Blockchain and GreenFi – tools for climate action

By increasing transparency, tokenising carbon markets, distributing clean energy, and GreenFi, blockchain can support the fight against pollution. Jane Thomason shares more.

Since COP 26 there has been a veritable flurry of initiatives to reach net-zero in less than a 30-year time frame. Among these are Blockchain-based initiatives to increase transparency, tokenise carbon markets, distribute clean energy, and green finance (GreenFi). The United Nations Environment Programme (UNEP) has acknowledged the role of Blockchain in accelerating climate action and Green Digital Asset Solutions are proliferating. Let’s explore what the possibilities are.

Carbon Markets and net-zero


With the increased interest in carbon neutrality post COP 26, Voluntary Carbon Markets (VCM) grew to an estimated record of USD 1 Billion in 2021. VCM is expected to continue to grow 15-fold by 2030 to respond to increased private sector demand for climate solutions. Carbon markets turn CO2 emissions into a commodity or tradable environmental asset by giving it a price. Carbon credits represent one tonne in carbon emission reduction via avoidance or reduction projects, and removal or sequestration. A carbon credit can be resold multiple times until it has been retired by the end-user who wants to claim the offset’s impact. Carbon registries store the carbon credits issued by third-party independent, internationally certified verifiers, in accordance with independent standards. Serial numbered credits are issued by the verifiers, and the offset reduction claim gets converted to carbon credits that can be traded.

Key challenges with the voluntary carbon markets which could benefit from Blockchain and GreenFi affordances include:

Transparency and Monitoring, Reporting, and Verifying (MRV)

  • Greenwashing with false energy-efficiency claims and high rates of ineffective credits being used.

  • Unrealistic carbon accounting claims.

  • Double counting due to lack of complete accounting protocols and alignment between market jurisdictions.

  • Subjective measurement of additionality for carbon removal projects.

Costs

  • Market Failures with high compliance costs and few incentives for businesses that voluntarily take action to mitigate an environmental impact.

  • High Monitoring, Reporting, and Verifying (MRV) costs reduce the incentive for implementation.

  • Reducing the cost of carbon credit creation.

Liquidity and Tradability

  • Building carbon credits as a viable asset class by providing predictable returns on investment and including value protection for buyers and sellers.

GreenFi and Carbon Markets

GreenFi includes a range of initiatives ranging from green utility tokens which reward the lowering of carbon emissions; tokenised carbon credit or biodiversity offsets; green crypto for green products and green Security Token Offering platforms to enable green proof of impact reporting. For example, Universal Protocol has launched a retail tradable carbon credit, allowing certified projects to turn their greenhouse gas reductions into tradable carbon credits. SavePlanetEarth is setting up certified Carbon Credit Smart NFTs on Phantasma.  First Carbon Develops Proprietary NFT Based Carbon Credits that leverage NFTs, providing carbon credit issuers access to the blockchain and enabling users to track, trade, and burn credits.

Others are using Blockchain to fund regenerative solutions. For example, Carbonland Trust creates a tokenised carbon credit-producing asset and forest conservation. Cambridge Centre for Carbon Credits is working on a solution to purchase carbon credits to fund nature-based solutions preserving biodiversity. ClimateCoin incentivises the offsetting of carbon emissions by awarding tokens to persons who plant trees or reduce CO2 emissions in exchange for carbon offset receipts. Carbon Offsets to Alleviate Poverty (COTAP) pools contributions and supports projects which compensate farmers for planting and maintaining trees on under-utilised portions of their land. The World of Waves aims to restore oceans and combat climate change, and Solarcoin distributes tokens as a reward to people to install solar.  

Evercity.io and Blockchain Triangle are integrated platforms providing guidance, aggregating initiatives, and carbon credits and linking them to investors and financial mechanisms such as digital green bonds. The application of Blockchain to carbon markets will facilitate the creation and trading of carbon credits but will not fix the current underlying market failures.

