How does Blockchain technology ensure trust in the carbon credit market?
Carbon credits are a mechanism to reduce carbon dioxide emissions, which are one of the main causes of global warming. Carbon credits are used to reward businesses and individuals for reducing their carbon footprint by rewarding them for taking action to reduce their CO2 emissions.
Blockchain technology has become an increasingly popular tool for managing carbon credit transactions due to transaction immutability, transparency and improved trust between parties.
How carbon credit markets work over blockchain
The use of blockchain technology in carbon credit markets will create an immutable ledger to record transactions, enabling real-time auditing and reducing the risk of fraud. It can reduce the costs associated with the market by eliminating middlemen while increasing the confidence of buyers in their purchases. The use of smart contracts will allow automated payments for carbon credits, further increasing efficiency and reducing costs.
Voluntary Carbon Market (VCM), blockchain and trust
The fragmentation of the voluntary carbon market (VCM) has raised serious doubts about the quality, efficiency and reliability of existing carbon credits. Without a unified system for assessing quality standards or mutually agreed accounting principles, buyers often cannot distinguish good credits from bad.
There is currently little transparency which has led to credibility problems regarding the claims made about the climate benefits of these carbon credits. This factor leaves buyers with an uncertain situation that can hinder progress towards environmental goals. It is imperative that we implement some form of regulatory oversight or higher level of security to increase transparency and trust in this intricate marketplace.
Blockchain developers have recently made inroads into the voluntary carbon market, the sector dedicated to incentivizing businesses to help tackle climate change.
This unveiling of disruptive activity has prompted an evaluation of whether blockchain-derived solutions can bring corrective action to a sector rife with an imbalance between low- and high-quality carbon credits and an opaque infrastructure around their measurement, reporting and verification (MRV).
To tackle the challenge, developers are aiming to innovate by adopting blockchain technology to increase transparency as well as create a more efficient system for tracking emissions reductions. It remains to be seen whether carbon blockchain can rise to the occasion and solve these problems facing the carbon credit market.
Blockchain Use Cases in the Carbon Credit Market
Use case 1: Carbon Credit Trading Platforms
One of the most promising applications of blockchain in carbon credits is the development of trading platforms that enable users to buy and sell these financial instruments securely and transparently. Such platforms can provide data on current prices for carbon credits, allowing companies to purchase the credits they need to reduce their CO2 emissions. Blockchain-based trading platforms can also enable users to trade carbon credits directly with each other, reducing the need for third-party brokers and facilitators.
Use case 2: Real-time carbon credit monitoring
Another application of blockchain technology for carbon credit transactions is real-time monitoring. This will allow entities buying or selling carbon credits to monitor their transactions in real time, ensuring accuracy and preventing errors or fraud by providing an immutable record of all transactions. It can also help to ensure compliance with various regulations relating to the purchase and sale of carbon credits.
Use case 3: Asset tokenization of carbon credits
Blockchain technology can also tokenize carbon credits and turn them into tradable digital assets, making it easier to track ownership of these financial instruments, as well as ensuring accurate valuation in a fast-moving market.
It can allow smart contracts that can automatically execute transactions when they meet certain conditions, increasing the automation and efficiency of the carbon credit market.
Use case 4: Carbon credit mega registries
The concept of a meta-registry, powered by distributed ledger technology (DLT) such as blockchain, provides a single source of truth for the aggregation and storage of metadata.
This decentralized digital resource promises to revolutionize carbon credit trading with its ability to provide greater transparency and verified buyer identity. With blockchain-based platforms, carbon credit databases, which have traditionally been siloed, can now be linked into one system that is publicly visible and traceable, reducing the risk of double counting or other errors related to reselling or claiming credits twice. Ultimately, DLT for carbon credits could revolutionize the market by providing users with more reliable data and efficient transactions.
