PwC tackles blockchain’s carbon footprint

The significant energy and computing power needed to process transactions on blockchain, the distributed ledger technology that underpins cryptocurrencies and other business use cases such as supply chain management, has been under scrutiny in recent years.

But – as companies face increasing pressure to meet economic, social and governance (ESG) goals – PriceWaterhouseCoopers has recently developed an assessment framework to help clients evaluate the environmental footprint of their blockchain initiatives.

PwC’s toolkit can help companies quantify the carbon footprint of blockchain technology at a time when companies are under pressure to balance sustainability reporting requirements, cost cutting and the need for technology upgrades.

“The current climate in crypto, technology, finance and ESG makes this tool more relevant,” said Scott Likens, head of trust technology at PwC. “As cost-cutting measures begin in the new year, companies must still meet announced carbon reduction targets,” he said, noting that PwC’s toolkit can help companies measure, assess and reduce carbon emissions without costly assessments.

Financial services firms are increasingly taking blockchain seriously, especially to facilitate payments, he noted. As C-suite executives assess the impact of blockchain initiatives, consensus mechanisms—or the processes by which a blockchain’s nodes reach agreement—are increasingly coming into focus.

“What we want to do is provide a highly quantifiable approach to understanding real energy use and then the carbon behind it,” Likens said. “We looked at everything from the network, the nodes … where the energy came from, that framework can now be used by anyone.”

The framework is a mathematical methodology that evaluates blockchains and their consensus protocols, he added. PwC markets a platform that includes environmental impact methodology; competitive assessments; and blockchain simulation modeling, PwC said.

Minimizing energy use was one of the core goals behind the Ethereum blockchain’s so-called “merge” in September from a “proof-of-work” consensus mechanism to one more energy efficient “proof-of-stake” system.

Stellar’s initiative

The Stellar Development Foundation, a non-profit organization founded in 2014 to support the development and growth of the open source Stellar blockchain network, has been working with PwC for a year on blockchain sustainability initiatives.

The foundation used the PwC-developed framework to establish a carbon dioxide removal commitment that will help eliminate the network’s historical carbon footprint back to 2015.

“We believe [the framework] is replicable for the rest of the industry to rely on to make their own assessment of the energy consumption of their networks,” said Denelle Dixon, Executive Director and CEO of the Stellar Development Foundation.

The tool could increase transparency, with applications that could be extended to other companies, she noted.

PwC would not name any additional partners using the tool, but noted that other clients interested in blockchain sustainability solutions include “cloud providers, consumer market brands moving to Web3 and financial services [firms] when they adopt parts of blockchain infrastructure.”

Looking to the future, PwC said it plans to continue working with lawmakers and regulators to put additional safeguards around blockchain and cryptocurrencies.

“For us, it’s about guiding that regulation … and helping our customers through it,” Likens said. “This will be more of a pervasive technology, and we want to do it the right way.”