Hundreds of millions of farmers manage billions of tons of carbon stocks every day through their use of regenerative techniques, soil care efforts, protection of native vegetation, and the use of cover crops, among many other practices, yet they have been largely left out of the global carbon credit market. ReSeed, a U.S. startup. is using Web3 technologies to help farmers quantify, verify, and transform these previously ignored carbon stocks into financial assets that can help provide extra income, improving the lives of farmers and their communities (see the photo).
By using of blockchain, an immutable digital ledger technology, ReSeed aims to introduces transparency and trust to carbon credits. It also collects data points about the farmers that span nine different U.N. Sustainable Development Goals, meaning corporates buying the carbon credits can prove that they are not only applying carbon offsets but also fulfilling social impact and corporate social responsibility objectives, says ReSeed co-founder Josh Knauer. The company says its approach also helps with supply chain stability – an issue corporates identify as a major problem – by ensuring small landholder farmers earn enough income to stay in business.
ReSeed currently works with 8,700 farmers in Brazil who have collectively removed 2 million metric tons of carbon in the vegetation and soil on their land. The plan is to go global and launch a trading desk by the end of the year that will allow corporates to buy farmers’ carbon credits on an open market. “We are hoping to get millions of farmers on the network over the next two years,” he says.
The U.S. startup is among a growing group of young companies harnessing Web3 technologies to fight climate change and promote inclusion through regenerative finance or ReFI. It is one of 30 companies, NGOs, and research organizations in a new Crypto Sustainability Coalition launched by the World Economic Forum which will investigate how Web3, which includes technologies like blockchains, cryptocurrencies, and NFTs , can be leveraged to reach climate objectives and for climate accounting.
The premise is that the core tenets of Web3 — transparency, coordination, trust, decentralization, and scalability — all have significant potential to combat the climate crisis and drive efficient and effective climate action at scale.
“Climate change is a global coordination problem,” says Evin Cheikosman, the Forum’s Lead of the Crypto Sustainability Coalition. “The current legacy system has failed to coordinate effective policies and capital investment into the commitments necessary to address the most pertinent threat to humanity. What is urgently needed are global coordination technologies that can transcend the mass bureaucratization of climate action. This is where Web innovation takes up the torch.”
The Crypto Sustainability Coalition aims to highlight and collate real use cases that demonstrate how Web3 technologies can be a force multiplier for positive climate action, she says. “Most importantly, we want to elevate the climate leadership and experiences driven by local communities that are often left completely out of the global sustainability agenda.”
Reforming The Global Carbon Credit Market
Startups in the coalition such as ReSeed and Nori, are aiming to do just that.
Like ReSeed, Nori is helping overlooked farmers turn carbon stocks into financial assets. Currently, carbon removal prices on the Nori marketplace are set by farmers in the U.S. Plans are to take the marketplace global. In the coming months the price will be dynamically set by the market using a NORI Token, says co-founder Alexsandra Guerra. The company says that 100% of each tonne customers pay for goes directly to supporting its suppliers, while Nori collects an additional 15% transaction fee to keep the marketplace running.
Suppliers must first register their carbon removal project with Nori by reporting any new (or planned) carbon removal practices they’ve undertaken, with enough data to establish an accurate project baseline.In the case of the U.S. Croplands Methodology, for example, farmers provide their historical land management and crop data for 30 years. To increase the likelihood of carbon storage, suppliers commit to annually reporting carbon removal data for at least ten years
Once project data is completely entered, a third-party carbon quantification tool estimates the carbon removal amount. In Nori’s U.S. Croplands Methodology, its partner Soil Metrics estimates the impact of a farmer’s regenerative practices on carbon removal and sequestration.
To ensure the NRTs represent real carbon removal and storage, Nori requires independent third-party verification. The company says it created its cryptocurrency, NORI, to provide a tradable market commodity while avoiding the double counting and fraud present in some legacy carbon markets.
Nori says adding the token will correct what it sees as another problem in the market. Those that want to sell certificates representing carbon dioxide that’s been kept out of the atmosphere by some act of conservation or removal, often hold back inventory to sell at a price that makes sense for them, says Guerra. Nori’s system removes that bottleneck by encouraging farmers to release the certificates and instead hold onto their tokens until the price is right. “To combat climate change we need to remove as much carbon as possible, which means encouraging more people to remove carbon as quickly as possible to get to higher levels,” she says.
