Institutions are betting on Blockchain technology to combat carbon emissions of DailyCoin

• Major global institutions push for blockchain in carbon credits.
• Global carbon markets rose 164% last year to $760 billion
• Markets are expected to rise further due to regulatory pressure

Most discussion about blockchain and carbon emissions has centered on the negative. This is largely due to the large energy consumption of many blockchain networks, including bitcoins.

But blockchain technology shows that it can help reduce carbon emissions. Leading global institutions are now betting on crypto to fight climate change.

One of the most promising applications is carbon credits. These tradable certificates represent the reduction of one metric tonne of carbon dioxide or equivalent.

The World Economic Forum, a lobbying organization focused on technology and sustainability, has promoted the use of blockchain to tokenize carbon credits.

Carbon credits originate from a system called cap-and-trade. Governments set a certain limit on the number of carbon emissions and allow companies to buy and sell credits through an exchange.

Carbon credit schemes are currently up and running in several regions, including the EU, New Zealand and California.

Are carbon credits a good investment?

The EU is by far the largest market for carbon trading. It accounts for 90% of the global carbon market, valued at $760 billion.

Currently, the EU’s Emissions Trading Scheme (ETS) covers significant parts of the economy, from the production of heat and electricity to commercial aviation. It also includes oil refining and the production of aluminum, iron, glass, paper and more.

All companies in these industries are subject to a cap on the number of carbon emissions they can produce. If their emissions are higher than the cap, they must buy carbon credits from companies with lower emissions.

Due to this dynamic, the prices of carbon credits are increasing. In 2021, the global carbon market rose by 164%, driven by the high demand for carbon credits. This figure is likely to go much higher as regulators further restrict supply.

For investors, carbon credits are similar to commodities. Holding carbon can be attractive to traders like , oil or gold if their prices increase. Traders can decide when to sell the commodity depending on market conditions.

Also, the price of carbon credits is most influenced by regulation, not the stock market. Their low correlation with the stock market potentially makes carbon credits an attractive resource for diversification.

Investing in carbon credits can help offer investors diversification while helping the environment. At the same time, it will help to reduce current emissions and stimulate new projects that promote clean energy.

Using Blockchain to Trade Carbon Credits

However, carbon trading has been inaccessible to the general public, says Zhi Li, CEO of blockchain-based climate technology company Carbon Credit Technology.

“Carbon credit trading is usually limited to institutions and large companies due to the complexity of the process and high transaction costs,” Zhi said.

The use of blockchain will reduce costs and accelerate trade. This will help more people participate in the green energy economy, Zhi explained.

To help make this a reality, Carbon Credit Technology has launched its own carbon credit token. The CCT tokens will give individual investors exposure to the carbon credit market. Supported 1:1 by EU carbon credits, the price of CCT will reflect the price of carbon credits.

“The CCT token allows retail investors to gain exposure to the carbon credit market, which was once only available to large financial institutions,” according to Zhi.

The CCT token is part of a larger initiative towards sustainable blockchain technology developed by the World Economic Forum (WEF). To coordinate with other major players, Carbon Credit Technology has joined the WEF’s Crypto Sustainability Coalition.

Large institutions believe that blockchain technology is the key to the green energy economy. Carbon credits are one of the many blockchain use cases that can help tackle the climate crisis.

By democratizing carbon trading, crypto will help spur the energy transition while giving retail investors a chance to benefit from a growing asset class.

“The crypto revolution has the power to democratize carbon markets and help create a fairer future,” Zhi said. “By making carbon credits available to everyone, we can start building a greener economy that works for everyone.”

On the other side

• Commodity traders face criticism for allegedly making the prices of tradable goods higher for consumers. Some might argue that trading carbon credits could make them more expensive than they should be.

Why you should care

Carbon credit tokens can help make crypto and blockchain technology more accessible to the public, and contribute to their mass adoption.

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