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Decentralized solutions to climate change are the key to disappointing the COP

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Climate change has become one of the most pressing issues in the modern world with increasing pressure on companies to develop and implement climate strategies. Politicians around the world have also been actively involved, with many countries pledging to be carbon neutral in the next two decades.

Amid all the initiatives and conferences spearheaded by politicians and multi-billion dollar corporations over the years, the threat of global warming and carbon emissions escaping into the atmosphere has grown.

The 2022 United Nations Climate Change Conference, or Conference of the Parties to the United Nations Framework Convention on Climate Change, was the twenty-seventh United Nations climate change conference. More commonly referred to as COP, the conference is one of the largest of its kind with attendance from top policymakers and technology executives.

COP27 ultimately resulted in minimal progress in losses and damages, with high-emitting countries agreeing to compensate those countries that bore the brunt of the climate chaos they played such a minimal role in creating. But, again, no promise has been made of stopping the emissions that are fueling this disaster.

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Politician-led conferences like COP27 have become a glaring example of all that is wrong with such initiatives. COP27 hosted more than 600 representatives of fossil fuel companies and many others who were there to block progress and action rather than support it. Above all, the event was sponsored by the world’s largest plastic polluter – Coca-Cola.

Perhaps the concept of an annual climate carnival is not the best way to encourage meaningful action on global warming. The existence of the fossil fuel industry and its consistent failure to serve its intended purpose means that the problem of climate change needs a modern solution, and for many, decentralized technology is the key that can benefit climate initiatives in the long term.

decentralized solutions

Decentralized technology has proven to be revolutionary in managing data for many industries beyond the financial sector. Climate change initiatives are already integrating blockchain technology to their advantage including a growing number of projects at COP holding annual conferences.

KPMG’s director of climate data and technology, Arun Ghosh, told Cointelegraph:

“One of the key outcomes of COP27 was the drop in the suite of loss and damage agreements that enable wealthier countries to help provide for and plan for the recovery of people and livelihoods in resource-starved nations. Blockchain technology not only provides a set of enablers of trust and transparency, but There are also CBDC pilot programs as well as the adoption of BTC as a recognized medium of exchange in countries such as El Salvador, and there are accelerating investments and plans emerging for integration and transacting between organizations, countries and citizens.”

Blockchain technology can be implemented in many ways to make initiatives related to climate change more efficient.

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Recycling is one sector where blockchain can encourage participation by giving a monetary reward for depositing recyclable items such as plastic containers, cans, or bottles. Similar settings already exist in several places around the world.

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plastic is a Non-fungible token (NFT) Souq sponsors initiatives to reduce plastic waste. Plastiks partners with recycling companies and endorses plastic recycling using NFTs that can become an additional source of income for recycling companies. The project claims that recycling data, once recorded on the blockchain, also becomes a hard-coded receipt for how much plastic was removed.

With its ability to transparently track critical environmental data and prove whether commitments have been reached, blockchain technology can also deter companies and governments from breaching their environmental commitments or falsely claiming progress.

For example, Regen Network offers blockchain-based fintech solutions for environmental claims and data. Some of their offerings include a public environmental accounting system and the Regen Registry, which allows land representatives to sell their ecosystem services directly to buyers around the world.

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EarthFund DAO is another environmental initiative that organizes a decentralized community looking to address humanity’s environmental problems. The platform allows token holders to vote for and crowdfund “world-changing projects” such as the EarthFund carbon capture project.

Crypto Climate Accord is a private sector-led initiative focused on decarbonising the cryptocurrency and blockchain industry. To date, more than 250 companies and individuals in crypto, finance, NGOs, and more have joined the movement.

Amidst all of the major use cases for blockchain technology, its progress in helping the very complex carbon credit market has been talked about — for both good and bad reasons.

Carbon markets and how they work

A carbon credit is one metric ton of carbon dioxide, which can be bought, sold, or eliminated. If a company is subject to cap and trade regulation (such as the California Cap and Trade Program), it likely has a set number of credits that it can apply to its cap. A company may trade, sell or store additional carbon credits if it emits fewer tons of carbon dioxide than is allowed.

The emission provision is purchased from the seller when the credit is sold. Despite the fact that a reduction in emissions is the result of an action, a credit becomes tradable as a result of a real reduction in emissions.

