Carbon Credits

Climatecoin, an Ethereum-based cryptocurrency, has partnered with a carbon credit exchange in an effort to help in the fight against climate change. The move is expected to lead to the creation of the world’s first blockchain-based platform for carbon credits trading.

Carbon emissions are wreaking havoc on our environment, and one way the world is attempting to combat this problem is through the use of carbon credits, an approach agreed upon by most of the world’s nations through an international treaty called the Kyoto Protocol.

The idea behind the system is that everyone has a limit to the emissions they can produce. If a nation wants to exceed its limit, it must purchase a carbon credit. Each of these carbon credits serves as a permit to produce a certain amount of emissions; for example, one credit might equal one ton of carbon dioxide emissions.

If an entity ends up with extra carbon credits, it can trade them to others on markets such as the European Union’s Emissions Trading System (ETS).

From this system emerged voluntary carbon offsets. These give companies and consumers the ability to pay a certain amount to offset their own emissions. For example, an airline might ask passengers if they want to pay an extra $20 when purchasing a ticket to offset the emissions caused by their flight.

The money used to purchase carbon credits and offsets is given to projects attempting to help the environment, such as by developing renewable energy systems or protecting forests.

These credits give purchasers a way to effectively cancel out the amount of emissions they produce. They’re doing something bad to the environment, so they give money to someone attempting to do something good for it.

Climatecoin

Recently, cryptocurrency mining’s negative impact on the environment has been the focus of much attention. According to a study by PowerCompare, a U.K.-based energy comparison tariff service, if bitcoin miners were a nation, they would rank 61st in the world in terms of electricity consumption.

Climatecoin aims to help individuals take part in the emerging crypto market while also assisting in the fight against climate change. Each token is “stapled” to a carbon credit, and climatecoin owners can use the tokens to purchase carbon credits on the Carbon Trade Exchange (CTX).

According to a Medium post from the company, money from the token sale will be invested into environmental businesses, making climatecoin the “first carbon-zero cryptocurrency in the world.”

In the past, carbon trading schemes have been criticized because of their volatility. Prices on the ETS have fallen almost 70 percent since 2008, leading to an overhaul of the system.

Offset programs have also been criticized as simply public relations tools that allow companies to avoid addressing their impact on the environment. Tracking the money is also next to impossible, and companies could claim to be using it for environmental purposes while simply pocketing it.

Blockchain is currently the most promising ledger technology available, so using it to track carbon credits/offsets could solve some of these problems. With the planet’s carbon dioxide levels higher now than they’ve been in millions of years, any action that addresses the emissions problem is worth considering.

Disclosure: Several members of the Futurism team, including the editors of this piece, are personal investors in a number of cryptocurrency markets. Their personal investment perspectives have no impact on editorial content.