daniel Batten and data analyst Willy Woo, Bitcoin mining’s sustainable energy usage is currently at an all-time high of over 55%. The surge is part of a sustained positive trend since mid-2021.

Both conditions required by Musk seem to have been accomplished, so will he and Tesla honor their promise and reinstate Bitcoin payments? 

Bitcoin miners’ wild renewable energy claims 

Major decisions like accepting a cryptocurrency for payments in a multibillion-dollar business require verifiable and solid data. But is the data on Bitcoin ming energy solid enough?

Alex de Vries, a data analyst and researcher at Vrije Universiteit Amsterdam and De Nederlandsche Bank, told Cointelegraph that Bitcoin miners’ energy disclosures lack transparency and verifiability.

“The Bitcoin mining industry loves to talk about transparency until you ask for specific data.”

He believes the requirements imposed by regulations such as the European Markets in Crypto-Assets Regulation (MiCA) will demonstrate these companies’ lack of transparency, as MiCA mandates disclosure of information that is “rigorous, systematic, objective, capable of validation and applied continuously.”

Recent: Europe’s crypto industry can ‘sleep better at night’ with new parliament

De Vries pointed out how the United States Energy Information Administration (EIA) had some first-hand experience with this when it tried to collect data from crypto miners.

A group of crypto miners, including Riot Platforms and the Texas Blockchain Council, sued the EIA earlier in 2024 for what they claimed was an “invasive” request to collect energy usage data on crypto miners. The EIA ultimately lost in court and agreed to destroy all the data it received.

De Vries said miners have made some “wild claims” about using renewable energy. He recalled when digital asset firm CoinShares claimed 78% of miners used renewable energy in 2019 and had to “swallow that claim years later.”

He believes Musk was “well aware of this” data manipulation, a possible argument that could have caused Musk to stop Tesla from accepting Bitcoin.

Accurate energy data for Bitcoin mining

As with many industries, retrieving accurate data for Bitcoin mining is complex. Biased researchers may find it advantageous to align data metrics for their own agenda, as seen in the mid-20th century when tobacco companies funded research that produced misleading conclusions about the link between smoking and cancer.

Alexander Neumüller, research lead at the Cambridge Centre for Alternative Finance (CCAF) — which studies the energy consumption crypto — told Cointelegraph that data retrieval is constantly improving.

However, he acknowledged that “current methodologies to derive the electricity mix still rely on many assumptions or are subject to certain biases.”

To avoid this, researchers must try to apply a rigorous method to collecting data.

To calculate Bitcoin electricity consumption, they combined the highest and lowest bounds to create an estimate from several data points, forming what is now the Cambridge Bitcoin Electricity Consumption Index (CBECI).

However, the key is to know which energy sources the miners use. As per the CBECI, coal usage has remained fairly stable, slightly decreasing from 40% to 36%. 

If gas and nuclear were to be included as sustainable energies, Bitcoin mining’s renewable energy usage rate would be 63%, with gas taking the lead. However, if both were removed from the equation, the rate would decline to 28%.

Neumüller pointed to other research from the Bitcoin Mining Council (BMC), which relies on surveys instead of estimations. According to BMC’s latest report from mid-2023, the global mining industry’s sustainable electricity usage has grown to 59.9%. This data is derived from its surveys of miners in North America.

The CCAF’s research is done by an independent entity, while the BMC is an industry body formed by miners. For Batten, this provides more reliability to the CCAF, as he explained in his introduction to his research model, the Bitcoin Energy and Emissions Sustainability Tracker.

Despite the CCAF scientific approach, Batten noted the lack of data on off-grid mining, which is connected to sustainable energy sources that are not part of the traditional electricity grid. These include solar, wind, hydroelectric power and flare gas.

Batten said the CCAF uses outdated data, as their estimation is based on data from January 2022. Neumüller acknowledged this issue and noted that the CCAF mentions this discrepancy in their data, stating that it “likely leads to an overestimation in our emission estimate by approximately 25%.”

Neumüller said that the CCAF is currently exploring adding a new collection of data “directly from miners and actively seeking ways to enhance our current IP-based electricity mix estimate by adding more granularity in terms of location and energy sources used by miners.”

Crypto is an ever-evolving industry. Neumüller concluded that based on the evidence he’s seen so far, he would “expect a marked drop in emission intensity,” which would be “driven by a larger share of sustainable sources and a change in the composition of the fossil fuel mix, with coal being largely supplanted by gas.”