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Carbon markets aim to reduce greenhouse gas emissions, enabling the trading of emissions units (carbon credits), which are certificates representing emissions reductions. Trading allows entities that can reduce emissions at a lower cost to be paid by higher cost emitters. By setting a price on carbon emissions, carbon market mechanisms raise awareness of the environmental and social costs of carbon pollution, and encourage investors and consumers to choose low-carbon paths.

There are two main categories of carbon markets: cap trading and voluntary trading. Cap-and-trade sets a mandatory cap (cap) on greenhouse gas emissions, and organizations that exceed these caps can purchase excess allowances to close the gap or pay a fine. As its name suggests, the mandatory market is used by companies and governments that are legally mandated to offset their emissions. On the other hand, the voluntary carbon market operates outside of the compliance markets but in parallel allowing private companies and individuals to purchase carbon credits on a voluntary basis.

Carbon credits problems

Carbon credits have been promoted as a market-based solution to help reduce carbon emissions, but they come with a slew of problems. Carbon credit markets suffer from poor offset quality, as some credits may not be as good as marketed and some are out of date and no longer meet the standards of the top carbon offset certification organizations.

Some of the organizations offering such carbon offsets are not doing what they say they will. Voluntary carbon markets are highly unregulated and companies often get away with false advertising called Greenwashing. These companies either invest in uncertain credits or calculate the same credit again. All of these measures trick buyers into thinking they are reducing their emissions when in fact they are not.

for example, depending For Yale Environmental 360, a total of 1 billion tons of CO2 credits have been made available for purchase to date in the voluntary carbon marketplace. However, there are approximately 600-700mt more sellers than buyers. Thus, only approximately 300-400 million tons of CO2 offsets were achieved. This indicates that between 600 and 700 million tons of carbon dioxide are produced without compensation.

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How can blockchain help?

There have been significant developments in computational technology in the blockchain world that can enhance the efficiency of these carbon markets. Blockchain technology can help the credit creation and validation process. Ra Wilson, CTO of digital carbon trading platform 1GCX, told Cointelegraph:

“Blockchain can significantly improve existing bottlenecks in the existing carbon credits market, including issues with fraud, misrepresentation, and duplication of credits. While these improvements will be key to expanding the carbon credits market and building greater trust within the industry, blockchain is only one part of The Solution In order to expand the carbon token credit market to its full potential, the industry will also require the participation of trusted carbon credit providers, as well as collaboration with regulators and government agencies.”

KLIMA DAO is leading the development of the voluntary carbon market by building a decentralized infrastructure that makes the market more transparent and accessible. It sells bonds and distributes rewards to holders of KLIMA tokens. Each bond sale adds to the ever-growing green treasury or improves liquidity for key environmental assets.

Nuri is another blockchain-based carbon credit market built with farmers in mind. This project supports farmers who adopt renewable farming projects to remove carbon dioxide from the atmosphere.

Tegan Kelly, climate data and technology lead at US firm KPMG, told Cointelegraph that blockchain, along with other technologies, certainly has the potential to help carbon credit markets in terms of traceability:

“Credit is traceable but not of high quality — blockchain will not inherently solve the quality problem, but it can help validate when a certified producer makes statements regarding origin or quality.”

However, not everyone was convinced. Dan Stein, director of the Giving Green Earth Climate Initiative, believes the problem is much bigger than double-counting or tracking.

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Blockchain-based climate solutions are hot air, Stein told Cointelegraph, and the real issue with carbon credits is quality offset:

“If anything, chain-based carbon credits exacerbate this problem by creating credit as a commodity when it is instead a differentiated product. In fact, I’ve heard stories of companies ‘laundering’ old offsets they couldn’t sell Any other way to these string based solutions”.

He added that by facilitating transactions, “it commodifies the credits more, and everyone treats them as the same. What happened in practice is that the developers of the project took old, low-extra credits that they couldn’t sell in a normal market and loaded them ‘on-chain’,” he added. Where they suddenly found new buyers.

The use of blockchain technology in combating climate change has faced both appreciation and criticism. On the other hand, decentralized technology is actively integrating to find new solutions on a global level to make certain aspects more transparent and streamlined. On the other hand, climate activists believe that existing blockchain solutions are not useful and focus only on tokenization.

Looking ahead, it will be interesting to see which projects evolve and expand to meet the challenges of climate change.

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