Distributed energy

The use of renewable energy is an important pillar of climate action. Blockchain can help improve and manage smart grids in decentralised energy markets and allow for the P2P trade of power reliably and transparently. For example, Power Ledger enables P2P purchase, sale, or exchange of excess renewable electricity directly. Solstroem focuses on accelerating the energy transition in developing and emerging countries, providing off-grid solar and geotagged, timestamped micro-carbon credits that individuals or companies can purchase. UK’s Electron uses smart contracts on the Ethereum blockchain to develop a smart grid that will consistently deliver energy. Grid Singularity is a decentralised energy marketplace and energy data exchange platform. TransActive Grid is also a blockchain-based energy marketplace, but it focuses on local peer-to-peer home-produced energy trading.

The massive adoption of mobile phones in developing countries makes it possible for solar panels to be connected to the Blockchain to enable consumers to benefit from distributed generation. Azuri Technologies, Off-grid Electric, and Mobisol produce low-cost solar panel solutions for off-grid areas in rural Africa. This smart PayGo system makes solar technology affordable at a fraction of the price of kerosene, when households pay off the solar panels, they move from renting to owning an asset. Deloitte suggests that P2P micro-grids could amount to as much as a 65% saving in energy costs and that advances in smart meter deployment, blockchain, P2P social platforms, and advancements in AI, make this a viable tool for climate action.

NFTs and gamification

NFTs are increasingly being leveraged for climate change with initiatives ranging from awareness-raising to fundraising and as a record for impact and carbon credits. SavePlanetEarth is launching certified Carbon Credit Smart NFTs. First Carbon is developing NFT Based Carbon Credits providing carbon credit issuers access to the Blockchain, enabling users to track, trade, and burn credits so there is no double counting. DigitalArt4Climate, is a multi-stakeholder partnership initiative that uses blockchain technology to turn art into digital assets or NFTs, which can be collected and traded, which helps unlock potential for resource mobilisation, youth engagement, and climate empowerment. 

Gamification is a key tool for Blockchain and climate action. Games could incentivise actions for avoiding nature loss; nature-based sequestration, reducing emissions, and technology-based removal of carbon dioxide from the atmosphere. Examples include: GreenApes, a game that allows consumers to earn points for engaging in low-carbon behaviours, and Rvolt which enables users to visualise their impact through a small planet that they take care of by engaging in low-carbon activities. We expect to see more of these in development.

Measurement, Reporting, and Verification

In a data-driven world, measurement is key and the combination of Blockchain with IoT, satellite data, laser-detecting devices and devices artificial intelligence analytics can increase rigor in measurement. Blockchain-based tools support standardised protocols across accounting scales and systems; transparency for voluntary carbon market producers and purchasers; certifications of rights and ownership of carbon credits; and improved traceability of carbon credits.

ClimateCHECK and IOTA have launched DigitalMRV (measurement, reporting, and verification) to digitise measurement, reporting, and verification for climate actions. Using IOTA’s Tangle DLT to bridge onsite digital sensors with online reporting tools, they aim to increase the confidence and utility of data and claims for climate actions and sustainability, and decrease the carbon footprint of conventional MRV, for example due to travel emissions from regular trips made by auditors to project sites.

There also needs to be mention of the energy consumption of Bitcoin and Ethereum, and the need to measure this, but distinguish it from the underlying blockchain platforms that support climate initiatives. For example, IOTA, Algorand, Celo, and Polkadot are climate-friendly blockchains. SavePlanetEarth is issuing certified Carbon Credit Smart NFTs on Phantasma, a green blockchain. With increased awareness, many Blockchain platforms are transitioning to sustainable energy sources and alternative consensus mechanisms. This trend needs to continue and be measured.

Blockchain has a lot to offer to increase transparency, tokenise carbon markets, distribute clean energy, and GreenFi. This is a valuable contribution, but insufficient. The global climate response needs to consider the world as a whole, not just a way to allow emissions creators to shirk their responsibilities by buying carbon credit.

About Jane Thomason

Dr Jane is a Thinkers 360 Top 10 Global Thought Leaders and Influencers on HealthTech, Sustainability and Cryptocurrency, and Top 50 in Blockchain. She is the Chair of Kasei Holdings, a London-listed blockchain and Web 3.0 investment firm. She is on the editorial board of the Journal of Metaverse and Frontiers in Blockchain, and is an Industry Associate: University College London, Centre for Blockchain. She is author of the Blockchain for Global Social Change and has been featured in multiple awards including Top 100 Women in Crypto, and Top 100 Fintech Influencers for SDGs.

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