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Category: Blockchain

Blockchain and the Environment

Unless you have been living under a rock the past few years, you have probably heard of bitcoin, a type of cryptocurrency that has generated headlines for its price rises (and falls) over the past five years. So, what has cryptocurrency, and the blockchain in general, got to do with climate action? First, let’s start with the basics.

What is cryptocurrency?

Cryptocurrency is a digital currency which allows two people to transfer money to each other without it going through a central authority (such as a bank). It is secured by cryptography (hence the name), which makes it almost impossible to counterfeit. Where once cryptocurrency was a niche subject, it has exploded into the mainstream in recent years. This mirrors the price of the most famous cryptocurrency, bitcoin, which cost less than $100 in 2013, but is now selling for more than $50,000 each.

So, what is the blockchain?

The blockchain is essentially a digital ledger of transactions that is distributed across the entire network of computer systems that make up that blockchain. The ‘block’ refers to the individual record of each transaction, while the ‘chain’ refers to the fact that those records are linked in one chain. Each time a transaction occurs, a record of that transaction is added to every participants’ ledger. This allows for transparency, efficiency and security.

Are there any climate action benefits to the blockchain?

Great question. There are multiple ways the blockchain can help with climate action, mainly due to the fact it is decentralised and so fosters greater transparency. As Alexandre Gellert Paris, Associate Programme Officer at UNFCCC says: “As countries, regions, cities and businesses work to rapidly implement the Paris Climate Change Agreement, they need to make use of all innovative and cutting-edge technologies available. Blockchain could contribute to greater stakeholder involvement, transparency and engagement and help bring trust and further innovative solutions in the fight against climate change, leading to enhanced climate actions.” These include:

Improved carbon emission trading

The blockchain can be used to improve the carbon asset transactions system. Energy Blockchain Lab and IBM created a blockchain platform to trade carbon assets in China, which “allows high-emission organisations to monitor their carbon footprints and meet quotas by buying carbon credits from low emitters.”

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IBM thinks blockchains can help reduce carbon emissions

The world is moving toward a “token-driven economy” in which all kinds of assets, from stocks and bonds to real estate and fine art, will be represented by crypto-tokens on blockchains—and this will unlock massive amounts of value. At least that’s what IBM, which hopes to build software platforms for trading these tokens, is betting. And one of the first things it plans to help digitize has a bonus feature: it benefits the environment.

Companies, governments, and others use what are called carbon offset credits to compensate for the carbon dioxide they emit. The credits are purchased or traded, and the investment goes toward reducing emissions some other way, such as renewable energy production or carbon sequestration. But there are various kinds, and some tend to lose value over time. Unfortunately, purchasing “high quality” carbon credits is a complex, cumbersome process that has to be done in over-the-counter transactions, which slows down the market for them, says Jim Procanik, executive director of the Veridium Foundation. Blockchain technology, he says, is a “perfect background for creating a more liquid and transparent marketplace.”

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