Autor Cointelegraph By Jane Thomason

The United Nations Climate Change Conference, known as COP26, in Glasgow, Scotland catalyzed a commitment to carbon neutrality, achieving net-zero carbon emissions, requiring reducing emissions as much as possible, and balancing the remaining emissions with the purchase of carbon credits.A carbon credit reduces, avoids or removes carbon emissions in one place to compensate for unavoidable emissions somewhere else through certified green-energy projects. Carbon credits represent one ton in carbon emission reduction. They are 1) Avoidance or reduction projects — e.g., renewable energy (wind, solar, hydro, biogas) — and 2) Removal or sequestration — e.g., reforestation and direct carbon capture, which are aimed at the voluntary carbon market (VCM). Carbon credits can be resold multiple times until it has been retired by the end-user who wants to claim the offset’s impact. Carbon credits can also have co-benefits, such as job creation, water conservation, flood prevention and preservation of biodiversity.Carbon registries store the carbon credits issued by third-party independent and internationally certified auditors or verifiers, in accordance with independent standards. Serial-numbered credits are issued by the verifiers, and the offset reduction claim gets converted to carbon credits that can be traded or retired. Carbon markets turn CO2 emissions into a commodity or tradable environmental asset by giving it a price.Related: UN’s COP26 climate change goals include emerging tech and carbon taxesIn the compliance market, carbon allowances are traded. There are currently 64 compliance markets in the world, and pricing is determined by the emitters and polluters. The European Union carbon market or Emissions Trading System (ETS), is the largest carbon market, with a 90% share in the global trade. Entry into the EU ETS is restricted to large polluters only and their brokers that are regulated by the operators of the program. The supply of credits is also controlled to manage the pricing. Only the carbon prices traded in the EU ETS reflect the true cost to pollute carbon, but access to the market is not equitable.Small companies and individuals can only access the voluntary carbon market, where they buy credits at their own discretion to offset emissions from a specific activity. Voluntary credits usually cannot be traded under the compliance market regime. Voluntary carbon markets are expected to grow 15-fold by 2030 to respond to increased private sector demand for climate solutions, according to the “Taskforce for Scaling the Voluntary Carbon Market Final Report January 2021.” A significant problem with VCMs is that carbon credit prices have been low. The low costs of voluntary credits at $2–$3 per credit neither motivate nor incentivize project developers and do little to capture the true cost of climate pollution as compared to the compliance markets.Related: The pandemic year ends with a tokenized carbon cap-and-trade solutionAn excellent article for understanding VCM is “The Good Is Never Perfect: Why the Current Flaws of Voluntary Carbon Markets Are Services, Not Barriers to Successful Climate Change Action.” In this article, Oliver Miltenberger, Christophe Jospe and James Pittman highlight key issues around the design, function and the scale-up of VCMs.Greenwashing. This happens when companies with false energy efficiencies claim to be more environmentally friendly than they really are, and thus high rates of ineffective credits are used to offset corporate emissions.Carbon accounting. The number of claims for offsetting emissions is unrealistic, given ecosystem constraints. Net-zero ambitions should have disclosure requirements and be audited. Double-counting can happen intentionally but also occurs due to a lack of complete accounting protocols and a lack of alignment between market jurisdictions or operators.Market failures and inefficiencies. One major critique emphasizes the risk to unfairly burden product and service markets with compliance costs, and there are few incentives for businesses that voluntarily take action to mitigate an environmental impact.Monitoring, reporting and verifying. The costs of these activities can constitute the majority of the market value of a carbon credit, reducing the incentive for implementation.Additionality and baselines. Carbon removal projects utilize inherently subjective baselines.Permanence. This refers to the assurance that carbon will remain in a stock for an extended period of time, usually 30–100 years. However, there is an opportunity to protect and expand carbon sinks, incentivize low carbon production, and increase the flow of carbon from the atmosphere to short-term and durable stock, even in cases with shorter-term permanence.Stakeholder inclusion and inequity. Projects can disenfranchise local livelihoods. In some early REDD + projects, the financialized carbon benefits resulted in local communities having restricted access to their traditional land and livelihoods.These can help with: standardized accounting protocols for interoperability across accounting scales and systems; greater transparency from VCM operators and credit purchasers; standalone certifications on rights and ownership of credits; improved traceability. Traceability, liquidity and smart contracts allow carbon credits to be used in innovative ways, creating additional demand in the overall VCM. Related: How blockchain technology is transforming climate actionWhen combined with remotely sensed data via satellite imagery, drones, laser-detecting devices and Internet-of-Things devices with machine learning and artificial intelligence, analytics can decrease development costs and increase rigor in measurement. Southpole pointed out: “Blockchain technology has enormous potential for climate action. This is only the case, however, when the right safeguards are in place to ensure environmental integrity. Web3 applications can be part of