- The UN Environmental Programme considers blockchain a potential opportunity for the reduction of carbon emissions and other environmental impacts faced globally
- Cryptocurrency and blockchain technology has the potential to create a positive environmental impact through the use of digital ledgers and carbon credits
- Carbon credits are digital certificates purchased by companies and environmental projects certifying that they have reduced emissions by at least 1 tonne of CO2 or equivalent greenhouse gas in a given year
- Companies can be considered carbon neutral if the number of carbon credits purchased equals their carbon footprint
- The voluntary carbon offsets market was valued at $305.8 million in 2020 and is expected to reach $700.5 million by 2027
Since being introduced in 2008, cryptocurrency and blockchain have become an emerging technology trend making headlines and catching the attention of venture capitalists. Often used interchangeably, crypto and blockchain technology are not the same. Since inception, hundreds of cryptocurrencies have emerged, creating an alternative to fiat currency – a decentralized financial currency. On the other hand, blockchain technology has been considered one of the safest ways to store data since it cannot be altered once added to the chain. Blockchain technology is the digital ledger technology that allows transactions to be executed in a safe, more secure setting. One of the highest valued cryptocurrencies and the first blockchain technology application is Bitcoin.
One of the biggest environmental debates in recent history (carbon emissions) has something in common with Bitcoin and blockchain technology, as environmentalists have expressed deep concern over the amount of energy consumed by Bitcoin miners and the increased carbon footprint it potentially leaves behind. The debate is not entirely founded, considering many companies are pushing for more environmentally sustainable forms of energy, potentially creating a greener future globally. Bitcoin mining companies like Marathon Digital Holdings Inc. (NASDAQ: MARA) are committed to creating more sustainable Bitcoin mining operations with a goal of being 100% carbon neutral by the end of 2022.
The UN Environmental Programme (“UNEP”) cites blockchain as a potential opportunity to help in environmental crises. Mark Radka, Chief of UNEP’s Energy and Climate Branch, made a statement regarding UNEP’s Emissions Gap Report 2021, stating that “The world needs to almost halve emissions over the next eight years to stay on track for a 1.5°C world, while at the same time expanding access to energy to bring hundreds of millions of people onto the grid. Blockchain technology can play a part by making possible more accurate load monitoring, generation and distribution in the grid through efficient use of data” (https://nnw.fm/ssfuo).
Cryptocurrency has the opportunity to go green using carbon offsets. These are credits that a company can purchase to reduce its carbon footprint. One carbon credit is a digital certificate providing the certification that a company or environmental project has avoided carbon emissions of one tonne of CO2 or the equivalent greenhouse gas in the year it was issued. A company is considered to be “carbon neutral” if its number of carbon credits equals its carbon footprint (https://nnw.fm/xHPP7).
The global voluntary carbon offsets market (carbon credit) was valued at $305.8 million in 2020. During the forecast period of 2021 to 2027, it is expected to grow at a CAGR of 11.7%, resulting in a value of $700.5 million by 2027 (https://nnw.fm/XaiKb). The market represents six primary categories of greenhouse gas emissions – carbon dioxide (“CO2”), methane (“CH4”), nitrous oxide (“N2O”), perfluorocarbons (“PFCs”), hydrofluorocarbons (“HFCs”), and sulfur hexafluoride (SF6).
With cryptocurrency and blockchain technology constantly evolving and the need for sustainability to be addressed globally, the UN created the Coalition for Digital Environmental Sustainability (“CODES”) in March 2021. CODES aims to advance digital sustainability to accelerate environmentally and socially sustainable development while mitigating the risks and unintended consequences, which is crucial in meeting the goals set in place by the UN’s Sustainable Development Goals by 2030 (https://nnw.fm/q6nlc).
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