The volatility in Bitcoin mining data is a reality; however, Batten says he is certain the rate is above 50%.

“There is still a statistically a possibility that mining is still under 50%, but I would rank this likelihood at less than one in a million now.”

The percentage of renewable sources Bitcoin miners use indicates a consolidation of over 50%, fulfilling one of Musk’s requirements. However, can BTC miners guarantee long-term growth in renewable energy adoption?

Stable regulation is vital for renewable energy 

One of the most significant changes in the dynamics of the Bitcoin mining industry came from regulation: the pseudo-ban on crypto mining in China. China didn’t ban crypto mining outright; it banned coal-based Bitcoin mining and some larger operations that were moving money out of the country.

Before the ban, approximately 50–60% of the world’s Bitcoin mining capacity was based in China. The ban caused an exodus that has since changed the industry landscape.

Neumüller explained that the marked decline in mining activity in China and Kazakhstan and the emergence of other countries cemented the U.S. as a global mining hotspot with a total of 37.84% of Bitcoin’s total hashrate. 

The researcher said that this geographic change in the global distribution of mining activity has impacted their electricity mix estimate. The dynamics of Bitcoin mining push miners to search for the cheapest energy source available. In the U.S., renewable energy is the most affordable form of energy, as it is in many developed countries.

Developed countries are seeding this new industry with subsidies to meet the United Nations’ Sustainable Development Goals, which require, among other things, the widespread use of renewable energy. Crypto miners can boost renewable energy issuers, as they can use wasted energy due to the mismatch between renewable generation and demand.

Furthermore, Bitcoin mining is location-agnostic, so miners can install their facilities wherever there is a renewable energy facility. For example, many mining facilities have migrated to countries such as Paraguay, Uruguay and Ethiopia, which have surpluses of hydro-power.

The Chinese case demonstrates how crucial regulation can be for Bitcoin mining energy usage, with the U.S. now intensely debating how to regulate the industry.

The crypto industry claims President Joe Biden’s stance could kill the U.S. Bitcoin mining industry, whereas former President Donald Trump advocates for Bitcoin “made in the USA.”

Miners could always migrate to other countries if regulations ban them or make their businesses unprofitable. However, regulatory uncertainty may not help with Tesla’s decision to accept Bitcoin or not, as the rates of renewable energy could change drastically depending on regulation.

Will Musk bring Bitcoin back to Tesla?

Musk may be a controversial figure, but the billionaire has shown little fear of public backlash when he has a goal in mind.

This was evident when he shared his infamous remarks directed at Disney CEO Bob Iger following the advertisement boycott on X.

Nick Cowan, CEO of fintech Valereum, told Cointelegraph, “I honestly don’t think he’s afraid of anyone other than his mum!”

Tesla is a company working to improve the environment by offering technological solutions and electric vehicles. The public perception that Bitcoin has a high environmental impact wasn’t compatible with its values. Despite many data metrics showing that Bitcoin is not so detrimental to the environment, it’s unclear if Musk would dare to take that step. De Vries believes it may be harmful for Tesla:

“Relying on any claims about Bitcoin mining and renewables at this time would set Tesla up for another PR disaster.”

Oleg Fomenko, an entrepreneur and co-founder of the Sweat Economy, believes that “Tesla as an electric vehicle manufacturer already does a lot for the environment” and, therefore, “should have no impetus to cave to pressure from environmentalists for this reason.”

Some segments of society don’t see any use for Bitcoin and would be “upset by wasting precious renewables on making useless computations for Bitcoin,” according to de Vries. He believes that “no amount of renewables can fix issues such as e-waste generation.”

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Fomenko concluded that Musk must decide on the “price of action versus the price of inaction.” In case of inaction, “a few of us reading this might harbor disappointment over Elon not keeping his word,” while if he takes action, the results are uncertain, and there is more at stake.

He believes this would depend highly on “Elon’s desire to take another potshot at Gary Gensler and the U.S. Securities and Exchange Commission.”

As Tesla’s CEO, Musk has the final decision. If he were to bring Bitcoin back, he would have to be prepared with data and ready for backlash, especially from green policy advocates.

Tesla did not respond to Cointelegraph’s request for comment.

Source : Cointelegraph.com