the climate solution, but they have to be designed and applied in the right way.”While the potential exists, we need action to rectify the problems in VCM, including:Strengthening the incentives for decarbonizationPricing carbon is urgently needed with improved price transparencyReducing the cost of carbon credit creationReducing transaction costs and providing additional liquidityMaking the prices in the spot and futures market higher and more reliableBuilding carbon credits as a viable asset class by providing predictable returns on investment and including value protection for buyers and sellersCreating safeguards to protect reputation and legal processes for disputes settlementClarity on taxation exemption of carbon credits, moving from “polluter pays” to “polluter invests” and full price discovery goes to the green owners on the ground taking direct climate action on their behalf.Kishore Butani of the Universal Carbon Registry in India pointed out, “Merely taking carbon credits on-chain does nothing for price discovery. It’s worse when the broker and middleman buy cheap and create tokens as we’re seeing currently, totally cutting off the project owner in the ground. What’s needed is not an NFT [nonfungible token] from the buy-side of the carbon market, but integration directly with carbon repositories that help rural developers and green project owners create the carbon NFTs.” He also added: “Can we learn from Bitcoin and price all mining years equally and make the entry into the VCM affordable to the rural poor in developing countries and stop diverting carbon finance to projects in Annex 1 countries? These countries are obligated to go green, my India isn’t.”VCM are an essential means to catalyze action but need major improvements to fulfill that role.This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.Jane Thomason is the chairperson of Kasei Holdings, an investment company specializing in the digital asset ecosystem. She holds a Ph.D. from the University of Queensland and has had multiple roles with the British Blockchain & Frontier Technologies Association, the Kerala Blockchain Academy, the Africa Blockchain Center, the UCL Centre for Blockchain Technologies, Frontiers in Blockchain, and Fintech Diversity Radar. She has written multiple books and articles on blockchain technology. She has been featured in Crypto Curry Club’s 101 Women in Blockchain, the Decade of Women Collaboratory’s Top 10 Digital Frontier Women, Lattice80’s Top 100 Fintech for SDG Influencers, and Thinkers360’s Top 50 Global Thought Leaders and Influencers on Blockchain.

The United Nations Climate Change Conference of November 2021, known as COP26, in Glasgow, Scotland urged the world to commit to curbing contributions to carbon emissions. Achieving a net-zero world in less than 30 years is causing many to turn to blockchain technology, buy carbon offsets, and spark renewed interest in carbon capture.The United Nations Environment Programme (UNEP) has identified transparency, clean energy, carbon markets and climate finance as areas where blockchain technology can accelerate climate action. At the 2017 Paris Summit, the UN Climate Change Secretariat joined a multi-stakeholder group of organizations to establish an open global initiative, the Climate Chain Coalition, signaling its early support for blockchain for the climate.At the Middle East and North Africa (MENA) Climate Week, UNEP, the International Association for the Advancement of Innovative Approaches to Global Challenges (IAAI GloCha), and the United Nations Economic and Social Commission for Western Asia drew together blockchain stakeholders in the MENA region to shape a common understanding of the technology’s potential for supporting countries with climate action, which was followed by the Blockchain4Climate networking event. Drawing from these discussions, I will shed light on how we use blockchain to address climate action.Green digital asset solutionsAlthough the digital asset industry has been slammed for its high energy consumption, such an accusation is misleading. It is essential to differentiate between cryptocurrencies and underlying blockchain platforms that are energy efficient and underpin climate initiatives. Few climate initiatives leverage cryptocurrencies. Algorand has declared its blockchain to be entirely carbon-neutral; Kickstarter is building a crowdfunding platform on the carbon-negative blockchain platform Celo; and SavePlanetEarth is setting up certified Carbon Credit Smart nonfungible tokens (NFT) on Phantasma, a green blockchain for developers to build their decentralized applications. The game is on, and platforms are transitioning to more sustainable energy and consensus mechanisms. Polkadot has also been highlighted as a climate-friendly blockchain.Related: Green ‘light’: The EU’s approach to crypto balances eco-values with regulatory relevance The renewed interest in carbon reporting, sequestration, and capture-leveraging voluntary carbon markets has opened the door for green digital asset solutions, which can be tokenized and used as commodities in a market system — e.g., green utility tokens, a reward for lowering carbon emissions; green asset tokens, tokenized carbon credit or biodiversity off-sets; green crypto, programmed only to be spent on green products; and green security token offering issuance platforms designed to enable green proof of impact reporting.We are seeing a maturation and proliferation of such projects as people innovate for climate action — e.g., TreeCoin sells tokenized assets tied to eucalyptus trees and reinvests them in eucalyptus trees in Paraguay. Carbonland Trust also has a tokenized carbon credit for forest conservation, while the Cambridge Centre for Carbon Credits is looking to purchase carbon credits to fund nature-based solutions preserving biodiversity. ClimateCoin incentivizes the offsetting of carbon emissions by awarding tokens to persons who plant trees or reduce CO2 