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In his scientific exploration “Enlightenment Now”, Harvard University’s DR Steven Pinker outlines how humanity is making sensational progress, citing real data that will surprise you. The data is real, verifiable and encouraging. But one challenge is highlighted as a critical need to be addressed: Climate change.
The year is 1848, Sacramento Valley is sprinkled with white powder from the heavens in a cold January. The USA is in the midst of a tense negotiation with possessors of the land, Mexico, who days later would cede their territory to the Yanks.
The investment space has grown into an entire industry with its own verticals and niches. Venture capital has never before seen such prominence, and there doesn’t seem to be an end in sight. Five decades ago, when someone referred to “investment”, it was usually a simple trust fund with a well structured portfolio providing solid dividends. Today, the term could mean a myriad of different things.
With a population now teetering on 8 billion people, the amount of carbon dioxide we as a developed species are releasing into earth’s atmosphere is astonishing. The current data shows that humanity is emitting 99.45 million tonnes of CO2 each day, which, as anyone with any comprehension of the “greenhouse effect” would know, is a recipe for global disaster.
It’s now glaringly obvious that climate change is having a serious impact on everyday human life. We’ve recently witnessed devastating floods in Pakistan and India, and scorching drought in most of Europe. Every month seems to bring more news of severe calamity brought on by mother nature.
Clean energy is given an enormous amount of media attention these days, so much so that it’s hard to imagine that 80% of the world’s energy is still produced from the combustion of fossil fuels. And while that share is projected to drop to 56% by 2050, it’s still staggering considering we are told daily about renewable energy exploits.
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.
As humanity advances to ever greater levels of technological progress, we are confronted with the consequences of that progress with increasing regularity. Each year seems to break records as the hottest ever, while flood-causing storms and drought-causing heat are becoming commonplace.
It’s now harder than ever to deny the reality that our climate is changing at a frightening pace, and the evidence is overwhelming that this change is at least fast-tracked by human activity. As an industrious species, we’re burning fossil fuels at record rates, causing 37 billion metric tons of carbon dioxide to be released into the atmosphere every single year. That’s the equivalent of 101,000 Empire State Buildings worth of carbon dioxide!
Most of us know the science behind that equation: The more carbon dioxide in our atmosphere, the more the sun’s heat gets trapped on earth’s surface, and our climate adjusts to those rising temperatures, causing more intense evaporation creating larger storm systems, and parching our land causing more severe drought.
It is argued that humanity is fast running out of time. The need for intervention has never been greater.
But what are our options in the face of such an ominous outlook?
While public intellectual Steven Pinker agrees that Climate Change is civilisation’s most serious existential threat next to nuclear war, he is also convinced of mankind’s technological prowess to build effective solutions. Humanity’s rise has been due to our ability to fight against the elements of the cold, the dark, and long distances using technology. Now we can do the same with an element brought on by our own doing, a warmer climate.
Is Our Answer Big Tech?
While big tech admittedly has an enormous carbon footprint, estimated to be around 2 to 3% of all global emissions, it is seeking to undo much of the damage it has caused. Amazon has targeted 2040 as the year it will achieve net-zero carbon emissions, reaching 50% of that milestone by 2030. In addition to its carbon neutral goals, the e-commerce powerhouse aims to be run on entirely renewable energy by as soon as 2025.
Google has set 2030 as the year they operate 24/7 on carbon-free energy, and aims to replenish 120% of the water they consume, an important step in contributing to sustainable water security. Their largest competitor, Apple, has also identified 2030 as a key date in their fight against climate change, aiming for every Apple device sold to have a net-zero climate impact by that time.
Microsoft is pushing the limits of what is possible, stating that they plan to remove all the carbon they have been responsible for since their inception in 1975. The computer behemoth aims to achieve this considerable landmark by 2050, and on the way there will reach 100% renewable energy operation by 2025, and will become carbon negative by 2030.
Even if the titans of Amazon, Google, Apple and Microsoft do indeed achieve these admirable targets, will it be enough? Some experts believe their pioneering vision is key to rallying more of the tech industry into effective action.