The hope is that blockchain-based carbon credits, such as those offered by ReSeed and Nori, could address current flaws in global carbon markets, including the lack of transparency around carbon offsets for either providers or buyers; the failure of markets to remove carbon emissions at the scale and pace required; and the inability of millions of the world’s smallholder farmers, forest stewards and Indigenous communities to participate in or benefit from carbon credit markets.
Using Blockchain As A Climate Accounting Mechanism
Using blockchain as a climate accounting mechanism could be very helpful for corporates. “Today companies are increasingly making net zero pledges, but it is very unclear how they are going to keep those pledges and how they are tracking them,” says Anna Lerner, CEO of the Climate Collective, a group of companies building at the intersection of Web3 and climate action that has joined the Crypto Sustainability Coalition. “There is a massive opportunity to put their pledges out in the public and use the blockchain as an accounting mechanism to show how they are progressing.”
EY Global Blockchain Leader Paul Brody, a member of the Forum Crypto Sustainability Coalition, says he tells corporate chief financial officers that “there are ways to do this safely, constructively, and positively.”
“I can say, without any hesitation, that blockchain is a phenomenal platform not just for sustainability but for all kinds of B2B transactions,” says Brody.” The future of nearly every B2B transaction will be on a public blockchain. The value is the interoperability, standardization, and ease of integration. Blockchain will do for structured information what the Internet did for data.”
The value proposition of blockchain “ is this idea that you can have continuity of information and shared processes across many different enterprises and measure the sustainability impact,” says Brody. “Almost any business runs across different entities so for large corporates to figure out the carbon footprint of a product they need to calculate all the components plus the transportation. It’s a big problem because in any of these types of processes the underlying data gets lost as people move it, or it is not measured correctly, or it is not measured in the same way.”
Creating a universal ledger and turning each component into a digital component on the blockchain has the potential to resolve those issues and make sure there is no double accounting, says Brody. That said, there is a need for a set of defined standards for both producers and consumers of carbon that accounting firms like EY can apply in its evaluations, he says, so it is good that the Crypto Sustainability Coalition is working on developing these types of standards.
“Some people are racing ahead without standards, but the markets are small and fragmented and larger enterprises are holding off. When standards become available there will be a cascade of activity from everybody from regulators to investors, causing an incredible wave of adoption that will grow these markets by a factor of 100,” predicts Brody.
Incentivizing Climate Action
People leveraged Web3 technologies to create a global alternative financial system in record time, says Chetan Nandakumer, founder and CEO of Avatree, a company that is attempting to use art to stimulate sustainability. “The question is can we use the same building blocks to get people around the world to coordinate on climate change?”
Avatree, which is a member of the Forum coalition, gives individuals or companies the opportunity to buy NFTs of digital saplings along with a three, six, or 12 month carbon sequestration pack. Customers are compensated for removing carbon through Avatribe, a community portal, which offers rewards and experiences, and the ability to connect with others passionate about creating a sustainable future. Every month the digital sapling NFTs “fruit” their own token, which can be used to personalize the tree, to buy brand awards, purchase tickets to virtual or real events or to sell on the open market. “What we are trying to do is incentivize climate action,” says Nandakumer. “Think of us as a frequent flyer program for ecological restoration.” Avatree is targeting both individuals and businesses. “Small and medium sized businesses want to support climate restoration but need a verifiable way, he says. “We offer that tool to them to show their climate commitments.”
Meanwhile PlanetWatch, another member of the coalition, runs an air quality monitoring network on the Algorand blockchain. It is too expensive for governments to deploy dense enough sensor networks to accurately measure air quality, says Claudio Parrinello, CEO and co-founder of PlanetWatch. PlanetWatch solves that problem by incentivizing citizens to buy devices to put on their balconies. With its customers permission it then crowdsources the data from the devices and sells it to governments or businesses. The owner of the devices collecting the data get a cut of the proceeds. “There is a huge scope across Web3 for environmental projects that prompt people to take action on things like air quality, plastic pollution and waste management and become aware of environmental issues across the board,” says Parrinello.
Web3 technologies are well positioned to play a major role in climate change, agrees Kathryn K. White, a Digital Financial Markets Leader at global professional services company Accenture. “The underlying technology enables creative ways to approach societal good and more efficient ways of doing things,” she says.