emissions. Carbon Offsets To Alleviate Poverty supports projects that reward farmers who plant and maintain trees on under-utilized portions of their land. Evercity is working with GloCha on a green chain solution toward COP28, the 28th session slated for Nov. 6–17, 2023.Related: UN’s COP26 climate change goals include emerging tech and carbon taxesSeveral projects are also focussing on tradable carbon credits. Universal Protocol allows certified projects to turn greenhouse gas reductions into tradable carbon credits. First, NFT-based carbon credits provide carbon credit issuers access to the blockchain and enable users to track, trade and burn credits. Moreover, organizations such as Evercity and Blockchain Triangle are robust integrated platforms that guide and aggregate initiatives and carbon credits, linking them to investors and financial mechanisms, such as digital green bonds through blockchain-driven platforms. The capacity to include these voluntary market credits in national reporting under the Paris Agreement is also being addressed through initiatives such as Blockchain for Climate and its Bitmo platform and the Open Earth Foundation and its Nested Climate Accounting for the Paris Global Stocktake. Smart grid managementBlockchain technology can help improve and manage smart grids in decentralized energy markets and allow reliable and transparent peer-to-peer power trading. Powerledger enables consumers to buy, sell, or exchange excess renewable electricity directly with one another. Solstroem focuses on accelerating the energy transition in developing and emerging countries, providing off-grid solar and geotagged, timestamped micro-carbon credits that individuals or companies can purchase. United Kingdom’s Electron uses smart contracts on the Ethereum blockchain to develop a smart grid that will consistently deliver energy. Grid Singularity is a decentralized energy marketplace and energy data exchange platform. TransActive Grid is also a blockchain-based energy marketplace, but it focuses on local peer-to-peer home-produced energy trading.New technologies that significantly reduce fabrication costs and the massive adoption of mobile phones in developing countries make it possible for solar panels to be connected to the blockchain to enable consumers to benefit from distributed generation. Azuri Technologies, Zola Electric and Mobisol produce low-cost solar panel solutions for off-grid areas in rural Africa. This smart “pay as you go” system makes solar technology affordable at a fraction of the price of kerosene, allowing households to pay off solar panels, which helps them move from renting to owning an asset. This can transform the lives of off-grid rural citizens, making them owners of cutting-edge technology, building a healthier, safer home environment and supporting additional sustainability initiatives.NFTs and gamificationNFTs are increasingly being leveraged for climate change, with initiatives ranging from raising awareness to fundraising; moreover, NFTs are used as an immutable record for impact and carbon credits. SavePlanetEarth is launching certified Carbon Credit Smart NFTs. First Carbon Corp. is developing NFT-based carbon credits, whose issuers will have access to the blockchain, enabling users to track, trade, and burn credits so that there is no double counting.Related: Despite the bad rap, NFTs can be a force for goodAnother NFT use case is DigitalArt4Climate, a multi-stakeholder partnership initiative that uses blockchain technology to turn art into digital assets or NFTs, which can be collected and traded, unlocking the potential for resource mobilization, youth engagement and climate empowerment. DCarbon founder​​ Adi K. Mishra points out that you can also use gameplay to incentivize widespread positive climate action. GreenApes deploys gamification to help people understand their carbon footprint, and we can expect to see more games where people can play to earn for climate action.Measurement and reportingBlockchain technology will be a critical tool for measurement and reporting in combination with artificial intelligence and the Internet of Things (IoT) with large-scale interconnected databases — e.g., climate, water, land — to develop action for desertification and deforestation and predict weather events and trends. Blockchain smart contracts offer a tamper-proof and zero-cost mechanism to connect positive (or negative) environmental changes or outcomes to financial incentives/disincentives — e.g., a measurable reduction in CO2 measured by an IoT-based network of atmosphere monitoring sensors placed around a village can “trigger” the release of crypto to the village based on the observed measurement in the environment.DAO for climate actionBlockchain technology can create new​ ​digital ​economies that ​unite ​and ​economically​ ​align people around ​a common ​purpose. It is possible to develop economies that value climate action. IAAI GloCha presented its United Citizens organization for climate empowerment plans at MENA Climate Week, which will be a flagship initiative at COP28.I will provide a deeper dive into each of these opportunities in the coming weeks. This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.Jane Thomason is the chairperson of Kasei Holdings, an investment company specializing in the digital asset ecosystem. She holds a Ph.D. from the University of Queensland and has had multiple roles with the British Blockchain & Frontier Technologies Association, the Kerala Blockchain Academy, the Africa Blockchain Center, the UCL Centre for Blockchain Technologies, Frontiers in Blockchain, and Fintech Diversity Radar. She has written multiple books and articles on blockchain technology. She has been featured in Crypto Curry Club’s 101 Women in Blockchain, the Decade of Women Collaboratory’s Top 10 Digital Frontier Women, Lattice80’s Top 100 Fintech for SDG Influencers, and Thinkers360’s Top 50 Global Thought Leaders and Influencers on Blockchain.