Updated: Nov 3
Blockchain | NFT | Token Economy for #climate
The Climate Challenge & Web 3
As temperatures continue to rise and extreme weather events become more frequent and intense, the devastating effects of climate change are becoming increasingly evident. Urgent action is needed to mitigate its impact while scientists and innovators alike are exploring various technologies and methods to do so. Among these, Web 3 and its components stand out as having great potential to scale solutions in the fight against climate change. Blockchain, Non-Fungible Tokens, and the concept of a Token Economy are three important elements of Web3, which we outline below.
Blockchain provides Transparency
Blockchain is a versatile technology, which has been already used in a wide range of applications. It is by far one of the most promising technologies that can securely and transparently record transactions and transfer value, especially if it is a permissionless, so-called public ledger.
An example for the application of Blockchain technology in Climate Action is the tracking of emissions: → The origin and properties of products, as well as data on projects that provide climate change solutions, can be efficiently recorded and verified. The risk of manipulations, fraud, or greenwashing is significantly reduced.
→ Companies and individuals can track the carbon footprint emission of products and services along the supply chain, starting with the raw materials all the way to the finished product.
→ People can track their own footprint, their cars’, flights’, as well as their contributions to fight climate change.
→ Investors and climate advocates can keep track of their investments and contributions to projects that matter through the transparency this technology provides.
NFT | Non-Fungible Tokens as Digital Ownership Rights
Non-Fungible Tokens are specific Tokens that represent unique physical or digital assets. Since NFTs can be traded, bought, and sold, they can also be used to represent carbon credits.
→ What are Carbon Credits?
One carbon credit is equivalent to one metric ton of CO2 emissions, either avoided or removed from the atmosphere. This process can be initiated with nature-based solutions, for instance by planting trees, which absorb CO2 from the atmosphere, or through carbon avoidance or removal technologies.
Carbon Credits are a mechanism to reduce greenhouse gas emissions over time. This mechanism incentivizes companies or individuals to invest in innovative products and projects to reduce their greenhouse gas emissions.
This mechanism has been proven to be very effective as a means to reduce carbon emissions in the so-called mandatory carbon markets, particularly in the European Union, where the biggest polluters are required to purchase those credits to keep their license to operate. Now, this mechanism is therefore extended to the emerging so-called voluntary carbon market. Carbon Credits are used to further incentivize climate action by companies and individuals, which are not obliged to participate in the mandatory carbon markets.
→ How do we, as individuals, compensate for our CO2e?
Our everyday actions, at home and work, such as driving, flying, heating buildings, streaming Netflix, sending emails, or posting on social media, consume energy and produce carbon emissions. Therefore, we can first adopt a more conscious way of doing things; we can also purchase climate-friendly products, invest, or donate for further CO2 emission avoidance or reduction to compensate for our carbon footprint. This is where Carbon Credit NFTs prove our contribution.
→ NFT as Digital Ownership Rights
Similar to Art NFTs, which store data on art pieces, carbon credit NFTs contain data on stored or avoided carbon emissions. This gives the buyer the opportunity to compensate for their own emissions:
- Carbon Credit NFTs prove the contribution of the owner including data on the origin such as source, location, and the amount of CO2 avoidance or reduction. - When it comes to transactions, the change of ownership and their use are recorded and auditable. - Projects, issuing these NFTs, receive funding for storing or avoiding the purchased carbon emissions. Once the Carbon Credit NFTs are used to offset emissions of a buyer or user, trading of these NFTs needs to be prevented either through locking them or a so-called burning mechanism. In other words, taking them out of circulation.
A Token Economy to Promote Climate Action
The term Token Economy describes a system where one or more token types are used to provide certain functions in an ecosystem like a marketplace. Typical use cases for tokens in this context are for instance payment functions or rewards. Tokens can also be used to pay out dividends or give voting rights. Imagine the coupons with points collected on groceries purchases. They have no intrinsic value but can be exchanged for rewards and discounts. Tokens are used to coordinate stakeholders that do not necessarily know or trust each other.
→ New ventures are brewing
One example where this concept is applied is gr33nBASE with its first vertical FUEL-SWAP. gr33nBASE provides a Web3 marketplace for Green Products and Services, Carbon Credits, and Investments in climate ventures, co-owned by producers, buyers, and investors. This requires the design of an effective Token Economy to coordinate these stakeholders. Fossil Fuels account for about 75% of global carbon emissions. A large number of technologies can be applied to reduce these emissions, for instance, to greenify electricity production, electromobility, and more. A further technology that has a large potential impact is Carbon Neutral Fuel (CNF). They avoid additional carbon emissions by recycling CO2. In particular, fully synthetic eFuels can replace fossil fuels, since they do not compete with agriculture as in the case of biofuels.
Renewable Energy, inorganic CO2 (captured from the air), and/or Organic CO2 (biomass from waste) are used to produce CNFs. These types of fuels can be placed and used in existing infrastructure such as fuel stations, airplanes, or ships that are hard to electrify, as well as in conventional cars or trucks, which remain in operation for decades to come.
eFuels avoid the emission of “additional” CO2 for each liter of fossil fuel that is replaced. They can therefore complement existing initiatives in electromobility, which do not scale fast enough to achieve the ambitious goals to reduce carbon emissions. In this case, Fuel Tokens can be used to reward early adopters with a price discount for future purchases. More work is underway to leverage Web 3.0 technology in this area.
Key takeaways | Web3 in the Battle against Climate Change
Web3 technologies, like Blockchain, NFTs, and Token Economies, have a real-world impact to mitigate climate change. This is exciting because this application goes beyond existing use cases in financial services, supply chain management, fashion, or digital art.
Tokenized Carbon Credits are proof that one ton of CO2 has been removed from the atmosphere. They allow each one of us to compensate for our own carbon emissions by funding an equivalent carbon dioxide avoidance or storage elsewhere.
Token economies can incentivize and reward early adopters to contribute and help emerging technologies scale.
Future posts will dive deeper into the various aspects of sustainability, Web 3.0, and climate action.