Examples of blockchain companies that compensate for carbon emissions
Devvio
Devvio is a revolutionary cryptocurrency that not only enables convenient transactions, but is also much greener than the alternatives.
Recent reports have proven that each transaction on the DevvX blockchain uses three and a half billion times less energy than Bitcoin! It doesn’t stop there – the organization has already partnered with Avnet and Panduit to finance carbon-neutral projects.
These companies offer stakeholders the opportunity to buy carbon credits as they work together to fight climate change.
Building on this commitment, Devivio launched ground-breaking ESG software that allows cities and towns to benefit from more accurate visibility of their Scope 3 emissions produced by vendors and suppliers. This not only makes Devvio an attractive option for those who want to transfer money online, but it also offers great potential for progress in the fight against climate change.
Algorand
Algorand has taken sustainability to the next level by committing to a carbon negative status. They achieved the commitment in April 2021 through a partnership with ClimateTrade, which provides products that enable companies to track their carbon emissions and offsets.
The Algorand system calculates the carbon footprint of specific blockchains so that it can determine the number of carbon credits locked in a green treasury. By doing so, the blockchain can stay true to its goal of being carbon negative and also helps support ClimateTrade’s mission to bring greater transparency to corporate sustainability efforts.
Tree challenge
Treedefi is an innovative project listed on the Binance exchange. It creates a development platform and uses transaction fees to plant trees, which they represent as non-fungible tokens (NFT) or #nftrees. They also commit a third of their fees to planting trees worldwide.
Their unique dashboard allows users to explore the wide range of #nftrees available for purchase, track data on each one’s carbon sequestration and generate CO2 tokens from their own purchases. These tokens can offset personal carbon emissions or sell to companies looking for a verifiable way to reduce their own footprint.
Such transparency around carbon emissions is rare in this area, giving Treedefi users peace of mind when investing and making a difference in reducing our global emissions!
Save Planet Earth (SPE / SPEC)
SPE’s ambitious goal aims to deploy a carbon credit market on the Ethereum blockchain to allow companies and individuals to offset their carbon emissions.
To generate income, SPE will focus on several projects, including afforestation, replanting, renewable energy sources, soil renewal, as well as recycling, and promoting ocean climate management.
They will provide certified carbon credits through $SPE token investments. Their goods will include products from trees grown by the organization and even plastic collected in beach clean-up projects and groups it supports.
SPE plans to develop a tree tracking application for its business customers. With these initiatives in play, Save Planet Earth is leading the charge to combat global warming and preserve our environment for the future.
7 factors hindering mainstream adoption of blockchain in carbon credit markets
1. Lack of awareness: Most people are not aware of the potential of blockchain technology in carbon credit markets. This needs to change if we want to see wider adoption.
2. Difficult to use: Many blockchain platforms have complicated user interfaces for the average person to master.
3. Lack of trust: Blockchain technology is still relatively new and unproven, making it difficult for people to trust its use in carbon credit markets.
4. Regulatory obstacles: Carbon credits are subject to various regulatory requirements. It can be difficult for blockchain companies to comply with all these rules, making them less attractive than traditional solutions.
5. High costs: The cost of running a blockchain-based carbon credit market is usually quite high compared to more traditional solutions. This deters some potential users.
6. Security considerations: As with all technology, there is always a risk of hacking or data theft when working with blockchain-based systems. This creates some uncertainty among users who may be wary of putting their data at risk.
7. Lack of interoperability: Despite advances in blockchain technology, many platforms still lack the ability to communicate and share data with each other. This makes it difficult for companies to use multiple systems in unison and limits the potential of carbon credit markets overall.
Conclusion
The potential of blockchain technology in carbon credit markets remains untapped. With the right education and continued development, this could soon change as more people realize the benefits. Ultimately, it will be up to companies and authorities to take action if we want to see meaningful progress in the work on sustainability. Until then, projects such as Treedefi, Save Planet Earth and others play an important role in leading the effort towards a greener future.