In a recent protest in Glasgow, Scotland, climate activist Greta Thunberg said that the climate crisis had already been solved, the solutions just haven’t been implemented yet. She pointed to numerous proposals and fact-based solutions, claiming that humanity only needed to “wake up and change.”
The solutions are diverse, but provably effective. From groundbreaking carbon capture tech to electric air travel, and tokenised carbon credits to seaweed for cattle. Some of the most innovative work being done in the fight for our climate will surprise you.
Carbon Capture Tech
Capturing the carbon already released into earth’s atmosphere is one of the most important tasks we face in this fight. It’s common knowledge that vegetation removes carbon dioxide from the environment, synthesising it in energy production, and releasing oxygen. And with the math suggesting that there is more CO2 being released than there are plants to consume it, man-made carbon capture is one of our more promising solutions.
Net Zero Teeside is one of the world’s leading industrial clusters doing just that. NZT in Middlesbrough, UK have developed pioneering carbon capture technology, and are able to produce 860 MegaWatts of carbon negative electricity, with carbon captured at source, which is then transported to geological storage via pipeline several kilometers below the North Sea.
Electric Air Travel
Greta Thunberg and leading climate scientists believe that air travel is the worst possible form of transportation due to the amount of CO2 emitted and the way in which those emissions happen. Experts have warned that unless something drastic is done to transform air travel, the world’s economies will never achieve their environmental targets.
A key contributor to this transformation will likely be a move to electric air travel, with EasyJet identifying leading E-plane engineers Wright Electric as the most effective solution they’ve seen. The airline has invested heavily into the engineering firm, who have already conducted tests on a 1.5 megawatt electric motor. The plan is to introduce the hybrid aircraft into Europe’s second-busiest route by 2030, traversing the 500 km journey between London and Amsterdam.
Tokenised Carbon Credits
Scientists, economists and politicians alike have identified a carbon scoring system that incentivises corporations to radically reduce their carbon emissions. The Carbon Credit system allows market mechanisms to drive business processes to be less carbon intensive, and utilise tradable permits representing the right to emit a set amount of CO2. One carbon credit is equal to one tonne of CO2 or equivalent gasses, and companies that capture CO2 out of the Earth’s atmosphere can sell those credits, while companies that emit CO2 can purchase them – thereby ensuring a climate equilibrium in a given economy.
Experts believe that tokenising the Carbon Credit system via Web 3 technology is one of the most effective means to scale the mechanism. IBM’s Senior VP of blockchain was recently quoted as saying that the technology is imperative to creating effective marketplaces for this kind of solution. The EcoWatt project on Polygon is one such solution, with a real portfolio of green energy assets backing each of its one billion digital tokens. The company has built an ecosystem that tokenises the carbon credits of renewable energy, cleantech and reforestation projects, enabling global brands to become carbon neutral, and participate in climate action projects through NFTs.
Alternative Cattle Feed
It’s common knowledge that humanity’s affection for dairy and beef has contributed significantly to the climate disaster. The 996 million heads of cattle on earth today are responsible for a devastating 13% of greenhouse gas emissions globally. But a recent discovery could transform that equation into one of the most promising stories of the century.
On Prince Edward Island in Canada, farmer Joe Dorgan discovered that his organic seaweed is able to reduce cattle’s gaseous emissions by an astonishing 40%. Dorgan produces organic seaweed for numerous culinary and fertilizer applications, and knew the health benefits of his product. Based on a hunch, he added it to cattle feed and tested the animal’s emissions, confirming the results with the Dalhousie University in Canada’s Nova Scotia district.
The discovery has scientists stumbling for its application, with conservative estimates targeting a global reduction of CO2 emissions by a remarkable 5.2% based on the diet change alone.
Is It Enough?
While these technologies are still in their infancy, there is no doubt there is overwhelming promise in their ability to turn back the climate clock. Adding seaweed to the entire planet’s cattle food supply isn’t going to be a walk in the park, and neither is shifting the world’s corporations to trade on Web 3 digital asset platforms for carbon credits, but experts believe that incrementally they could contribute to shifting the tide.
