Could Blockchain help us stop Climate Change?

Bitcoin ups and downs have distracted public attention from the underlying technology enabling it and all cryptocurrencies: the blockchain technology. This technology, is a disrupting one whose enthusiast are calling the next revolution and compare it to the ‘internet revolution’. Great disruption could be expected in areas as diverse as finance, democracy and notary systems, to name a few. There are some people who like to call blockchain, the ‘internet 2.0’. That is, a new era of the internet, able to bring democratic values to the core of technology. New blockchain applications are surging every day and private and public institutions are starting to explore its implications. One of the areas where blockchain holds great promise is at helping the humanity tackle climate change. According to Investopedia’s Blockchain Definition:

“A blockchain is a digitized, decentralized, public ledger of all cryptocurrency transactions. Constantly growing as ‘completed’ blocks (the most recent transactions) are recorded and added to it in chronological order. It allows market participants to keep track of digital currency transactions without central record keeping. Each node (a computer connected to the network) gets a copy of the blockchain, which is downloaded automatically.”

Blockchain is not just for Financial Transactions

However, blockchain does not only allow users to make financial transactions, almost any type of data can be recorded on the blockchain as stated by Don and Alex Tapscott, authors of the famous book ‘Blockchain Revolution’ released on 2016:

“…the blockchain is global spreadsheet. An incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value and importance to humankind: birth and death certificates, marriage licenses, deeds and titles of ownership, educational degrees, financial accounts, medical procedures, insurance claims, votes, transactions between smart objects, and anything else that can be expressed in code.”

If you want to learn more about this technology, Blockgeeks is a good place to start.

Is Global Warming Real?

The general consensus among the scientific community is that climate change is real and is starting to cause extreme weather events such as floods, fires, mega-hurricanes, droughts and extremely cold winters. In this article we are going to adhere to the Intergovernmental Panel on Climate Change (IPCC) for all climate science related facts and figures. The international community embodied by the United Nations has led initiatives to stop climate change. Under the UN auspices, 195 countries have signed the 2015 Paris Agreement, which intends to hold the increase of global average temperatures below 2°C above pre-industrial levels. This is an ambitious goal taking into account that CO2 emissions have not ceased to grow (See figure below).

Figure 1. Observed increase atmospheric CO2 derived from direct measurements, taking the average of Mauna Loa (Hawaii) and the South Pole (thin solid line) and two ice cores: Law Dome (dashed thin line) and Siple (thin dotted line). This is compared to total anthropogenic emissions (thick solid line) and 46% of total emissions (thick dashed line). (Knorr 2009)[/caption]

Can Global Warming be Stopped?

Scientists and entrepreneurs from signatory countries are facing a huge challenge creating new and more efficient ways to curve greenhouse gas emissions. But it is also creating a huge market which has been presented as a 6 tn dollar opportunity at the World Economic Forum at Davos this year. According to a 2015 IEA report, the world needs to invest 400 bn dollars each year between 2014 and 2030 in renewable energy in order to avoid the world getting warmer than 2 °C above pre-industrial levels.

Whether or not the humanity is able to stop climate change is not a matter of available technology, nor it means sacrificing economic growth, it is rather a shift from current investments in fossil fuels to green projects. Fighting climate change is a must for humanity and as stated above, the financial incentives for businesses seem to be a good start for creating a low-carbon global economy. Now, lets focus on how blockchain can help us get there:

Carbon Offsets 2.0

Carbon credits and carbon offsetting mechanisms is an area where blockchain technology could help simplify things and increase efficiency. The Carbon market is a market mechanism created under the Kyoto Protocol to allow heavy polluters to buy carbon offsets from carbon offsetting projects. Since the distributed ledger of blockchain allows for a transparent, traceable, distributed and cost efficient registration of almost anything, administrative costs of setting up and following up on carbon offsetting projects could drop down to negligible levels compared to the value of the project. According to a BBC report, only 30% in every pound spent in carbon offsets, goes directly to projects themselves. The UNFCCC has already recognized the potential of blockckchain technology and a “Blockchain for Action” hackathon was created last year by the government of Lichtenstein and other sponsors in the margin of COP23.

