The World Bank’s affiliate IFC supports a blockchain-based platform for trading carbon offsets
The International Finance Corporation (IFC), a member of the World Bank Group that focuses on investing in less developed nations, has formed a partnership with Chia Network, a blockchain platform with an emphasis on the energy industry, for the Carbon Opportunities Fund.
In particular, the IFC supports a blockchain-enabled carbon offset trading platform in an effort to increase institutional investors’ support for climate-friendly initiatives in emerging markets, according to a Reuters report 17 August.
The IFC hopes that adopting blockchain, a digital database containing information that can be openly shared across a large decentralized network, will increase the use of carbon offsets to a greater level than more conventional means.
When calculating their carbon footprint, businesses and other organizations will use these credits to offset the emissions attributed to them. They are supported by activities that compensate for emissions, such as planting trees or producing solar and wind energy.
Fintech is shown with digital tokens that convert carbon offsets
In the past year, several fintech companies have been established to convert carbon offsets into digital tokens; However, the market has struggled to gain a foothold with companies and institutional investors due to concerns about the origin and environmental benefits of some of the credits being traded.
Blockchain technology has also been criticized by environmentalists for the high energy consumption.
Aspiration, a firm specializing in sustainable finance, and Cultivo, an investor in biodiversity, are both participating. The fund will deliver blockchain-based carbon credits that were acquired from projects selected by the aforementioned two organizations.
Benefits of carbon offsetting
Carbon offsetting allows companies to offset the greenhouse gas emissions they are responsible for by obtaining credits from organizations that support initiatives such as tree planting and renewable energy production.
According to Paulo de Bolle, Senior Global Director of IFC:
“This new framework that will use new blockchain technologies is an innovative way for capital markets to engage in carbon credit trading in a transparent, secure, fair and beneficial way.”
The $10 million proof-of-concept fund will raise carbon credits from Aspiration and Cultivo, which will be tokenized using Chia technology and monitored using the World Bank’s Climate Warehouse database.
Due to the increased transparency, blockchain technology may seem like an obvious choice for companies working on carbon offsets.
On the other hand, for many people, blockchain is tarnished because it is associated with the energy-intensive mining involved in cryptocurrency mining, the method by which new currencies are issued on the network.
