Blockchain technology will help businesses and consumers to cut their carbon footprint Image: REUTERS/Srdjan Zivulovic
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If you know something is bad for you but you don’t know how to measure it, how can you reduce it? Take calories, for example. If we want to lose weight, we need to reduce our calorie intake. To do this we can use the information found on packaging and in apps to monitor our calorie intake and adjust to what is healthy. Let’s apply this analogy to the environment. Just as many of us are clogging up our bodies with invisible calories, so every day we clog up our world with invisible greenhouse gases. Wouldn’t it be great if we could count, take control of and reduce our carbon emissions just as we take control of our diets?
We might not realise it, but every financial transaction has a climate consequence – whether it is obvious, such as filling up your car with petrol or booking a long-haul flight, or subtle, like when you buy a coffee or a new pair of shoes, or even increase your cloud storage plan. Our daily choices leave a carbon footprint. We know this, and we are all aware of the monumental climate risks posed by carbon emissions. Demand for solutions is growing.
The Paris climate agreement codified the pressure on countries to reduce their emissions and companies are increasingly under the same spotlight from investors, shareholders, employees and customers to reduce their carbon footprint, demonstrating that their business models are aligned with delivering a stable climate. Consumers, led by socially conscious millennials with increasing buying power, want to purchase greener products and invest in sustainable projects. In fact, 72% of people between the ages of 15 and 20 are willing to pay extra for environmentally and socially responsible products and services. But until now, despite huge advances in technology, monitoring and reducing our impact on the planet has been difficult.
So how can we start having a positive impact on an individual level, without dramatically changing our lifestyles?
Credit where it's due
One important thing we can all do is to protect a powerful ally in the fight to reduce carbon – forests. These powerful ecosystems act as a natural “carbon sponge”, whilst at the same time protecting plants and animals, and providing economic opportunities for local communities. High quality sustainable projects to protect rainforests are among the most effective ways of delivering large-scale, cost-effective emissions reductions in the short term and achieving science-based emissions targets.
Carbon credits, which put a price on carbon reductions and provide revenue for such forestry protection projects, therefore represent a clear way in which companies and individuals can be empowered to reduce or offset the negative or unavoidable impact of their business and choices on the environment. By placing a value on the ecosystems that support our planet, carbon credits internalise the invisible costs of everyday choices and allow a sustainable market place to emerge.
However, since its inception, carbon trading has suffered from some issues that have suppressed its potential. The market is beset by a lack of visibility, which prevents people from trusting the carbon credit as an asset. Differing standards and regulations in different jurisdictions and the potential for double counting (where the same credit is sold more than once) have resulted in a lack of confidence from potential market participants. And without a universal ledger it isn’t easy to track how much carbon you’ve used or – if you offset it – what the impact of your reduction has been on a tangible level. As an individual, it is hard to incorporate carbon credits into your daily life.
Yet even if every country satisfied their Paris commitments to reduce carbon emissions, this would still not be sufficient to create a safe climate. Individuals and businesses will need to do more to plug this gap, and we urgently need to find a way to help them do this, while working on longer-term shifts in parallel.
This is where blockchain technology comes in. Put simply, blockchain is the name for a digital ledger in which transactions (often made with "tokens" or a cryptocurrency such as bitcoin) are recorded chronologically and publicly. Applying this to carbon credits to create a "carbon currency" is the key to demystifying and consolidating the carbon market so it can scale up. Carbon credits are the perfect candidate for a digital currency as they are data-driven, rely on multiple approval steps and exist separately to the physical impacts to which they correlate.
Imagine a world in which carbon emissions and credits can be tracked transparently and reliably. Retailers will be able to sell a product and take into account the carbon impact it creates at the same time. Governments will be able to measure, track and trade emissions transparently. And crucially, for the first time consumers will be able to understand the environmental impact of the products they are buying – both positive and negative – at the point of sale, and will be able to mitigate this in an instant, with millions of micro-transactions scaling up to make a huge collective impact.
Momentum is building towards natural solutions to climate change, and not a moment too soon. Pressure on businesses from consumers to improve the sustainability of their supply chains and their products will soon be matched by regulatory pressures and quotas if we are to stand any chance of reversing the climate damage that is a reality today.
It is not an overstatement to say that we all need to take responsibility for the carbon consequences of every choice we make. What is exciting is that by creating a global, trusted and accessible carbon currency, with the help of new digital technologies available to us, we are on the cusp of being able to do so.
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The views expressed in this article are those of the author alone and not the World Economic Forum.
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