The scientific consensus is that we have reached a crunch point. We have a rapidly closing window of the next few years or so where if the world works together, cuts emissions, switches to renewables and adopts and implements net zero plans - in line with the 2015 Paris Agreement - we can limit global temperature increase to 1.5 degrees centigrade.
Official peer reviewed data published by the United Nations is quite simply frightening.
Blockchain can help by accurately recording each company’s carbon footprint. Blockchain technology has the capacity to measure carbon footprints through intelligent sensors compatible with the Internet of Things (IoT).
The Internet of things (IoT) describes physical objects (or groups of such objects) with sensors, processing ability, software, and other technologies that connect and exchange data with other devices and systems over the Internet or other communications network.
Incidentally the Internet of Things or IoT is considered, by many, to be a bit of a misnomer as devices do not need to be connected to the public internet, they only need to be connected to a network and be individually addressable.
Blockchain + IoT combined make it possible to calculate energy consumption and generate data that can be analysed in the blockchain.
So how blockchain technology help companies reduce their carbon footprint and help fight climate change?
One source of market friction is overwhelming demand. Zero net corporate commitments mean global demand for voluntary carbon offsets is projected to grow from USD$1 billion in 2021 to USD$50 billion by 2030.
The first thing blockchain has changed in how ESG markets operate, is improving market efficiencies. Market structure is a constant problem, even with ESG product standardisation. According to Sussex Research Online, “at the most fundamental level, carbon markets are problematic because they often presume that the relationship between emissions and climate change is a linear one, that a one-to-one tradeoff is present between emissions and offsets, and that a carbon credit is “homogenous” or “equally valuable” independent of when and where carbon dioxide was emitted. Each of these assumptions is wrong.”.
However, the implementation of blockchain into carbon markets has made three major improvements. First, decentralisation is reducing the difficulty of registering, managing, and trading carbon credits. For example, the ESG1 platform is already generating public chain offsets from energy measurement software such as Corda and Smart Contracts. This type of automated credit validation system is simplifying markets and consequently increases quota utilisation. A great example of this is Air Carbon in Abu Dhabi. It will be the first fully regulated carbon trading and clearing centre in the world.
Blockchain is helping drive the environmental, social, and governance (ESG) agenda.
Many greentech discussions focus on the environmental problems of blockchain supported mining. But it should not be forgotten that this technology was invented to democratise social policy and financial governance.
NASA and other space agencies have been monitoring greenhouse gas emissions for years. However, with the new generation of private satellite operators, like Spire Global and GHGSat, it is now possible to focus on individual facilities and detect specific emission rates. Better, specific data, means a clearer understanding, more control, and more effective plans to reduce emissions.
Oil and gas corporations are the largest industrial source of emissions worldwide and are the leading users of these services. Other industrial sectors which produce a large amount of carbon dioxide include electricity generation, coal mining, steel manufacturing, cement production, agriculture and waste management.
Large amounts of high quality satellite data has produced data analytics companies such as Descartes Labs, Enverus, Kayrros and SatSense etc. These specialised companies help emission generators, regulators and market analysts by providing them with high quality data. This data is then used by investors and fundraisers to better understand whether a company’s claims are pure greenwashing.
The lack of transparency in the unregulated carbon offset marketplaces, and the lack of proof re offsets, is where blockchain can make a positive difference.
Blockchain can provide an auditable and standardised recording system, without the need for centralised management. It records, tracks and manages data that is critical for ESG environmental reports.
When environmental data is recorded by satellites and IoT devices, real-time evaluations are transferred to the blockchain by intermediaries. This way, automatic transactions can be made (smart contracts), because they are based on actual numbers, not just speculation.
In this information age, brands cannot and should not escape their stakeholders' watchful eyes. Hence, a new material revolution is needed to fight the global waste crisis and climate change.
The chemical industry for one seems to be in the lead in the race for net zero. Moreover, it is contributing to circular society technologies, as chemicals are prevalent in almost all manufactured goods.
Material procurement and traceability are more important than ever, but circular systems and economies cannot exist without traceability.
We call it the “Mass Balance” approach. This system allows manufacturers to know what percentage of their product is sustainable. The approach encourages recycled and renewable materials accountability. This is where our blockchain ecosystem, MARCO, comes in.
Due to its decentralised nature, blockchain technology can help with the certification of sustainable material uses, mass balance concepts, trust and visibility. Physical assets can be digitised into tokens. As the physical assets shift, so do the tokens. Every transaction or mineral is attached to the previous one, which makes the process tamper/proof, visible, and traceable.
The decentralised nature of blockchain gives all participants the same level of control, and jurisdiction over data. Data is shared with all participants equally, and it is synchronised in real-real time. When it comes to the chemical industry, members would have full transparency over the entire supply chain.
Smart contracts can empower regenerative agriculture programmes including rewarding (and thus incentivising) raw material providers for reducing their carbon footprint. This is usually done through land-based practices such as tree planting and conservation.
A great example of this is the Green World Campaign. They are building smart contracts using satellite data and are automatically depositing rewards to individuals that successfully regenerate land by planting trees and improving top soils and drainage, etc.
Payouts are made when trusted intermediaries acquire data from satellite images that trigger smart contracts on the blockchain. This guarantees people earn rewards fairly and transparently. This generates trust.
The implementation of technology in the food supply chain can improve traceability and can have a positive impact on the food industry. Many operations, such as safety control, are still managed manually and are vulnerable to human error. If the food industry decides to digitise its manufacturing process, it would be able to leverage digital methods such as “Digital Product Passports', to validate food safety and ESG compliance. A digital product passport would store all the information about the components of certain products, which would enable long-term control and production transparency.
Transparency and trust are not only important to consumers. In the B2B sector, certification for sustainable procurement of chemicals and environmentally friendly and socially responsible production conditions is essential.
When communicating their favourable outcomes, businesses need to be confident that they have an undeniable record that verifies their message. By adopting a transparent digital agenda, including using blockchain technology to demonstrate transparency in ways not possible with other digital technologies, businesses can improve their sustainability credentials and reports.
Giant facilities are usually centralised and often cause sustainability issues. On the other hand, distributed grid aggregates distributed energy generation from distributed energy sources. These are typically renewable energy sources such as wind, solar and hydroelectric power. A decentralised grid is the best solution for communities and individuals to become owners of energy distribution and generation.
These energy grids can use real-time satellite weather data to predict charge throughout the grid. By redistributing energy within the grid, you can respond to changes in weather and fluctuations in energy supply from renewable sources.
A distributed energy grid would give consumers more control over their energy supply, offering flexibility, customisation and convenience. Decentralisation of energy generation, transmission and distribution, from microgrids serving small communities to grids serving entire urban areas, cities or countries, would result in more autonomy in terms of electricity supply. Furthermore, it would provide much more resilience and reliability.
Climate change and carbon footprints are real, and the clock is ticking.
The most important thing to remember when introducing blockchain and smart contracts into your business model is that individual, isolated efforts can become networks - that can then identify everyone's contribution to helping combat climate change.