It could be argued that the world has never before experienced such unified fear over the climate emergency. While the UK recently endured its highest temperatures ever recorded, Italy finds itself in the throes of one of its worst droughts in history, and across the pond the USA has placed thousands of cities and towns on heat advisory warnings. This all in conjunction with unprecedented flooding in the likes of South Africa and India, and hail and snow storms ravaging Mexico and New Zealand.
The catalog of climate catastrophes is getting longer by the day, and solutions are arguably humanity’s most prized necessities right now. While some of the planet’s largest conglomerates (long guilty of being the worst contributors) are now frantically exploring ways to reduce and even turn back their environmental impact, some experts propose that carbon credits are the easiest method to start reining in the carnage.
Carbon Credits: A Financial Product to Offset Environmental Footprints
A carbon credit is a type of asset that a person or organization can purchase to offset their carbon footprint. One carbon credit represents an emission reduction of one metric ton of carbon dioxide (CO2). They’re most commonly used in the corporate industry, where companies purchase them to offset the negative impact they’re having on the climate via their CO2 emissions.
In addition to offsetting their own climate impact, the purchasing of carbon credits also contributes to the funding of environmental projects actively working to remove CO2 from the atmosphere. This strategically innovative economic system was introduced in 1997 at the United Nations’ Kyoto Protocol, and is an ingenious way to not only incentivize the reduction of carbon emissions, but also that of carbon capture technology. By creating a regulated economy whereby corporations can offset their CO2 emissions by purchasing “credits”, forward-thinking entrepreneurs and engineers are motivated to create and run efficient carbon capture technology because of the revenue it will generate.
In essence, the purchasing of a carbon credit is akin to buying a certificate that states an individual or corporation has emitted a specific amount of CO2 whilst conducting business, and have now funded a project that counters that emission with an equal or greater amount of O2, thereby offsetting their pollution. Thanks to the carbon credit system, many of the world's largest companies are now carbon neutral, and some are even able to venture into “carbon negative” territory due to their investments into carbon capture tech. While some of the world’s more famed companies like Google and Microsoft have a lengthy history of purchasing carbon offsets, the economic mechanism has now inspired them to engineer their own carbon capture technology
Web 3.0 Driving Climate Change Through Carbon Credits
Traditionally, the Web 3.0 industry has been on the receiving end of intense backlash when it comes to climate change. This is mostly due to the amount of energy required for securing “Proof of Work” blockchains like Bitcoin and Ethereum. In recent years, however, the scrutiny has led many Bitcoiners to seek renewable energy sources and has motivated Ethereum to shift to the energy-conserving “Proof of Stake” algorithm.
But beyond the two largest blockchains in the industry, there are a considerable number of ways that Web3 tech is empowering climate action. From solar farming to carbon credit tokenization and everything in between.
Abe Cambridge, a climate scientist from the UK who recently moved to South Africa to establish a solar panel network in the country, is of the firm belief that blockchain technology is a boon for taking the carbon credit economy to the next stage of development.
“Solar panels are so effective that subsidies are not required to provide a double digit return on investment,” Cambridge said in a recent interview. “By combining the power of cryptocurrency with solar, we’re able to close the solar funding gap by connecting the world to the sun.”
Cambridge’s “Solar Exchange” aims to motivate retail investors to partner in the building of new solar plants and earn passive income on their contributions based on the amount of energy produced.
In a similar vein, EcoWatt envisions a future where carbon credits can be tokenized and traded as easily as any cross border digital asset. By taking advantage of the global, cross-border nature of cryptoassets, EcoWatt is reducing the friction of carbon credit purchases.
“The carbon credit economy is one that needs to scale, and scale fast,” tells CEO Thomas Puskas. “There has never been a more urgent time in human history than right now to move toward carbon negative industry. I believe this can only be achieved through a carefully engineered carbon credit economy.”
Puskas and his team at EcoWatt aim to be part of that engineering solution by introducing NFT technology to the carbon economy in addition to the tokenization of their generated carbon credits. The company has a portfolio of renewable energy, clean tech and reforestation projects that generate carbon credits, which are in turn tokenized using blockchain infrastructure and sold as digital assets. These assets can be purchased by corporate or retail investors alike, who can then earn utility NFTs that certify their environmental contributions over two decades.
Is The Future of Web3 Green?
While blockchain networks certainly came under fire in their formative years, their evolution has shown that they are a powerful ally in the fight against climate change. If implemented securely, using carbon neutral Proof of Stage consensus, it is highly likely that public perception about the technology will change when confronted with projects like EcoWatt, Solar Exchange, and others.
The global and instant nature of blockchain and cryptocurrencies makes them a perfect fit for both the tokenization of considerable assets like carbon credits, as well as the cross-border funding of important environmental projects.
Web3 looks to have matured, and it couldn’t have come at a more critical moment.