The CEO of the Global Blockchain Business Council explains how blockchain can pay a pivotal role in ensuring green targets are met.
By 2050, green activities are expected to create a market opportunity of $10.3tn. The green technology and sustainability market, worth $46.54bn in 2022, is expected to grow to $417.35bn by 2030, with a compound annual growth rate of 21.6%. Not only is this good business, but it also brings the mass benefits to the planet and its eight billion human residents: a clear win-win situation, right? Not quite.
In the final COP27 agreement, the cover decision outlined that “at least $4tn to $6tn a year” needs to be invested for a global transformation to a low-carbon economy, and that “about $4tn a year” needs to be invested in renewable energy until 2030, including technology and infrastructure, to reach net-zero emissions by 2050. This does not even reference the need for greenhouse gas emissions reductions to be net-negative only a quarter of a century from today.
Though the climate emergency has been a central topic of policy and business for some time, there is an overwhelming lack of trust, shown both in the data provided and the solutions suggested. For example, mistrust is prominent in carbon markets and carbon offsetting, which have attracted widespread criticism for their failure to have any meaningful impact on overall emissions targets.
The UN Environment Programme’s Emissions Gap Report 2022 describes the need for rapid societal transformation to begin to address a credible pathway to a 1.5-degree Celsius future and finds that “only an urgent system-wide transformation can deliver the enormous cuts needed to limit greenhouse gas emissions by 2030”. At the individual level, this may take the form of changing habits. At the corporate and organisational levels, spanning all industry sectors and public entities, it takes the form of responsible governance.
More than this, we need transparency and accountability to entrust these changes to governance, and we need to be able to accurately quantify the impact this has on emissions reduction. In other words, we need to be able to measure results.
So how do we advance rapid societal transformation and meet that goal?
Verify and report
Blockchain enables real-time monitoring of data, verification that it is correct, and sharing across multiple parties, spanning smallholder farmers, non-governmental organisations, private sector entities and government entities.
Alongside the usage of the Internet of Things devices including drones and satellite technology, trusted entities on the ground verifying methane emissions and artificial intelligence to draw patterns and inform decision-making, blockchain can be used as a real-time global ledger system. It keeps information up to date, while ensuring it is shared securely and publicly to advance awareness and entrepreneurial innovation.
Tokenisation, in digital assets terms, is a process that transforms ownership and rights of specific assets into digital form. Tokenisation and blockchain technology can drive the harmonisation and scaling of carbon markets as commodities, fundamental for entities offsetting their emissions while funding carbon removal and reduction projects. Standard amounts of carbon offsets can be represented as tokens on a blockchain, traded on transparent marketplaces and permanently retired when used up.
Embracing innovation
Industry players are applying blockchain technology to tokenise green bonds, which will support countries in wiping out existing debt loads by offering issuances that pay, for example, to keep biodiversity and forest preservation within sovereign borders. One recent example is the Hong Kong government’s plan to launch green bonds for institutional investors before the end of the year, becoming the first government green bonds in the world.
In India, the government of Uttar Pradesh has amended its regulatory framework to facilitate controlled peer-to-peer energy trading, acting as a market-based incentive for the accelerated deployment of rooftop solar photovoltaics. The governments of Canada and Chile, in collaboration with private sector organisations, have developed a programme that includes mitigation measures such as the commissioning of a modern landfill gas capture and destruction system, while also developing standardised measurement, reporting and verification methods to quantify the emission reductions achieved.
Key jurisdictions advancing innovations in climate finance include Bermuda, with its insurance/reinsurance catastrophe bonds and related financial products. In 2021, the Bermuda Business Development Agency – led by a public/private partnership including the government – launched the Climate Risk Finance Initiative as part of a strategy to foster sustainable and equitable growth. The country is now looking to establish itself as a capital for climate risk finance and will host the Bermuda Climate Summit 2023 on June 26.
Singapore is adopting innovative concepts of tokenising existing natural resources and developing financial products which incentivise nature preservation and sustainability, while penalising destruction and overuse. Through the Project Guardian initiative, the Monetary Authority of Singapore is currently exploring the economic potential of asset tokenisation within four major focus areas and the use of public blockchains.
The World Bank has partnered with governments across the world to foster regional initiatives aimed at preserving biodiversity and adopting climate-smart agriculture practices through green bonds. In 2021, the World Bank partnered with the state of Paraíba in Brazil to increase resilience to extreme water-related climate events, reduce water pollution, and modernise the wastewater system through energy efficiency.
Collaboration is key
Emerging tools are important, but they are of no value unless there is global coordination to ensure that they are being used responsibly and effectively. Solving the complex global crisis we face today is an open crowdsourcing opportunity, utilising the energy of youth, indigenous peoples, farmers, the Global South and multi-stakeholder initiatives.
Emerging tools are important, but they are of no value unless there is global coordination to ensure that they are being used responsibly and effectively
Taxonomies driven and adopted widely by industries are crucial to scaling solutions in climate finance.
The InterWork Alliance’s (IWA) Token Taxonomy Framework (TTF) sets common ground for collaboration by providing a language for defining tokens based on the necessary data and behaviours the token must possess. The TTF is being used by more than 50 entities and in consideration by many more. Alongside this, the IWA has released a Voluntary Ecological Markets Overview, which establishes a model set of standards for tokenisation, contractual extensions, workflows and analytics for voluntary ecological markets utilising blockchain technology for audit and scale, with the objective of incentivising dialogue and co-operation across relevant stakeholders.
The IWA’s work is one of many initiatives that are part of the Global Blockchain Business Council (GBBC), a Swiss-based non-profit association that, along with its network of change-makers, is taking a multi-pronged approach to collaborate and coordinate with people from all walks of life who wish to share in the common mission of using technology to overcome global challenges and problems. The GBBC has launched the Food for Crisis initiative in partnership with the World Food Programme Innovation Accelerator, and is now gathering multiple stakeholders to address the growing world hunger crisis.
Just as we saw in the most recent headline of a coalition of Opec of Rainforests by Brazil, Indonesia and the Democratic Republic of Congo, we will see a rise of new global organisations to meet the demand of accelerating global dialogue and action. This increased public and private sector pressure to ‘move faster’ will promote both massive economic opportunities and innovation around the world, while also preserving and sustaining what biodiversity and natural resources we have today to combat climate change. The GBBC’s role in this is to convene the community to foster collaboration and innovation.
Addressing the climate emergency requires collaboration as a global community and serious commitments, more than ever before, to attain the imperative transformation needed to avoid catastrophe. Alongside other emerging technologies, blockchain can provide the transparency, verifiability and trust so urgently needed to accelerate a coordinated global response.
Sandra Ro is CEO of the Global Blockchain Business Council.
