The U-turn comes after Tesla purchased $1.5 billion worth of bitcoin in February and announced that it would start accepting payments in the cryptocurrency in March.
“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 on Twitter.
“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 Bitcoin network guzzles up more energy per year than the entire country of Sweden.
Some estimates suggest that its energy use has more than doubled since the start of this year, going from an annual average of up to 224 terawatt-hours in January to 515 terawatt-hours in May according to Cambridge University’s Bitcoin Electricity Consumption Index.
The currency’s energy consumption is due to its underlying algorithm, which means that every time a new bitcoin goes into circulation and every time a trade is made, thousands of computers in the bitcoin network race to verify this transaction.
Known as proof of work (PoW), this inefficient system relies on large amounts of computing power and electricity, often derived from fossil fuels such as coal.
Ironically, the rapid increase in bitcoin’s energy consumption could partially be traced back to Musk himself, as his February investment caused a surge in demand for the currency, hiking up its value.
But now Musk is has stated that Tesla will not be selling or accepting any bitcoin until the system runs on renewable energy.
— Elon Musk (@elonmusk) May 13, 2021
Musk tweeted a graph showing bitcoin’s increased energy usage
In the meantime, the company will look into cryptocurrencies that use less than one per cent of the amount of energy per transaction compared to bitcoin.
A number of smaller cryptocurrencies such as Tezos and Cardano are based on a more efficient algorithm known as proof of stake (PoS), in which only one computer in the system is picked at random to verify a transaction.
“The energy consumption required to run a proof of work network is equivalent to a nation of tens of millions of people,” co-founder of development firm TQ Tezos Chris Lawlor told Dezeen.
“But the energy needed to run a proof of stake network is a few hundred computers.”
The environmental impact of cryptocurrencies and their underlying blockchain technology has been brought into the spotlight in recent months with the boom of non-fungible tokens (NFTs).
These are certificates of authenticity for digital assets, which are recorded on the blockchain and thus generate emissions any time they are created and traded.
As awareness around this issue is growing, creators including architect Chris Precht have cancelled upcoming NFT sales while musician Imogen Heap offset the emissions from her first drop by removing 20 tonnes of CO2 from the atmosphere.