There are several key areas of the climate crisis to which blockchain projects can be invaluable. This is due to the fundamental basis of blockchain technology which is essentially a Distributed Ledger System with the ability to create accurate, trustworthy, decentralized, and incorruptible data flows.
In the climate space, The UNFCC (United Nations Framework Convention on Climate Change) recognizes 4 key opportunities for application:
- Carbon Emission Trading
The potential for blockchain and crypto projects to facilitate global carbon markets is beyond obvious. The topic has recently been covered in Forbes, the Times and WSJ. This is key to implementing Article 6 of the Paris Agreement, which seeks to develop cooperative approaches to bilateral and multilateral carbon trading and the development of voluntary markets.
Blockchain applications can:
- Improve data accuracy and transparency, addressing the issue of double counting of credits.
- Help grow nascent carbon removal markets by verifying smaller projects; and drive up the price of carbon credits by enabling them to be purchased and held as a kind of currency.
- Enabling Peer-to-peer Renewable Energy Trading
- Blockchain technologies can facilitate markets and platforms for the trade of small scale, locally generated renewable energy- for example home generated wind or solar energy.
- Users can buy, sell, or exchange assets with one another using tokens or digital assets stored on the blockchain, reducing curtailment, and enabling the development of regional energy economies.
- Enhancing Climate Finance Flows
Financing certain climate related projects remains a challenge for traditional banks, such as those that are small-scale or in politically risky or remote regions. Blockchain technology can create access to decentralized finance (DeFi) applications, enabling money to be transferred in a way that enables small transactions in a trustworthy, secure, and accessible way. This also has huge implications for sustainable development.
- Better Tracking and Reporting of Emissions Reductions and Climate Data
Blockchain technology can also be applied to recording a country’s progress towards implementing their Nationally Determined Contributions under the Paris Agreement or summits such as COP27 and other similar international agreements that set global goals and targets. This enables climate policy makers to record and access transparent data and reporting of climate action.
It can also improve access to accurate climate data collected and collated by different organizations in relation to better understanding climatic patterns to prioritize, protect and insure climate projects. This can assist in accelerating sustainable forest and land regeneration, a major new initiative agreed by leaders at COP26.
- ESG Reporting
Beyond the energy production process itself, companies will be coming under increasing scrutiny by regulators to disclose their ESG credentials: from ensuring fair working conditions and remuneration of workers across the lifecycle of production (from source to supply to delivery), to maintaining environmental protections and controls across operations (including clean-up).
If a business needs to meet set ESG standards – e.g. a required set of data to be input into the network, such as the emissions associated with a specific source controlled or owned by a company, or the ethical sourcing of a material in the production of batteries for electric vehicles – DLT (Distributed Ledger Technology) could be used to securely pass the verified data along the supply chain with the end user / reporting agencies or regulating authority.
Why Achieving Net Zero is Essential for Businesses
As the demand for greener products and services from customers grows, and governments legislate to cut emissions, investors are seeking out the next big climate solution. Businesses know they need to decarbonize, and quickly and in a way that can be quantified and recorded.
Transitioning to net zero is a daunting task that companies find arduous to achieve while maintaining their profit margins. In most cases, the path is unclear and there is a scarcity of knowledge and people with the understanding of the process
This leads many to focus on easy and temporary solutions. They offload emissions onto others by divesting high carbon emitting businesses like mining minerals, processing meat or financing oil companies, or whatever other ideas they may come up with. They end up creating islands of green within their company – for example, sourcing all electricity from renewables. While it can be beneficial for businesses to start off by focusing on immediate reduction; in the long term however, it does not do enough. Switching to renewables-sourced electricity is a good way to reduce carbon dioxide emissions but data analysis shows that it only gets you 30-35% of the way. Ultimately, companies will have to logically and thoughtfully redesign their business models to reduce emissions to get to Net Zero. This is where experts like Amplo Global can help to understand and audit the current situation, recommend changes, with logical modelling and simulations based on Artificial Intelligence and Data Analytics.
The good news is that there is mounting evidence that it is possible for corporations to transition to net-zero business models profitably, especially when compared with a future of inaction. Companies that ignore or put off these opportunities may be caught unprepared as customers, investors and policy makers increasingly require them to reduce carbon emissions to continue operating. As discussed earlier, there is a scarcity of proper knowledge and experience in this field. Consultants with expertise in this domain can help make the transition easy and quantifiable.
Achieving Net Zero with the help of Blockchain might sound like a contradiction in terms. We have all come to recognize how painfully energy intensive Bitcoin mining is, and since most of the energy is from fossil fuels, often any discussion regarding the use of blockchain for Net Zero quickly gets railroaded.
Finding Low-energy Solutions:
Despite the potential strengths, the huge energy consumption associated with the crypto industry is the main challenge that must be overcome. One of the ways to address the issue is by implementing low energy solutions. For example, the Ethereum Foundation is working on a new way to verify transactions by switching to a different method called Proof of Stake (PoS). They say that the energy cost of each transaction could be cut by 99.95 per cent compared to Proof of Work (PoW) verification as used by the Bitcoin Blockchain. Other major crypto blockchains like Tether, Tron, Ripple, Solana to name a few are all working on low energy and green solutions.
Major industry players are striving to ensure that the energy consumed by the industry is entirely carbon-free. In April 2021, three important organizations (the Energy Web Foundation, Rocky Mountain Institute, and the Alliance for Innovative Regulations), formed the Crypto Climate Accord, which is supported by organizations spanning the climate, finance, NGO, and energy sectors. The aim of the Accord is to “decarbonize the industry in record time” and achieve net-zero emissions in the global crypto industry by 2030.
Blockchain technology is a very specific domain of knowledge. Understanding and harnessing the power of this technology to meet an organization’s Net Zero goals is a formidable challenge for many. Choosing a low energy blockchain, that is itself Net Zero, and how it will help in achieving the organization’s Net Zero target is an area where consultants like Amplo Global can hand-hold their clients. Amplo Global uses mathematical models and algos, combined with the power of AI and Data Analytics to analyze your risks, evaluate your targets, and find the best solutions for achieving them.