Blockchain technology may be one of the more instrumental innovations that will help nations reach their emissions target of “net zero by 2050,” according to blockchain climate experts.
The “net-zero” emissions by 2050 target comes from the Paris Agreement, which was reached at the UN Climate Change Conference (COP21) on Dec. 12, 2015. So far, 194 parties have signed the accord.
Today, much of the strategy around reducing carbon emissions is through a system of carbon credits. One carbon credit permits the emission of one ton of carbon dioxide or equivalent in greenhouse gases.
Individuals and entities that create projects that either reduce the production of greenhouse gases from their credit allocation or offset them in some way, can then sell those credits to other less efficient producers, which in theory, provides a market incentive for companies to reduce emissions.
However, in comments to AIBC, Josh Knauer, co-founder of web3 start-up Reseed and co-chair of the World Economic Forum on Carbon argued that legacy carbon markets have been far too centralised, inefficient, and too slow to address climate change issues.
Knauer said that the biggest problem in addressing climate change is that there is often limited financial incentive for the removal of carbon.
Improving farming through blockchain
Through blockchain technology, Knauer’s company Reseed incentivises thousands of farms around the world to improve their farming techniques to “capture more carbon from the air.”
Blockchain is used at the core of the company to provide transparency, and directly connect the suppliers and buyers of carbon credits, whilst also tracking socio-economic impact.
He also stated that we have “3-5 years” to turn around the net positive carbon dioxide flow that “spews” from global emissions and causes climate change.
Meanwhile, Peter Moulton, co-founder, and CEO of web3 earth tech company Sensand believes that blockchain can help the market adapt to policy shifts and climate change targets set by the government, by making it more “cost-effective” and efficient to get climate projects off the ground.
Moulton believes that if the efficiency and flow of capital into carbon projects can be facilitated faster through enterprise, as well as micro farms, then the whole market can “galvanise” around achieving “net zero by 2050.”
Moulton believes climate change is fundamentally about using a price on carbon to “facilitate” a change in business behaviour. He stated that blockchain will make it easier to price actual climate impact rather than just “profiteering” off carbon markets, otherwise known as greenwashing.
The additional transparency and better access to global liquidity that blockchain offers will help facilitate a faster transition to net zero, he explained.
FTX saga could impact the climate
The recent high-profile collapse of cryptocurrency exchanges however could hurt confidence in the crypto sector, which could then spill into blockchain-powered climate change platforms, warns Moulton.
The Sensand co-founder shared concerns that the fall of FTX has “hurt the credibility” of blockchain which may give the impression from the traditional finance world that the blockchain market cannot be trusted.
Moulton suggested that it is now up to the web3 industry to build great projects and solve problems so that the blockchain industry’s contribution to net zero can ensure that the process isn’t hindered.
However, Knauer believes that despite the damage to blockchain’s credibility, it is “entirely” possible to use blockchain without venturing into the world of cryptocurrencies, which is where a lot of the concerns lie.
He added that most businesses he has interacted with have “no interest” in conducting crypto transactions but are more interested in blockchain technology providing an open, auditable, and transparent solution.
Climate change has been an important point of innovation and discussion in the crypto world.
A number of blockchain companies have attempted to put carbon credits on the blockchain aimed at making carbon more trading accessible.
In May this year, leading blockchain company Ripple announced its commitment to the development of carbon markets pledging $100 million in funding to invest in innovative carbon removal companies and climate fintech.
This came after the company set a target in 2020 to be carbon neutral by 2030, which they believe is on track to do so by 2028.
KlimaDAO is one of the more well-known decentralised organisations using decentralised finance to fight climate change, allowing web3 builders and users the opportunity to participate in the carbon market through the KLIMA token.
Earlier this month, blockchain oracle network Chainlink released an article on Nov. 14 stating that in parts of the developing world an estimated “one in ten people” lack access to electricity, resorting to using liquid kerosene to meet their basic energy needs.
The network highlighted decentralised autonomous utility Liquidstar’s development of modular solar-powered smart batteries that can be distributed to developing countries, utilising smart contracts to allow easy access to buying and selling energy.
Climate change has also been one of the major drivers behind the Ethereum network’s shift away from the energy-intensive proof-of-work consensus mechanism to proof-of-stake in September.
The shift is expected to reduce the energy requirements of processing transactions on the Ethereum blockchain by 99.95 percent. However, other top cryptocurrencies including Bitcoin, Dogecoin, and Litecoin continue to operate under the energy-intensive Proof-of-Work Mechanism.
The United Nations for Climate Change recently stated on Sept. 13 that the past seven years were the “warmest on record,” with an alarming prediction that during “at least” one year in the next five years, the annual mean temperature will “temporality be 1.5°C” higher than the 1850-1900 average.