Some startups such as DAO are already creating smart contracts and decentralized applications on the Ethereum Blockchain creating a new set of carbon offsets, which, according to their website:

“Solves the issues of fraud, double counting of assets. Unlimited options for linkage, interoperability and program integration, fungibility of instruments at discretion of numerous market stakeholders with negligible transaction costs.”

Democratizing Environmental Action

With the aim of balancing the economy, the environment and people’s happiness in the long term, Neutrum has envisaged a global token that would reflect each person’s entitlement to environmental services. By creating a token that every human is entitled to have and profit from but no one can sell, this startup wants to include every citizen of the world into the environmental conversation. These are some characteristics of the token:

• The token would give people voting rights on key environmental issues at a global scale.
• The token would mobilize funds to green projects.
• Token holders could get returns from those investments.
• Eligible projects are those working on clean energy, reforestation, waste management, carbon sinking, smart mobility and others.
• Corporations and individuals can sponsor and profit from these green investments.

Blockchain and Energy

In a not faraway future, energy production, distribution and sale will not be a monopoly owned by huge utility companies, as is often the case today. It will rather be distributed among users and each of us could become a prosumer (short for producer & consumer). Although startups such as SolarCity are proving that the concept works without the use of the blockchain, this new technology could enable peer-to-peer autonomous and transparent transactions by letting people buy and sell energy among themselves with the use of smart contracts while getting paid in real time. Blockchain in conjunction with other technologies such as the IoT (Internet of Things) could get us there. This is what IOTA (another cryptocurrency similar to Bitcoin) is all about. Strictly speaking, IOTA does not use the blockchain but a similar technology called directed acyclic graph (DAG). IOTA allows many devices to connect with each other in a decentralized manner, with no transaction fees. According to its website:

“IOTA is the missing puzzle piece for the Machine Economy to fully emerge and reach its desired potential. We envision IOTA to be the public, permissionless backbone for the Internet of Things that enables true interoperability between all devices.”

Blockchain Energy Use

Ironically, one of blockchain’s biggest drawbacks is also the amount of energy it requires to operate. Most blockchains including Bitcoin use Proof of Work (PoW) as consensus algorithm. PoW simply means that cryptominers try to solve huge equations with the use of a lot of computational power (and energy) and whoever gets to solve the equation first, gets rewarded with more cryptocurrency. Fortunately, not all blockchains are created equal and there are several types of consensus algorithms. Proof of stake (PoS) and Decentralized Byzantine Fault Tolerance (dBFT) are consensus algorithms that do not require big amounts of energy. PoS could be adopted by Ethereum later this year and dBFT is currently used by NEO.

How Blockchain is Changing Green Finance

Green project finance could get a boost with blockchain. In part for the same reasons that are creating ‘Carbon Offsets 2.0’ but also because the blockchain has created an entirely new way of raising money via crowdfunding: Initial coin Offerings (ICOs) and token emissions. Canadian startup CarbonX plans to use Ethereum tokens to finance carbon offsetting projects and create a peer-to-peer carbon trading market.

Finally, blockchain could bring the much needed trust and transparency to the green financing market. Allowing stakeholders to verify green finance transactions on the blockchain.

About me:

My name is Sebastian Moncada. I’m the founder of Neutrum and an enthusiast of blockchain technology. I hope this article provided a good introduction and insight on how blockchain can help us stop climate change. At Neutrum we want all the citizens of the world to have a voice on ‘Climate change’, which is a problem that concerns us all. We plan to do this by creating market mechanisms enabled by the blockchain technology. Please leave your comments bellow, I’d love to know what you think.

(Image taken from: https://www.skepticalscience.com/co2-levels-airborne-fraction-increasing.htm)