Evaluating Energy Use
For all its benefits, there are some questions on the amount of energy blockchain networks use when validating transactions. There is a greater emphasis and demand from customers on understanding the sustainability aspect of crypto assets and how an underlying blockchain network and associated applications align to an investor’s environmental, social, and governance (ESG) goals, says James McDonald, a product manager at Lukka, a company which provides enterprise data and software solutions to large financial institutions, fund administrators, hedge funds, trading firms, and other businesses interacting with crypto asset. One of the goals of the coalition’s energy working group is to get a baseline understanding of the energy consumption of different blockchain networks. It is important not to give all blockchains a bad rap for being energy intensive, as different consensus mechanisms have different energy requirements, says McDonald.
Until recently both Ethereum and Bitcoin , the two largest blockchains, used energy-intensive proof-of-work consensus mechanisms to keep themselves secure, relying on a horde of computers around the globe competing to process transactions in a practice called “mining.”
But earlier this month Ethereum made a dramatic shift away from proof-of-work to a less energy intensive way of securing its assets based on economic theory rather than complicated math problems. The Ethereum Foundation estimates that the merge to proof-of-stake dramatically reduces the blockchain’s power consumption by 99.95%.
Bitcoin still uses large amounts of electricity. Indeed,the Cambridge Centre for Alternative Finance , a research centre at Cambridge Judge Business School, announced September 27 a new update to its Cambridge Bitcoin Electricity Consumption Index (CBECI) that provides estimates on the greenhouse gas emissions related to Bitcoin. The new tool estimates current greenhouse gas emissions from bitcoin of 48.35 million tonnes of carbon dioxide equivalent or 0.10% of global greenhouse gas emissions, similar to the emissions of countries such as Nepal and the Central African Republic, and about half the emissions from gold mining.
Some bitcoin miners are addressing this. A U.S. company called TeraWulf, for example, generates domestically produced bitcoin powered by nuclear, hydro, and solar energy with a goal of utilizing 100% zero-carbon energy.
Bitcoin could redeem its reputation as an energy hog in other ways by using its unique properties to further the transition to zero carbon, says Sudmedha Deshmukh, a policy advisor to the Crypto Council For Innovation, a global alliance advancing crypto innovation worldwide. For example, since proof-of-work data centers that mine bitcoin can be located anywhere, Crusoe Energy Systems, is locating its operations near oil fields and using waste natural gas to power its mining activities, removing the pollutant byproduct of petrochemical production from the atmosphere.
In the U.S. and some other countries renewable energy sources are not connected to transmission lines and there are grid stability issues. Crypto can help, says Deshmukh. For example, Houston-based tech company Lancium is building bitcoin mines across Texas that run on renewable energy. Lancium offers something that Texas, which has chosen not to connect to grids in other states, desperately needs: a flexible customer, willing to buy when supply is abundant and shut down when it’s not. That flexibility is a huge help when it comes to stabilizing a grid that is rapidly on-boarding inherently unstable sources of power like wind and solar.
Coalition member Energy Web, a not-for-profit founded in 2016, is helping grid operators to come to grips with energy systems that are less and less centralized in other ways. It helps them assign self-sovereign IDs to help coordinate information about different assets such as rooftop solar systems and charging infrastructure and do capacity planning, so the right amount of energy is available at the right time, says Amy Westervelt, Energy Web’s Senior Delivery Lead. “We work with them to help them coordinate with distribution operators and companies working as aggregators so that the wholesale operator knows that it needs some assets to ramp up or down,” she says. Energy Web is also helping car manufacturers to use Web3 tools to prove to drivers that the energy they are using to charge cars is from 100% renewable sources.
The Ultimate Goal
Sheila Warren, the inaugural CEO of the Crypto Council for Innovation and a participant in the Forum’s coalition, says it is important to ask the right questions and keep in mind the ultimate goal: using crypto technologies not just to become carbon neutral but to help the world get to carbon negative.
Lerner, the CEO of The Climate Collective, says she hopes that the Forums’ coalition can identify and communicate the areas where blockchain and distributed ledger technology can make a real difference. “It is incredibly inspiring to see how entrepreneurs are putting all their energy and efforts to solve climate change with really impactful projects and real use cases to help this market grow in a sustainable and insightful ways,” she says.
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