WEF Report: Blockchain's Role in Scaling Up Climate Action
The World Economic Forum (WEF) recently published a report on “Blockchain for Scaling Climate Action.” While many blockchain initiatives on the corporate end of the scale were overlooked in the report, the content is still valuable because the web3 world provides an opportunity to tap into retail financing for climate action.
The focus of the report is on the crypto side of blockchain, including incentive systems for regenerative finance. As the report outlines, blockchain-based carbon registries offer a transparent digital record. So much so that the World Bank-backed Climate Action Data Trust is creating a registry to store data from multiple registries. Plus, blockchain can be used for measuring and reporting by pairing it with data collected from IoT sensors, smart meters, and drone imagery.
Blockchain Offers New Solutions for Climate Action Financing
Governments have recognised that the scale of money required for sufficient climate action is beyond their finances to date. Hence there has been a push to include corporates with both compulsory and voluntary carbon credits and numerous other initiatives. The Web3 and blockchain sector presents an opportunity to extend that to consumers, provided it can address its trust issues.
As the report states, “recent movement to ‘tokenise’ (i.e. digitise) credits has enabled fractional (i.e. sub-tonne) ownership of credits, allowing individuals and smaller organisations to participate in the market.” One of the lead authors of the WEF report is from the Toucan Protocol, which tokenises Verra carbon credits.
While the report doesn’t focus on Toucan, it had tokenised 21 million tonnes of carbon, estimated to represent 2.25% of total credits. That sort of scale attracted Verra’s attention, and it wasn’t happy with Toucan’s methodology. That wasn’t because Toucan was doing something dodgy, but because Toucan retired carbon credits at the point of tokenisation. Previously ‘retired’ meant a carbon credit had been consumed. Verra thought that was confusing and as a result, Verra paused tokenisation and opened a consultation. It’s in the final stages of coming up with an action plan.
WEF Report Addressing the Industry’s Challenges
As we reported on Zatrun.com, the WEF report highlights some of the industry’s challenges, including a multi-faceted reputational one. On the one hand, unrelated to blockchain, there’s the potential for carbon offsets to be used for corporate greenwashing. The report also acknowledges crypto’s reputation for scams, which may be the reason why the term ‘crypto’ is barely used in the report. It glossed over the fact that the quality of crypto carbon credits, in particular, have been questioned.
Several recommendations are made in the report to address many of the challenges. But trust is a key one. When Verra announces its proposals, there’s a chance that they will include Verra performing due diligence on the firms that tokenise its carbon credits, which will be a step in the right direction.
