Crypto, but for the climate

With help from Derek Robertson

In most green circles, “crypto” is a dirty word due to the huge amount of energy used in Bitcoin mining.

But some environmentalists are beginning to see the potential for blockchain to play an important role in the fight against greenhouse gas emissions—by fixing the world’s dysfunctional carbon credit markets.

These markets have been plagued by several problems as they have grown, including the rise of dubious credit brokers and the potential for firms to sell credits for the same project twice. Public blockchains—as shared, transparent ledgers—are pretty good at preventing double-counting, as well as building accountability.

So far, this is an idea that is mostly being pursued in the private sector through a handful of venture-backed projects. Yesterday, however, marked a major milestone for public procurement: The World Bank and the government of Singapore unveiled plans to launch a joint project to aggregate information from the world’s major carbon offset registries into a single distributed ledger. The new project, called Climate Action Data Trustwill be launched in December.

There is no guarantee that it will catch on. Some early attempts to improve carbon markets with blockchains have faltered or failedbut this comes with the weight of national authorities and multilateral institutions.

Why do it with blockchains? Under the current system, many competing registries certify the offset projects that produce carbon credits, things like tree planting programs and clean energy installations. As a result, the operators of these projects can, and sometimes do, be certified by more than one registry and then sell duplicate carbon credits for the same project.

One solution to the double-counting problem could be a central global registry, but supporters of the Climate Action Data Trust and similar efforts argue that it would be too difficult to get the entire world to trust a single entity with control over the data that makes carbon markets run.

“It is arguable that you cannot build a carbon market without a blockchain, says Gene Hoffman, the California-based president of the Chia Network, the crypto platform partnering with the World Bank initiative.

With a blockchain, he said, you can select a few dozen privileged users from around the world — various national governments and NGOs — and program the system to allow signatures from two of them to certify an offset project.

Distributing governance while keeping it in the hands of a limited number of trusted entities has a particular appeal in voluntary carbon offset markets, which occupy a sort of gray area between government policy and PR-minded corporate philanthropy. The current market structure is hindered both by the certification of waste projects that do little to compensate for carbon emissions, and a lack of consensus on how to evaluate a project’s effectiveness.

“In terms of market imperfections, it kind of ticks all the boxes,” said Rene Reinsberg, the Berlin-based co-founder of Celo, a blockchain platform that has carved out a niche among socially conscious applications.

Cryptocurrency could also make it easier to pay directly to people running offset projects instead of relying on middlemen, according to Anna Lerner, a World Bank and Facebook veteran who now runs the Climate Collective, a nonprofit that supports technology startups in developing countries .

So far, experiment with using blockchains to address climate change remain in the experimental phase and are likely to develop significantly in the coming years, she said.

Meanwhile, have early mistakes of some efforts to build blockchain carbon markets have turned some environmentalists against them.

So, what’s the appetite for trying another version of this? The World Bank and the International Emissions Trading Association, another partner in the initiative, will soon get a feel for it. They say they have already worked with a few dozen groups, including 11 national governments, to test the system.

And next month they will take their case to the 27th UN Climate Change Conference in Egypt with a series of panel discussions, before their official launch on 7 December.

One of Washington’s heavyweight think tanks throwing its resources into AI development.

Center for strategic and international studies announced yesterday the formation of its “AI Council,” a group of 17 thinkers led by senior executives from Accenture and Microsoft to “etch out what corporate responsibility, international cooperation, and effective governance of AI look like, not just in principle, but in practice.”

Like CSIS, the group is an international one – including also the president of Sony; leading researchers in Australia, Japan, the UK and Germany; and a former head of, among others, the World Bank. The council promises three white papers “that provide detailed, actionable and wise recommendations to the global AI policy community” by spring 2023.

The launch comes shortly after the White House released its own “AI Bill of Rights,” a guidance document for AI development and implementation that largely adheres to the same values ​​and goals outlined by the Council. It also overlaps with the EU’s ongoing hashing-out of a sweep The AI ​​Act along similar lines, which will carry actual statutory enforcement muscle. — Derek Robertson

A CFTC commissioner warns the banks to tread carefully before getting involved in crypto.

Commissioner Christy Goldsmith Romero spoke at a crypto conference in New York yesterday, as POLITICO’s Sam Sutton reported reported for Pro subscribersand said that crypto investments at major financial institutions could “unexpectedly amplify risks and heighten concerns about financial stability.”

That matters because finance is becoming increasingly intertwined with a crypto industry that has suffered a brutal year of market losses and hacks. As Sam writes, “Many in the digital asset industry feared that the collapse … could drive mainstream investment firms from the industry. But institutions like BlackRock and Bank of New York Mellon have begun partnering with startups or offering their own crypto-friendly services during the the last few months.”

So buyer beware. Romero’s voice is the last in one chorus of regulators warns banks to tread lightly, largely inspired by Report from the Norwegian Financial Supervisory Authority published in early October, which recommended a legislative and regulatory discount to reduce risk in the system. — Derek Robertson

Keep in touch with the whole team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Steve Heuser ([email protected]); and Benton Ives ([email protected]). follow us @DigitalFuture on Twitter.

Ben Schreckinger covers technology, finance and politics for POLITICO; he is a cryptocurrency investor.

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