Blockchain and GreenFi – tools for climate action

By increasing transparency, tokenizing 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 amount of initiatives to reach net zero in less than 30 years. Among these are Blockchain-based initiatives to increase transparency, tokenize carbon markets, distribute clean energy and green finance (GreenFi). The United Nations Environment Program (UNEP) has recognized the role of Blockchain in accelerating climate action, and green digital asset solutions are proliferating. Let’s explore what the possibilities are.

With the increased interest in carbon neutrality after 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 times by 2030 to respond to increased private sector demand for climate solutions. Carbon markets turn CO2 emissions into a commodity or tradable environmental resource by putting a price on it. Carbon credits represent one tonne in reduction of carbon emissions via avoidance or reduction projects, and removal or sequestration. A carbon credit can be resold several times until it has been withdrawn by the end user who wants to claim the offsetting effect. Carbon registries store the carbon credits issued by third-party independent, internationally certified verifiers, in accordance with independent standards. Serially numbered credits are issued by the verifiers, and the counter-reduction claim is converted into carbon credits that can be traded.

Key challenges with the voluntary carbon markets that can benefit from Blockchain and GreenFi subsidies include:

Transparency and monitoring, reporting and verification (MRV)

• Greenwashing with false claims about energy efficiency and high rates of inefficient credits being used.

• Unrealistic claims about carbon accounting.

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

• Subjective measurement of additionality for carbon removal projects.

Costs

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

• High costs for monitoring, reporting and verification (MRV) reduce the incentive for implementation.

• Reduce costs by creating carbon credits.

Liquidity and marketability

• 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 number of initiatives ranging from green utility symbols that reward reduction of carbon emissions; tokenized carbon credit or biodiversity; green crypto for green products and green security token offering platforms to enable green proof of impact reporting. For example, the Universal Protocol has launched a private tradable carbon credit, which allows certified projects to turn their greenhouse gas reductions into tradable carbon credits. SavePlanetEarth sets up certified Carbon Credit Smart NFTs on Phantasma. First Carbon develops proprietary NFT-based carbon credits that leverage NFTs, giving carbon credit issuers access to the blockchain and enabling users to track, trade and burn credits.

Others are using Blockchain to finance regenerative solutions. For example, the Carbonland Trust creates a tokenized carbon credit-producing asset and forest preserve. The Cambridge Center for Carbon Credits is working on a solution to buy carbon credits to finance nature-based solutions that conserve biodiversity. ClimateCoin encourages carbon offsetting by awarding tokens to people who plant trees or reduce CO2 emissions in exchange for carbon offset receipts. Carbon Offsets to Alleviate Poverty (COTAP) collects contributions and supports projects that compensate farmers for planting and maintaining trees on underutilized parts of their land. The World of Waves aims to restore oceans and fight climate change, and Solarcoin distributes tokens as a reward to people for installing solar energy.

Evercity.io and Blockchain Triangle are integrated platforms that provide guidance, aggregate initiatives and carbon credits and connect them to investors and financial mechanisms such as digital green bonds. The use of Blockchain in 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 in climate measures. Blockchain can help improve and manage smart grids in decentralized energy markets and allow P2P trading of power reliably and transparently. For example, Power Ledger enables P2P buying, selling or exchanging excess renewable electricity directly. Solstroem focuses on accelerating the energy transition in developing and emerging countries, providing off-grid solar power and geotagged, time-stamped microcarbon 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 decentralized 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 use of mobile phones in developing countries enables solar panels to be connected to Blockchain to enable consumers to benefit from distributed generation. Azuri Technologies, Off-grid Electric and Mobisol produce affordable solar panel solutions for off-grid areas in rural Africa. This smart PayGo system makes solar technology affordable at a fraction of the cost of kerosene, when households pay down their solar panels, they go from renting to owning an asset. Deloitte suggests that P2P microgrids can deliver as much as 65% savings in energy costs, and that advances in smart meter deployment, blockchain, P2P social platforms and advances 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 of impact and carbon credits. SavePlanetEarth launches certified Carbon Credit Smart NFTs. First Carbon develops NFT-based carbon credits that give carbon credit issuers access to the Blockchain, which enables 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, that can be collected and traded, helping to unlock the potential for resource mobilization, youth engagement and climate empowerment.

Gamification is a central tool for Blockchain and climate action. Games can stimulate actions to avoid the loss of nature; nature-based binding, reduction of 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 behaviors, and Rvolt, which enables users to visualize their impact through a small planet that they care for 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 detection devices and artificial intelligence devices can increase the rigor of measurement. Blockchain-based tools support standardized protocols across accounting scales and systems; transparency for voluntary carbon market producers and buyers; 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 digitize measurement, reporting and verification for climate measures. Using IOTA’s Tangle DLT to bridge on-site digital sensors with online reporting tools, they aim to increase the trust and utility of data and claims about climate action and sustainability, and reduce the carbon footprint of conventional MRVs, for example due to travel emissions from regular trips made by auditors to project sites.

Mention must also be made of the energy consumption of Bitcoin and Ethereum, and the need to measure this, but separate it from the underlying blockchain platforms that support climate initiatives. For example, IOTA, Algorand, Celo and Polkadot are climate-friendly blockchains. SavePlanetEarth issues 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 must continue and be measured.

Blockchain has a lot to offer to increase transparency, tokenize carbon markets, distribute clean energy and GreenFi. This is a valuable contribution, but insufficient. The global climate response must consider the world as a whole, not just a way to allow emitters to avoid their responsibility by buying carbon credits.

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 chairman of Kasei Holdings, a London-listed blockchain and Web 3.0 investment company. She is on the editorial board of the Journal of Metaverse and Frontiers in Blockchain, and is an Industry Associate: University College London, Center for Blockchain. She is the author of Blockchain for Global Social Change and has been featured in several awards, including Top 100 Women in Crypto and Top 100 Fintech Influencers for the SDGs.