A significant tidal shift is indeed needed in the fight against catastrophic climate disaster, and technologies of this nature are certainly hope inducing.
As Samuel Smiles so eloquently stated, “Hope is the companion of power, and mother of success; for who so hopes strongly has within him the gift of miracles.”
And we can all agree, a miracle is most certainly needed here.
Tesla has been criticized for its previous years’ earnings being dependent on the sales of its carbon credits. These credit sales have been a
major driver of Tesla’s profits over the years.
But since it separated reporting its regulatory credits from other sales, it showed that it’s profitable.
The carmaker revealed a big jump in its net income in its latest quarterly report. This is a plus for the company’s reputation as it managed to exceed Wall Street’s estimates. And this is amid the worst supply chain shocks hitting the entire industry right now.
Tesla’s profits on electric vehicles totaled $3.22 a share, beating the $2.27 estimates. Also, actual revenue rose to $18.8 billion, higher than $17.9 billion estimates.
Most interesting is its $679 million carbon credit sales. It’s more than double the prior quarter’s sales of $314 million and is even much higher than its Q1 2021 sales ($518 million). Its Q2 2021 and Q3 2021 credit sales are $354 million and $279 million, respectively.
The chart below shows Tesla’s regulatory credit sales since Q1 2021.
Tesla’s regulatory carbon credit sales account for over 20% of its profits this quarter.
Tesla has warned that carbon credit sales in the future will fluctuate and decline.
Tesla’s Regulatory Carbon Credit Performance
Tesla has earned billions already through its regulatory carbon credit sales. This allows other automakers to meet emissions regulations and avoid billions in fines.
Tesla has been receiving emissions credits from various local regulations sources like California’s ZEV program. These credits are then sold which helps the company’s bottom line.
Tesla has been getting paid by other carmakers for selling its carbon credits for years whose names used to be a secret.
But a report from Bloomberg revealed two famous names. These are General Motors and Fiat Chrysler Automobiles (FCA). About how much exactly they’re buying, it’s between them and Tesla.
So far, it’s only Tesla that’s selling a lot of regulatory credits within the industry. Others even speculated that Volkswagen is also buying credits from Tesla to offset its huge emissions credit shortage in China. While others are striving to be at par with Tesla’s all-electric car production.
What Comes Next For Tesla’s Regulatory Carbon Credits?
Governments are tightening up their regulations to decarbonize the automotive industry. This is because of the urgent need to tackle climate change and the industry’s huge emissions.
In a sense, this seems to drive Tesla’s carbon credit sales further up in the coming years. Plus, the company remains the most-valuable zero-emissions vehicle (ZEV) maker by volume.
Unfortunately, other major automakers are also catching up on their own ZEVs programs. It means that they will rely less on Tesla in meeting the regulatory carbon credit cap.
For instance, Europe’s Stellantis that owns FCA (once Tesla’s biggest buyer of carbon credits) planned to sell more of its own ZEVs.
In fact, it had significant emissions reductions in 2021 with its electrification ramp-up. This involves its battery electric vehicles and low emission vehicle programs.
The European carmaker also pledged to reach net-zero by 2038 through various measures. These include energy efficiency, renewable energies, technological innovations, and carbon capture and storage.
Considering this, it appears that Tesla has to continue its efforts to have more deliveries to its customers and do better in reducing costs.
Still, will Tesla’s carbon reduction initiatives produce more regulatory carbon credits?
Tesla’s Net-Zero Strategy
Tesla’s all-electric car lineup has been helping cut down emissions in the industry. This is a big part of Tesla’s mission to speed up the transition to a sustainable energy ecosystem.
Yet, the carmaker remains less transparent of its decarbonization strategies. It still has not made any public commitment on net-zero or carbon-negative targets.
What is only shared so far is its plans to make EVs more available to consumers by using profits from new models to make subsequent models less costly.
Currently, the carmaker is providing energy generation and storage products using solar power. It also has a network of Supercharger stations for EVs across North America, Europe and Asia. These contribute to Tesla’s regulatory carbon credit generation.
But for its clear and detailed net-zero roadmap like Stellantis has, the public is still waiting for Tesla’s disclosure.