Quick summary: Blockchain technology helps businesses to bring credibility to their carbon offsetting strategies to backup their net zero commitments with public transparency.
In recent years, the public debate on climate action has spread widely through the media, government, and the business world. What companies are doing to reduce their carbon footprints and achieve the pledged “Net-Zero” is not only an expected response from the general public but an overriding business issue.
Environmental and financial performance are for the first time being assessed with the same rigor. Moreover, forward-thinking companies wisely recognize that increased attention to accurately evaluate their environmental impact will be crucial to protecting their reputation, staying ahead of new regulations, and helping them respond to future opportunities and risks.
Read on to learn how innovative carbon management strategies that rely on Blockchain are enabling action on climate change and helping companies back up their zero-emissions commitments with public transparency.
In the case of a business organization, it is the amount of GHG emitted directly or indirectly due to its daily operations.
This measure helps identify the individual GHGs from each activity within the supply chain process and the framework for assessing the cumulative total over the life stages of a product, from the production of raw materials used in its manufacture to the disposal of the finished product.
Carbon footprint is measured in terms of how many tons of carbon dioxide and other harmful gases such as methane, for example, are emitted per year. The larger the carbon footprint, the more GHGs a person, organization, event, or product releases into the atmosphere, the leading cause of accelerated climate change.
Net-zero means reducing greenhouse gas emissions as close to zero as possible, bringing the remaining emissions into balance by an equivalent amount of carbon removal from the atmosphere.
The commitment to achieve Net-Zero and reduce carbon footprints was made under the Paris Agreement, in 2015. More than 130 countries agreed to reach a climate agreement to keep the global average temperature increase “well below” 2 °C by 2050 at the latest. At its core is a “ratchet mechanism” that requires parties to the agreement to submit more ambitious national climate targets every five years.
The Paris Agreement reviewed at the 2021 UN “Conference of the Parties,” COP26, in Glasgow, where countries revised their climate commitments to phase out carbon and fossil fuel subsidies. COP27 last year had five key focus areas that were Nature, Food, Water, Industry Decarbonization and Adaptation. These will be clearly impacted by adopting regenerative agriculture practices and making dietary shifts in food consumption. Policy makers and stakeholders need to come to the table and align their local goals with common objectives.
A recent KPMG report that benchmarks the performance of 32 countries in cutting greenhouse gas emissions and assesses their preparation and ability to achieve emissions reductions by 2050 – lists the 25 best-performing countries and seven countries to watch for significant opportunities to advance their decarbonization efforts through large-scale projects and emerging intensification initiatives.
India with 75 million sq km arable land and a 300 million cattle population has 160 million rural households with agriculture being the main source of livelihood. Agriculture and livestock emits around 14% of total emissions with 3 % linked to livestock. Apart from livestock, the other emissions are due to rice cultivation- 17.5%, fertilizer application – 19.1% and burning of agriculture residue 2.2%. Decarbonization has to be carefully chalked out to avoid an impact to 120 million marginal farmers.
The decarbonising pathways
The path to net-zero emissions includes the need for each company’s upstream and downstream suppliers to decarbonize as well. However, this is not an easy endeavor for large global organizations that often have thousands of suppliers.
Companies need a panoramic view of their business environments. Therefore, understanding their current industrial emissions will be critical in facilitating investment in green technology and Net-Zero energy solutions.
The prospect of Blockchain as a climate tool began to emerge at the 2015 Paris climate conference.
Its defining characteristics – distributed and immutable ledger, advanced cryptography, ease of transferring a range of assets between parties securely and cheaply without intermediaries – can help reduce climate change impacts as an enabler of various climate change policies, including renewable energy deployment, international financial transfers, climate regulatory enforcement, and for carbon credits trading.
A carbon credit is a license that allows the company that owns it to release an equivalent to one ton of carbon dioxide or other greenhouse gases.
For starters, companies are allowed a certain number of carbon credits that diminish over time. They can be traded with another company or organization if not used, resulting in a carbon trading system known as a carbon market.
In this system, carbon credits function as a new commodity that can be transferred and sold. Each unit is tracked and recorded through the Kyoto Protocol registry systems and an international transaction registry that ensures the secure transfer of emission reduction units between countries.
The carbon credit market is estimated to be worth more than $50 billion by 2030, and cryptocurrencies surpassed a market cap of $2 trillion in 2021
The main objective of the carbon market is to create incentives for companies to reduce greenhouse gas emissions. They are fined when they exceed the limit and can earn money by storing and reselling some of their emission credits.
The purchase of carbon credits can also be used to finance projects that reduce or absorb carbon emissions anywhere in the world. So far, more than 500 projects are helping to improve the lives of 10 million people most at risk from the immediate impacts of climate change.
There are three types of climate action projects:
These projects are subject to international regulations and standards, such as Verra or Gold Standard, to ensure that they deliver what they claim. Therefore, to obtain carbon credits, projects have to demonstrate their impact on emissions in a measurable way. Using a Blockchain-based management system for automating data collection makes the verification process much more credible because it is tamper-proof.
Universal Carbon [UPCO2] was introduced in 2020 as the world’s first exchangeable carbon token available on a public Blockchain and created by the Universal Protocol Alliance and leading voluntary carbon credit companies.
According to the World Bank, by 2020, humanity will offset only 22% of global emissions through the purchase and retirement of carbon credits.
Yet, the share of countries operating regulated carbon markets has increased from 40% of global GDP in 2016 to 70% in 2020.
The Tokenization of carbon credits allows not only companies and organizations but also individuals around the world to participate in this important – and potentially lucrative – new market, as well as doing the right thing for the planet.
Seventeen GHG emissions trading schemes have now been established worldwide, operating in 35 countries, 12 states, and seven cities, either through the allocation or purchase of allowances from a central authority or the purchase of emission credits from market participants.
The world’s six major CO2 emitting countries/regions (China, the United States, the European Union, India, Russia, and Japan), along with New Zealand, South Korea, Switzerland, and Canada, have already implemented carbon trading systems and many more are on the way to doing so.
The use of Blockchain as a climate tool demonstrates that this technology is more than just a cutting-edge enabler in measurement, reporting, and verification (MRV) processes. It is paving the way for environmental and financial performance to collide most transparently and efficiently.
Companies can now, more accurately than ever before:
As companies look for ways to reduce carbon footprint and other climate commitments to meet stakeholder expectations and regulatory requirements effectively, the need for reliable, high-fidelity data has become paramount.
Blockchain technology provides business leaders with a robust infrastructure to calculate and reduce carbon footprint through intelligent data management.
Trace Carbon is a sustainability and carbon accounting platform that helps companies in their decarbonization journey. The DLT platform helps in Carbon management with accuracy and accountability being the underlying principles. Measuring, monitoring and reporting of Sustainability metrics helps companies to realize their Sustainable development goals and validate their efforts in their net-zero journey.