Can blockchain carbon projects save the planet?
Burning carbon based fossil fuels release greenhouse gases, including carbon dioxide, into the atmosphere. And the planet warms up, putting humans at risk of extinction. Carbon credits and offsets initiatives are not effective. But the tokenisation of carbon assets could provide a way to make these initiatives effective.
Credits vs offsets
Carbon credits and carbon offsets are two separate initiatives that attempt to reduce the amount of carbon in the atmosphere.
The Intergovernmental Panel on Climate Change (IPCC) recognised that putting an actual price on burning fossil fuels would be more likely to make us see its value. Therefore, the Kyoto Protocol introduced carbon credits.
A carbon credit is a license for a country or organisation to emit a certain volume of greenhouse gases. Under the terms of the Kyoto Protocol, each country receives a fixed number of carbon credits. Any business or organisation that exceeds its given quote can purchase additional credits from the market.
Carbon offsets refers to activities which reduce greenhouse gas emissions. They are a way to earn carbon credits and include clean energy projects, such as wind or solar.
They can be part of the same Kyoto Protocol regulated market as carbon credits or can be voluntary. To qualify for participation in the regulated market, the project must take place in a Kyoto Protocol member country, and supported by government.
Despite the growing acknowledgment by governments that climate change is an issue, not all countries are adhering to the terms of the Kyoto Protocol. Similarly, we need far higher engagement in voluntary programmes to have any impact on emissions.
Blockchain can enable the tokenisation of assets, including physical ones. Some blockchain projects are creating innovative solutions for tokenising carbon credits and offsets:
Veridium brings carbon credits onto the blockchain. The company is working in partnership with IBM and using the Stellar blockchain to tokenise carbon credits traded on markets. The token is backed by carbon assets verified by third parties.
In addition, Veridium calculates the number of carbon credits that a company needs to buy or generate to provide enough carbon offsets for its footprint. This calculation is one of the barriers for businesses adopting carbon credits.
Nori is a blockchain based carbon removal marketplace. On the supplier side, it verifies that a business has performed activities that removed carbon dioxide from the atmosphere. Nori then issues an authenticity certificate to the supplier.
Anyone can sign up as buyer to buy certificates from the suppliers. The benefit of Nori is in creating a peer-to-peer connection for carbon offsets. This reduces the bureaucracy associated with voluntarily purchasing carbon credits.
Poseidon aims to create a global carbon marketplace starting with the integration of carbon credits into everyday retail purchases. Each purchase spends OCEAN tokens (generated by cleantech projects supported by Poseidon) to offset its carbon footprint.
Poseidon is also built on the Stellar blockchain. Because Stellar has lower energy consumption than other blockchains, the company said it was a natural choice.
These projects certainly demonstrate that blockchain is a driving force for change in the world. Blockchain could enable people to integrate carbon offsetting into their daily lives.
We need to do far more in terms of reducing greenhouse gas emissions than we are doing today. Using blockchain for carbon credits and offsets is a step in the right direction.
This article is an abridged version of an article originally posted at Coincentral.com (a P27 Partner) under the headline “Can Blockchain Carbon Offsetting Save the Planet?”.
CoinCentral’s owners, writers, and/ or guest post authors may or may not have a vested interest in any of the above projects and businesses. None of the content on CoinCentral is investment advice nor is it a replacement for advice from a certified financial planner.