Blockchain Is A Powerful Weapon In The Battle Against Climate Change

But there’s an ugly side to Bitcoin too – its network of “miners” uses incredible amounts of energy to process transactions and secure the underlying blockchain, with negative consequences for the environment we live in. 

However, it may well be that for all of the carbon emissions Bitcoin has directly pumped into the atmosphere, it ends up being a net positive in the bigger picture around climate change. After all, it’s Bitcoin that first introduced the concept of the blockchain, and the distributed ledger technology is powering numerous projects that incentivize people to help clean up the environment. 

These projects range from decentralized renewable energy grids that have an obvious impact in terms of reducing carbon emissions, to initiatives that provide more indirect benefits, funding the planting of trees that will help to clean the air for future generations. 

Funding for renewable energy projects

Renewable energy is nothing new. Things like solar farms and wind farms have been around for decades already, but we’re still a long way from reducing our reliance on fossil fuels that continue to pump millions of tons of carbon emissions into the atmosphere every year. 

One of the major challenges for clean energy projects is that it can be extremely difficult for them to find the funding they need to build their infrastructure first. The clean energy industry has typically always relied on traditional investors, such as hedge funds and venture capital firms. The problem is that these investors’ primary motivations are not clean air, but rather money, and many renewable energy projects struggle to match the profitability of power plants that rely on oil, coal and nuclear energy sources. 

With the advent of blockchain, climate-friendly energy projects now have an alternative. A startup called EcoYield Energy has developed a decentralized funding platform that enables nascent wind and solar farms to reach out to retail investors who are primarily motivated by helping to clean up the environment. What’s more, it offers them an attractive deal, with a return on investment that can be much higher than whatever interest rate their bank might be willing to offer them. 

EcoYield brings renewable energy profits on-chain. It “tokenizes” the revenue of participating projects so it can be distributed to thousands of investors who are willing to help fund it with crypto capital. Investors deposit stablecoins such as USDC and ETH tokens into the EcoYield protocol, providing the funds that verified projects need to build up their infrastructure. When investors deposit money into its smart contracts, they’ll be given receipt tokens that represent their share of the liquidity pool, which entitles them to receive a portion of the revenue generated by the projects each month. 

EcoYield is hoping to tempt anyone who supports the idea of a cleaner energy grid, giving them a chance to contribute to building it and the opportunity to earn a decent amount of money too. As an example, investors can deposit USDC and ETH into a 100kW Rooftop Solar Project that’s located in Hull, England. It advertises a yield of around 25% APY, and this is backed by a long-term Power Purchase Agreement that’s been verified and is visible on the transparent blockchain. 

Cleaning up carbon credits 

Carbon credits are another long-established concept, used by businesses that don’t have an easy way to reduce their carbon emissions. By purchasing carbon credits, companies can offset the amount of pollutants their activities pump into the environment by supporting projects that aim to take it out. 

It’s a cool idea in theory, but existing carbon credits can be problematic due to a lack of transparency. Quite simply, there’s a big issue with fraudulent carbon credits, with many firms exaggerating their claims about the effectiveness of their carbon reduction projects. 

The immutable and transparent blockchain can help to fix this, providing the basis of a transparent platform for anyone to verify and trade carbon credits on a decentralized marketplace. For instance, KlimaDAO is aiming to create a market for companies to buy and sell carbon credits with full confidence that they do meet the claims they make. 

What KlimaDAO does is verify each carbon credit before tokenizing it so it can be traded in its transparent marketplace. Every prospective buyer can check for themselves that the credits they’re buying really do help contribute to removing pollutants from the atmosphere. 

Bringing transparency to sustainable products

These days, many of the world’s biggest brands are motivated to help clean up the environment, and one of the best ways to do this is by sourcing their products and components from sustainable providers. 

But to really have an impact, brands need to build more transparent supply chains that can prove the ethical nature of their products. They need to create a system that allows consumers to reliably track the raw materials that went into their products, so they can ensure the brands they buy from are not contributing to deforestation and other negative activities. 

This is exactly what Provenance does with its blockchain-based tools that allow products to be tracked all the way back to their natural origins. The blockchain records verifiable information that tracks the entire journey of a product, from the field where its ingredients were grown or the mine where it was first dug up, to the factory, the transportation network and the retailer. 

For example, a company that sells cereals will be able to show that all of the foods within it were ethically sourced, while a clothing brand can demonstrate that the cotton and nylon used to make their products comes from sustainable sources. By providing this transparency, brands can combat the damage done by “greenwashing”, which results in products that falsely claim to be climate friendly. For consumers, it gives them the option to make an informed decision on what to buy if they care about environmental sustainability. 

Making a real difference

Although Bitcoin continues to be an energy hog, the growing number of climate-friendly blockchain projects suggests that it may ultimately play a role in cleaning up the environment. For without Bitcoin, there would be no blockchain, and no way for the above projects to democratize investing into renewable energy or transparently verify carbon reduction initiatives. 

Moreover, blockchain these days is cleaning up its act with the emergence of lower-energy networks that utilize “Proof-of-Stake” consensus mechanisms that eliminate the need for computationally-intensive mining.

That’s not to say blockchain is going to be the silver bullet we need to clean up the environment once and for all, but by supporting so many innovative eco-friendly initiatives, it will play a significant role in helping us to get there.