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Last updated: Aug 29, 2023

How blockchain can boost climate action

Author: Anna Iuchanka
Last updated: Aug 29, 2023
What's inside

When it comes to climate change, waiting is a losing game. Instead of pinning hopes on scientific moonshots, it's high time we put proven technologies like AI and blockchain into play. 

And blockchain, particularly, is a far better fit than you probably think. Given that data is the engine of any sustainability effort — no matter corporate or governmental — the development of robust climate action policies and programs largely depends on accurate and transparent data collection, attribution, and distribution.

But here's the hitch: Our data isn’t quite there yet in terms of reliability. A recent Deloitte survey found that only five percent of firms are fully confident in the insights they use to measure, track, and achieve their net zero objectives. (Ouch!)

Fedar Piashko, a blockchain expert at Vention, thinks that zeroing in on decentralized technologies might be the solution. “Integrating blockchain into climate solutions amplifies data transparency and allows all market participants to tap into high-quality, open-source information,” he explains. “It’s a pathway to better calculations and predictions and more inclusive climate action.”

Then there are smart contracts. They make it possible to create self-executing reward systems that encourage sustainability efforts through positive peer pressure. Plus, their adaptability makes them ideal for tackling administrative challenges.

The wider industry seems to be noticing this, too. Leading brands like Shell and Kia are leaning into greener manufacturing solutions on blockchain, while authoritative voices like KPMG predict that “interest in blockchain and digital asset solutions will only increase in the environmental, social, and governance movement (ESG) space.” 

The reason for that is simple: As crypto faces some headwinds, attention is shifting to other blockchain applications, especially in areas such as voluntary carbon offsetting, supply chain monitoring, renewable energy trading, and regenerative farming.

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Carbon credits and emissions trading 

One industry that's really turning the heat on blockchain is the voluntary carbon market (VCM), which is projected to hit $50 billion by 2030. Essentially, the VCM lets businesses offset their unavoidable emissions by purchasing credits from projects that reduce or remove greenhouse gas emissions (GHG) — think reforestation, urban greening, and agricultural soil management.

Blockchain’s role here is to facilitate tracking and trading carbon credits through smart contracts while ensuring that measurement and verification of emissions reduction are spot-on. On top of that, smart contracts automate transactions, which smooths out the whole trading process.

Flowcarbon, for example, helps projects sell tokenized carbon credits to eco-conscious companies. By putting all transactions on the blockchain, the company enables project developers to secure funds and achieve credit issuance, while making it a breeze for corporations to create and oversee their carbon portfolios. And their robust funding flow speaks volumes: So far, Flowcarbon has raised $71.6 million from major investors such as a16z, Samsung Next, and RSE Ventures.

And ever heard of Moss.Earth? This São Paulo-based startup pioneers the digitization of environmental assets, including conserving the Amazon rainforest. Its first NFT, MCO2, is a tokenized carbon credit representing a hectare of the Amazon, which will subsequently be protected using a portion of the invested funds. (Given that the Amazon rainforest could disappear in the lifetime of many of us, the company’s mission is nothing short of vital.)

Supply chain management

Blockchain revolutionizes the environmental side of supply chains by providing full transparency in tracking a product's journey — all the way from sourcing to delivery. This accountability encourages stakeholders to make greener choices, as every step is visible and verifiable.

To better understand the concept, check out Circulor, which offers traceability-as-a-service and supply chain solutions for manufacturers. Powered by blockchain and AI, the startup enables tracking of raw materials across the consumer electronics and electric vehicle batteries supply chain. As a result, businesses have visibility into the carbon footprint at every stage, from production and recycling to end-of-life.

And transparency isn't just a benefit to businesses; it resonates with consumers, too. According to KPMG research, a whopping 86 percent of consumers consider social and environmental factors when making a purchase. The challenge? Getting accurate information about how goods were made and reached the market.

This is where Provenance — a sustainability communications and data platform for e-commerce — steps in. It empowers brands to validate their sustainability efforts through an independent, blockchain-based system; this, in turn, equips retailers with an opportunity to elevate their brand image and foster deeper connections with customers by featuring eco-conscious brands.

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Decentralized energy trading and renewable energy adoption

The energy sector is also plugging into blockchain power. With the increasing adoption of decentralized energy grids, individuals can engage in peer-to-peer (P2P) energy transactions, bypassing central utility hubs. This forward-thinking model not only allows homeowners with renewable sources — say, solar panels — to sell extra watts to neighbors, but also lessens reliance on major energy corporations and cuts down those pesky energy bills.

Notable players in the field include Australian-based Powerledger, the world’s first energy and environmental commodity trading platform fueled by a Solana blockchain, and Electrify, a P2P marketplace promoting zero-carbon energy in Singapore. 

Other companies focus on sustainable mining solutions, as many in the crypto arena are finally waking up to its notorious energy consumption. A great example is Arkon Energy which leverages hydroelectric-powered data centers for mining bitcoins. Notably, they recently secured a solid $26 million investment to expand their operations from Australia into North America.

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Regenerative agriculture

Conventional agriculture is a significant contributor to GHG, so the world is now planting the seeds for a green-centric future with regenerative agriculture — a farming approach aiming to restore degraded soils and enhance biodiversity with a minimal carbon footprint.

Blockchain offers a mechanism to financially incentivize adherence to sustainable farming protocols through smart contracts, which harvest real-world data from decentralized oracle networks like Chainlink to verify that the practices are genuinely regenerative.

Chainlink’s peer, Agreena, rolled out a platform enabling farmers to earn carbon credits for managing solid in a more climate-conscious way. The company uses smart contracts to ensure swift payment transactions between farmers with immediate reconciliation at scale. (And the market's catching the vibe: Agreena has raised a $50.3M Series B just a year after their $21.8M Series A, as well as increased the land it covers by 10x.)

Blockchain: a stumbling block or off-the-chain transformation?

When FTX and a few crypto bigwigs went belly-up, naysayers quickly zoomed in on crypto's gray areas: long-standing regulatory mazes and its not-so-green mining practices. But just like the internet outgrew its "just for emails" phase, the rise of smart contracts shows that blockchain is much more than decentralized currency and crypto trading. Its goals are getting bigger and bolder. 

“Marrying our eco goals with blockchain will set a new ‘green’ standard in tackling environmental challenges,” says Ivan Pilnikau, a blockchain program coordinator at Vention. “It’s not a cure-all, but it’s a good chance to modernize traditional processes and infrastructures.”

Ivan Pilnikau, Blockchain program coordinator at Vention“Marrying our eco goals with blockchain will set a new ‘green’ standard in tackling environmental challenges. It’s not a cure-all, but it’s a good chance to modernize traditional processes and infrastructures.”

What’s more, blockchain offers a framework for the effective management and oversight of rapidly expanding global climate initiatives, ensuring integrity and efficiency right from the start. 

"Blockchain levels the playing field for all market players by addressing data disparities and inconsistent asset transfer methods," says Fedar Piashko. "If we play our cards right, a more stable, eco-conscious era might be just round the block.”