UPDATE 2021-04-05: Added some notes and caveats, thanks to a discussion with Russell Thomas
You may have already seen them on the road. The Model 3 has been largely successful, everybody and their mother knows these cars run on electricity, not directly making harmful carbon emmisions that pollute our planet and contribute to climate change.
Last week, Elon Musk has announced plans to fix that by reducing the Model 3 fuel economy from an EPA rated ∞ MPG down to 22 MPG, the exact rating of the original Ford Model T.
How? Bitcoin.
Technology made simple
Bitcoin is a complicated technology which is misunderstood by many people. Rather than explain it in complete detail, I will here only tell you about the 99% of how it works that you might care about.
- Every one dollar you spend on Bitcoin directly pays somebody else to emit one dollar’s worth of carbon somewhere else on Earth (most likely China).
- The primary reasons people purchase Bitcoin is to buy synthetic heroine, evade taxes or speculate on more people wanting to buy synthetic heroine, evade taxes or speculate.
It might sound weird but Bitcoin is the exact opposite of a carbon offset. A carbon offset is where you pay somebody else to not emit carbon. Bitcoin is when you pay someone else to emit carbon.
How much carbon dioxide emissions can you buy in China for one dollar?
We are doing a little division and multiplication here. If you hate math, you can skip this part.
| Input | …to energy use | …to carbon use | Output |
|---|---|---|---|
| 1 USD | ÷ 8¢/kWh | × 2 lbs CO2/kWh | = 25 lbs CO2 |
Here is one more math, hold your breath.
| Input | …dollars | …to carbon use | Output |
|---|---|---|---|
| One Model 3 | × USD 37,990 / Model 3 | × 25 lbs CO2/USD | = 578 metric tons CO2 |
Okay so let’s compare that to the fuel economy of the Ford Model T. The Model T (released 1908) had a fuel economy up to 22 MPG. What are the average annual carbon dioxide (CO2) emissions of a vehicle with 22 MPG fuel economy? This exact question is answered on the EPA website because a typical car sold today also has a fuel economy of 22 MPG.
Answer: 4.6 metric tons of carbon dioxide per year.
Summary
Buying a Model 3 today with Bitcoin has basically the same carbon footprint as going back in time, buying the original Model T and then driving it for 100 years.
References
- Where, geographically, are Bitcoin mined? https://cbeci.org/mining_map/ [:warning: cookie spam].
- How much of China electricity is from coal? https://www.cec.org.cn/detail/index.html?3-292822 (see coal “原煤” compared to total “能源消费总量”).8¢/kWh I don’t have an authoritative source for this one, help me.
- Pounds of carbon per coal kWh https://www.eia.gov/tools/faqs/faq.php?id=74&t=11.Tesla
- Model 3 price https://www.tesla.com/model3/design#payment.EPA
- CO2 emissions https://www.epa.gov/greenvehicles/greenhouse-gas-emissions-typical-passenger-vehicle.
- CO2 weight math https://www.uigi.com/co2_quantity_convert.html
- Tesla will not convert Bitcoin back to USD. https://x.com/elonmusk/status/1374619379929772034
Caveats (thank you Russell)
- This article assumes that you when you buy a Tesla you are just now spending $50,000ish to get a new Bitcoin and spend that on the Tesla. In other words, it’s an incremental Bitcoin. If you already owned that Bitcoin ahead of time, this article does not apply to you.
- We also assume that someone in China (most common), who uses coal for electricity (most common) created a new Bitcoin by mining and he sold it to you for the $50,000. He cashed out that money to pay his electricity which, as long as electricity costs $49,999.99, he should be happy to do.
- We also assume that nobody else is using the Bitcoin network at this exact second as you and the miner are making this transaction. Taxes are zero. Equipment rental is free. Employees work for free. Risk premium is zero. Interest rates are zero. Transaction costs are zero. Economists typically like to add those kinds of caveats.
- You can peel back these assumptions and get basically the same result—you are adding $50,000 worth of demand into the system, and the matching supply is created by business people competing nearly at-cost where their biggest expense is electricity.
▧
Comments
There are no comments yet.
Please discuss this topic anywhere and let me know any great comments or media coverage I should link here.