Companies are leveraging blockchain and other emerging technologies for transparency and accountability in carbon emission offsetting.
As the world celebrates the 50th anniversary of Earth Day, a number of industries appear to be looking toward blockchain to address one of today’s largest global threats: climate change. The Paris Agreement, which was signed into effect in 2016, addressed the long-term goal to keep a global temperature rise to less than two degrees Celsius before the end of the century.
According to a recent U.N. Environment Program report, annual emissions have to be reduced by 29–32 gigatonnes of equivalent carbon dioxide by 2030 in order for the Paris Agreement goals to be achieved.
Something to consider
Nadia Hewett, the World Economic Forum’s project lead for blockchain and distributed ledger technology, told Cointelegraph that blockchain works well in providing transparency of carbon emissions reporting:
“If you can get organizations to report their carbon emissions across a blockchain network, then a single platform is created to increase the transparency among partners. In turn, it becomes easier to compare different numbers.”
According to Hewett, accurately calculating carbon footprints is a complex and costly process, which lacks a single global methodology. She added that, “Most companies today are likely using different standizations metrics to calculate carbon footprints, so it’s difficult to compare these footprints.”
Hewett noted that a key benefit of blockchain is that it can serve as a single platform for carbon measurement, helping provide a standardized algorithm for reporting carbon emissions that can be agreed upon by different entities. “At the end of the day, this is all about transparency and accountability,” she said.
Interestingly enough, the International Chamber of Commerce launched its new Carbon Council initiative on April 22, which leverages blockchain to create higher liquidity for the carbon market. According to Time magazine, carbon markets are a key tool for states to get businesses to help mitigate climate change, as businesses running climate mitigation projects can sell those emission reductions to countries.
The ICC noted that the main goal of the new Carbon Council is to bring both private and public companies together to create a better, more transparent system for funding global action. As Hewett mentioned, blockchain ensures this by bringing liquidity, accessibility and standardization to the carbon markets.
The United Nations also notes that carbon offsetting is particularly important for meeting the Paris Agreement’s goals. Carbon offsetting allows companies and individuals to reduce carbon emissions by purchasing carbon credits from carbon reduction projects. These projects include planting new trees, avoiding deforestation, clean water access and investment in renewable energy.
Unfortunately, there are many questionable offsets being sold to consumers and companies today. And while some regulations have emerged, there are still no federal regulations in the United States for carbon offsets purchased by individuals. That being said, there are features that blockchain technology can bring to the carbon offsetting market to ensure transparency and accountability.
For example, Everledger is applying blockchain technology and emissions data generated from the diamond industry to offset its carbon footprint. On April 22, the technology company launched a climate platform designed to help India and the U.S.-based Shairu Diamonds and Atit Diamonds generate awareness about the carbon footprint created by their supply chains and the stakeholders in their value chains, such as mining companies and diamond manufacturers.
Leanne Kemp, CEO of Everledger, told Cointelegraph that the platform is collecting carbon footprint data from the two companies’ supply chains and uploading it to the Everledger blockchain network, which is powered by Hyperledger Fabric, adding:
“Consumers are making purchases based on trusted information that mirrors their own values. It’s not enough to claim that a diamond is non-conflict or carbon neutral. Buyers need proof, putting the burden of evidence with the diamond supply chain.”
Echoing Hewett, Kemp noted that blockchain can provide a secure, permanent and transparent digital record of a diamond’s journey all the way from the mine to the consumer. She noted that consumers can view sustainability reports on the Everledger platform, adding:
“The bank of evidence around sustainable environmental practices in the diamond industry gives partners a commercial advantage in the market. This business imperative is driven by the growing demand for provenance data among climate-aware consumers such as millennials — one of the fastest-growing retail segments in the diamond market.”
Additionally, Kemp pointed out that Everledger enables the offsetting of the carbon footprint of diamonds through their partner, Carbonfund.org, a nonprofit organization that purchases and retires certified carbon offsets on behalf of its donors. She explained that offsetting certificates are accessible online and that data is presented graphically.
Blockchain isn’t enough
Yet while blockchain provides transparency for sustainability, Kemp explained that blockchain alone isn’t enough. She mentioned that machine learning, IoT and near-field communication protocols are required to ensure that data is accurate and secure.
