Blockchain and Forestry
There are many ways blockchain or ‘distributed ledger technology’ (DLT) can help the forestry industry and other businesses be more sustainable and provide transparency for multi-national supply chains. But ultimately, it’s a tool that needs to provide value. Some of the values blockchain can produce are:
- Provide Security
- Increase Transparency
- Track data across borders (if inputs are regulated in some way)
- Provide Due diligence
- Streamline Identification
- Establish legality
The recent announcement for a UN coalition on blockchain technology and the SDGs is a clear sign there could be value, and I think there is huge potential in the forestry/bioproduct industry and carbon in the marketplace.
Bioproducts are made from cellulosic (woody) inputs. They could be used for energy, like bioenergy or biojet-fuel, or for plastics and other products.
But what isDLT?
“A distributed ledger is digital data shared/replicated/synchronized across multiple sites.” — Ari David Paul
It’s a simple way to transfer data in a ‘distributed’ or disbursed way. Distributed means that it doesn’t need a bank or some third party to verify the data, because everyone can verify it that is part of the ‘system’ or ‘chain’. A critical factor for DLT though, it’s a database, not a data collector.
Supply chain transparency
The most obvious benefit of DLT is supply chain transparency and management. Large, multinational supply chains are built on numerous transactions and contract fulfillment. If you cut a tree in Canada, sell it to a broker, who then puts it in a pile to be shipped to Japan, which then gets distributed to a mill, then sold to a housing project in Kyoto. The layers of contracts, transactions and red type is a real challenge, especially when considering timber trading laws, sustainability regulations and forest management practices.
This is the main issue with palm oil and biodiesel in the EU right now. Governments pay for bio-diesel, but they end up funding massive deforestation in Indonesia and other places. Because of greed, lack of oversight and transparency. Now, we can set the record straight. Now we don’t have to rely on another country’s documentation. DLT can provide transparent, legal documentation as evidence. Evidence that there was no land-use change when creating this bio-diesel or that biofuel. Because it’s trackable.
Some 3rd-party sustainability certification standards already help with sustainability measurement and management (FSC, SFI). Blockchain won’t replace standards like Organic, Natural, or the Forest Stewardship Council (FSC), because we still need good data. But, they lack the tools required to truly track important product data, like GHG emissions or carbon.
Planting a tree is easily the cheapest way to remove carbon from the atmosphere (other than never leaving your log cabin and never using electricity). It costs $4 CAD/tree. Carbon credits are a great way for people to immediately offset their emissions, by buying trees or paying for planting trees.
However, additionality and leakage are the prime issues with carbon credits. These two critical issues are really about trust. Trust that if you buy a carbon offset, it’ll truly take carbon out of the atmosphere. You’re taking someone’s word that it is happening. It’s hard to measure. You can’t hold it in your hands.
Blockchain can increase that trust. Tracking physical assets, like trees, and attaching values to them, like carbon sequestration or carbon storage. If those data points were set in a DLT, then we’d know! We’d know from day 1 to day 1,000 that this particular forest next to your house had X carbon in it, depending on our modeling. We’d also know if you cut other trees down to supplement your income, or changed your behavior and bought a gas guzzling Hummer with your carbon credit money... It’s an expansive problem, but blockchain could help.
Poseidon, an NGO that is changing the way people pay for offsetting their emissions, is giving power to the consumer through blockchain. There’s a way to pay $100 for carbon offsets, and link it with your purchase on the blockchain, removing the trust issues with additionality and leakage. Because the work is tracked.
Despite this excitement, there’s a few major drawbacks from the hype of blockchain right now though…
Valuing carbon is still a problem. There is no global price, only nationally determined prices, at best. Perhaps a company can fix that, likely not. Governments will be pressured to not subject others to a global carbon price (at least right away). I’m pretty cynical on that front, but who knows. The salience of the issue could press government to act.
Garbage in, garbage out. We still need good data. If we attempt to track emissions or carbon, how can we measure that effectively? Will we use the same measurement method or model? What about Life Cycle Emissions? How does international aviation emissions play a role?