Two ideas stood out from the Kyoto Protocol of 1997. One was that of carbon credits, where polluters could ‘offset’ their CO2 emissions by investing in ecologically-friendly projects around the world. The other was that the world’s majors polluters would all have to work together to tackle climate change – without the United States, who did not ratify the treaty.
20 years since, and we find that neither of these ideas aged well. The carbon credit concept, though adopted by numerous multinationals and nations, failed to take off. And the United States, by choosing to backtrack from the Paris Climate Agreement, has retained its position as the world’s number one obstacle to preventing global warming. It leaves an onus on too many polluters to make up for the emissions of just one superpower.
There is cause to retrospect on either. The failure of carbon offsetting could in large part be accounted for by lax verification procedures. In 2008, an organization that ‘verified’ nearly half of the 1,200 carbon-offsetting projects approved by the Kyoto Protocol’s Clean Development Mechanism (CDM), had its work suspended for ‘serious flaws’ in its validation activities.
It’s a classic case of ‘who watches the watchmen?’ and it’s one that has plagued developed and developing nations across the world in executing projects with a degree of accountability and efficiency.
Likewise, the issue of the United States staying out of climate talks has greatly to do with the lack of regional incentives being offered for its senators to vote for agreements that, in their view, will throttle development. In choosing their own polluting commercial interests, the US raises the classic economic problem of short-term gains over long term-pain.
How does one authenticate the process of carbon-offsetting around the world – while making the act a sweeter deal for emitters? Enter blockchain technology.
As Lisa Walker notes in the World Economic Forum, a combination of differing standards and regulations, a lack of transparency, and the issue of double counting have diluted public faith in carbon offsetting. These are all problems that blockchain technology sets out to solve.
The blockchain that powers Bitcoin and Ethereum is at its most basic, a large, immutable public ledger. It’s a constantly updating record with no capability for being tampered with. If you upload a document today, you’ll be able to verify it years from now – and ensure that nothing has changed. This ledger, where every transaction is recorded on the network as a whole, leaves room for many opportunities once you consider the implications of immutable data.
In a food supply network, blockchain has been used to verify the organic-contents and quality standards of tea products along Unilever’s entire supply chain in Malawi. The United Nations even organizes hackathons on the blockchain, to help bring out new ideas that could revolutionize our approach to tackling climate change.
Amidst an unprecedented surge in Bitcoin transactions – pushing the eponymous currency into the largest bubble in history – cryptocurrencies are being created on a frequent basis. One new example is IOTA – an even-further decentralized network than Bitcoin, designed for the Internet of Things.
IOTA was platform partner for this year’s Hack4Climate hackathon – where participants tried to develop innovative ways of using blockchain to solve problems relating to the environment.
The principle idea of blending blockchain with carbon credits is that it can reward users who adopt climate-friendly measures – by issuing them cryptocurrencies or tokens.
One example is CarbonX, which works with UN carbon purchasing schemes that certify greenhouse gas reductions to issue CxT tokens. These are then sold to retailers and manufacturers, who can use it to incentivize customers to pick sustainable options. Choosing a ride-sharing taxi journey instead of a whole car will net you some tokens, as will choosing a manufacturer’s more eco-friendly options. However, the number of tokens you receive will be up to the respective companies.
It’s essentially a loyalty-rewarding program for carbon credits. But it has the potential to take carbon trading to the individual consumer. But what about blockchain for larger entities?
Writing in Nature.com, Guillaume Chapron has advocated for crypto governance – using blockchain to make environmental policymaking transparent and traceable, while using bitcoin’s convenience (instant payments, low transaction fees, no middlemen) to reach unbanked farmers.
The sky is the limit. But the immediate question regarding blockchain and the environment is whether new blockchains will be able to pay for themselves. As has been reported, the energy consumption of the entire Bitcoin network is over 10.4 TeraWatt hours a year, equal to Uruguay’s total energy consumption. While millions of computers running at a high-energy state, the technology that keeps Bitcoin decentralized is also what makes it a carbon guzzler.
A single Bitcoin transaction takes up exponentially more energy than a credit card transaction. At the rate of growth of Bitcoin use, by 2020 Bitcoin alone would consume more power than the rest of the world.
And so, while eco-currencies try to save the world, the elephant in the room remains Bitcoin itself. This means that, like Bitcoin’s rate of growth against the dollar, its global energy usage is anything but sustainable.
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