For instance, on Feb. 26, Fortune 100 tech company Honeywell launched its Forge Energy Optimization platform, which leverages machine learning to study energy consumption from buildings and aircrafts. Lisa Butters, a general manager at Honeywell, told Cointelegraph that organizations using the forge platform are able to calculate their greenhouse gas usage.
While the platform primarily focuses on data analytics, Butters explained that the goal moving forward is to connect the data generated from companies to Honeywell’s blockchain ledger to determine their GHG consumption:
“We want to be able to link those software tools to our ledger. For example, if Southwest Airlines has forge installed, everytime a plane lands that data can be recorded on our ledger to show their greenhouse gas consumption.”
The global blockchain-based marketplace, Proof of Impact, is also collecting and tracking relevant data from a number of organizations around the world to meet the U.N.’s Sustainable Development Goals aimed at tackling climate change.
Kevin Pettit, Proof of Impact’s chief operating officer, told Cointelegraph that POI is working with a variety of groups, including farmers deploying regenerative agriculture practices in California to increase soil sequestration of carbon, along with organizations delivering clean cookstoves to households in Lesotho. According to Pettit, both of these examples have resulted in carbon offsets:
“Unlike traditional monitoring and evaluation processes that collect data long after the impact has occurred, we generate and collect impact data in tandem with the event itself. We then verify and store that data using decentralized technologies (IPFS and Ethereum) to create a record of that unique event.”
Pettit noted that POI recently partnered with Roar Africa, a private-jet safari company, to offset their carbon emissions for a flagship, luxury safari within four countries in Africa.
What about carbon removal?
In addition to carbon offsetting, climate change can also be solved by pulling carbon dioxide directly from the atmosphere. This process is known as greenhouse gas removal. Paul Gambill, CEO of blockchain-based marketplace Nori, told Cointelegraph that carbon offsetting is performed to avoid future carbon emissions. Greenhouse gas removal, however, removes carbon emissions already in the air.
Rather than issuing carbon offsetting credits to individuals or organizations, Nori functions as a marketplace that uses cryptocurrency to fund corporations, governments and individuals working to reduce levels of carbon dioxide in the air. For example, Nori is currently being leveraged by a small group of farmers based in Rock Hall, Maryland to fight climate change by providing “credits” for carbon stored in the soils of their farms.
Trey Hill, one of the farmers using Nori, noted in a Grist article that Nori paid him $115,000 for just over 8,000 tons of carbon stored in his soil. According to Gambill, farmers do not have to pay to use the Nori platform, and certificates are issued based on the amount of CO2 that is sequestered. Gambill noted that the goal of the Nori marketplace is to facilitate true price discovery for CO2, adding:
“When a supplier removes their CO2, we verify that the data is accurate. The supplier then receives NRTs which they can sell to a buyer. The NRT is then retired and we record that transaction on the Nori Ethereum blockchain, allowing everyone to see who paid for it, when the transaction occurred and more.”
While data analytics plays a large role in the Nori marketplace, Gambill explained that blockchain ensures the transparency needed to prevent fraud in carbon markets: “Carbon markets are filled with fraud since there are no true price discovery mechanisms. Currently, the only way to understand voluntary carbon prices is through self-reported surveys, but blockchain changes this.”
Blockchain for climate change moving forward
Arun Ghosh, a blockchain leader at KPMG, told Cointelegraph that blockchain-based systems will continue to evolve global efforts and existing approaches meant to reduce the cost of trust for reporting. According to Ghosh, ongoing efforts are being applied to use blockchain for climate accounting. He said:
“We predict blockchain will be widely adopted across private and public sectors to solve massive data problems that have prevented accurate measure, accounting and management of carbon footprints and climate risk.”
Amy Slawson, a partner of engineering at cLabs, told Cointelegraph that the Celo Foundation plans to make Celo one of the first carbon neutral blockchains dedicated to sustainability, saying:
“If approved via on-chain governance, this will entail building an energy-efficient proof-of-stake protocol, directing a portion of all block rewards to a carbon offsetting fund in partnership with Y Combinator carbon offset startup Wren.”