White House Recognizes Voluntary Crypto Carbon Markets
Did you know that the White House recently released a paper titled “CLIMATE AND ENERGY IMPLICATIONS OF CRYPTO-ASSETS IN THE UNITED STATES” where the Biden Administration acknowledged the potential for Voluntary Crypto Carbon Markets (VCCM).
The Good
Positive political recognition for the potential of crypto and climate is a step in the right direction for the legitimacy of the ReFi movement.
- “Executive Order 14067 calls for a discussion of the potential uses of blockchain that could support technologies for monitoring or mitigating climate impacts.”
- “There is potential for blockchain and Distributed Ledger Technologies (DLT) to facilitate the development of environmental and energy markets, including carbon markets”
The Bad & The Ugly
However this public endorsement for an on-chain carbon market hinges on one critical factor that both blockchain and voluntary carbon markets (VCM) have yet to fulfill: trust.
According to the paper, VCM’s have failed to instill trust in the following areas:
- High quality carbon credits*: “In VCMs, some uses of DLT are emerging, though it is not yet clear if they reflect an improvement over existing market infrastructure. Crucially, some stakeholders have raised concerns that existing carbon credits may not represent additional, permanent reductions in GHG emissions”
- Measuring, Reporting and Verification (MRV) for carbon offsets:“The challenge these markets face is verifying that the standards ensure that the particular market advances the desired environmental objective. This equates to verification of physical activities and outcomes against those standards and, as appropriate, enforcement of standards.”
- No regulatory compliance standards: “To date, administrators of compliance markets have not adopted blockchain or DLT. A central authority regulates and controls the process of issuing and surrendering carbon allowances. Covered entities have regulatory requirements to ensure the integrity of emissions reporting, and to ensure that emissions reductions are achieved.”
*A good read is CarbonPath’s post “Zombies on the Blockchain” about the predominance of low quality carbon projects on-chain.
Conclusion
For us Regens building in ReFi we need to own the fact that most of DeFi did not take financial stewardship seriously. Attracting and managing investor money lies at the highest spectrum of trust. Building a bedrock of integrity will lay the foundation to unlock trillions of dollars in TradFi towards crypto. We need to focus on adopting “best in class” standards and regulations if we are ever going to make a compelling value proposition against our Web2 counterpart.
Deep gratitude to the Spirals & Cryptohunt teams, Celo, ReFiDAO, Writing Club, Blockchain at Berkeley and so many more 💚
