It’s 5:15pm, Day 2 of the Asia Pacific Climate Week (APCW 2018), and my brain has already hit a critical point of information overload. In the midst of sipping on black tea and recovering from a quick social media huddle, my colleague came over, pointed to his left and mouthed one word “blockchain”.
What is that?
My curiosity peaked. After a quick skim of the program and feeling the caffeine creeping to my head, I found myself rushing to Virgo 2 (name of room) to attend a session that I knew nothing about.
The projector displayed an impressive title, “Digitising Sustainability: Blockchain for Climate Action”, with a panel of six sitting in front of the screen. Mr. Joseph Pallant, the founder and executive director of Blockchain for Climate opened the session with a concise address on how blockchain can save the planet.
Blockchain, I learned, was a digital tool we could use to “perform rigorous projects and close the loop of turning stuff into offsets”. Being distant from developments in the technology sector, I took a quick trip to the google-verse to read up on the hype behind blockchain. Having scoured through at least ten separate sites, I do see how and why blockchain could save the planet.
Blockchain is a database that is constantly updated and verified by users, in a mutual distributed network. Data is stored as blocks and the blocks are chained each other, creating an ever-growing list. The chains are a form of cryptographic measure, and each consequent block contains a timestamp and transaction data of the former block. The cryptographic hash means that network members can surveil the records, ensuring that the information shared is transparent.
Once the data in blocks have been recorded, they cannot be altered without the consent of network peers. What makes the technology reliable is its five principles – distributed database, peer-to-peer transmission, transparency with pseudonymity, irreversibility of records, and computation logic. Since its launch in 2008, blockchain technology has been used as public ledgers for cryptocurrencies like Bitcoin, smart contracts, banking ledgers, and more.
According to Mr. Pierre Rousseau, Senior Strategic Advisor of Sustainable Business from BNP Paribas, the technology will revolutionize carbon trading because now the issuers, traders and brokers have access to same information, cutting out the middle man and allowing free market forces to act at full force. What the technology entails is the centralized systems like energy systems may no longer be beyond our reach. Having a blockchain market will give people a choice in their power sources. They may even sell their surplus power generated from their own roof-top solar panels.
Mr. Jeffery Liu, the founding partner of Xarbon Sustainability further elaborated on the importance of transparency in carbon trading. Like any market transaction, Mr. Liu explained, a unit may be double-counted and sold twice if we do not have visibility. Transaction can also be costly without the level of transparency blockchain offers because it requires due diligence and time. With cryptohash system, network peers are able to do their own due diligence. Having the right knowledge to correctly implement the system and build its infrastructure would not hurt either. For Ms. Deanna MacDonald, the CEO of BLOC, cryptocurrency in the blockchain system also offers “verified and valid assets that can be traded”, meaning that it has great liquidity.
So how does blockchain technology have a role in climate change mitigation? Now, the panel proceeded to let us in on the secret behind making climate action work – making the marriage between the UNFCCC standards and offset benefits work in our everyday lives. Turns out, mega projects are not hip anymore. All the resources and money could be better paid off when specialized and distributed to the masses.
Mr. Rousseau also mentioned that the future of climate financing will be ushered in by the support of climate action on a community level. In aggregate, small projects investors can be attracted and make a positive impact in climate action. An example would be facilitating clean energy trading between consumers. Consumers may conduct a transaction using digital assets within a market. The technology is also an improved carbon emission trading system, as mentioned before.
In China, IBM and Energy Blockchain Lab are developing a pilot platform to trade carbon assets. Blockchain technology has also improved tracking of carbon credit transactions between companies and entities, as well as their emissions. With blockchains’ level of transparency, the technology may be used as a tool for the tracking and reporting of greenhouse gas (GHG) emissions, and even implemented as part of the Nationally Determined Contributions (NDCs) monitoring process.
On official terms, the UN Climate Change secretariat initiated the creation of the Climate Chain Coalition (CCC) during the One Planet Summit on 12 December 2017 in Paris. The CCC aims to explore the potential of distributed ledger technology (DLT) and blockchain technology in facilitating climate action. Among the coalition’s principles and values, CCC members state their intent to align with the long-term goals of the Paris Agreement and the United Nations Sustainable Development Goals. The members’ charter also addresses collaboration, technology neutrality, standardization and dissemination of benefits.
However, there was no clear verbiage on supporting the mobilization green finance, especially on making the technology, incentives and solutions available to the hardest-hit communities. Sure, DLT and blockchain technology is a great way forward, but it does not provide a sustainable method to bridge the gap between the right solutions and delivering them to the right problems. However, I have to note that the panel was presented in the point of view where blockchain technology can be mobilized for offsets for mostly Annex I countries, particularly in the talk of blockchain being used in the future to monitor the International Transferred Mitigation Outcomes (ITMOs) that is listed Article 6.2 of the Paris Agreement.
That said, blockchain is still in its nascent stage and there are a number of obstacles in the way of becoming a ready solution. Ms. MacDonald mentioned that as an emerging technology, there are no real regulations on a global scale. There is also no single system to go with, and until the network has inter-operability, people will have to learn to navigate through different operating platforms. Ms. MacDonald also brought up a great point about disintermediation and avoiding, with the lack of better paraphrasing, the “crap in crap out problem”. As mentioned earlier on in the article, an advantage of blockchain technology is its ability to get rid of the middle man.
Contrary to that, Ms. MacDonald believes that the sources of offset projects are still the actors in the supply chain. The digital realm still needs to rely on eyes on the ground to source “products” and make sure that these “products” are well-integrated into the system for consumption, which brings us to the problem of capacity building. Mr. Liu adds on by saying that data can only be stored “trustlessly” when implemented properly, meaning that the system will still be imperfect because offline data still requires oracles.
For a new technology, its plans to tackle the Paris Agreement head-on seem to be ambitious – for most of the world does not have the technical knowledge and infrastructural capacity to mobilize their personal participation. When asked about actions that will generate most impact to change, Mr. Liu quips in that it is not entirely up to regulation but it is about behavioral change. He believes that the success of blockchain technology in climate action depends on how the technology is marketed.
Using the diamond as an anecdote, as long as blockchain is marketed as a premium tool that you have to be informed to access, consumers will want it. Ms. MacDonald responded by pointing to the market mechanisms to make blockchain a viable consumer case. “Money makes it happen” she stated.
As the panel wraps up, I was left thinking, was this just another promise plug? Seems like it. I was not convinced by the excessive optimism sprinkled on by the moderator’s closing remarks on blockchain bringing capital, resources, and information all together.
Combing through my notes, I came across an uncredited set of bullet points with the message from a panelist – “We need to be realistic. It’s going to take time, money, (and) dead ends. We need to go in to provide the proof. We have the responsibility to define the problem”. Perhaps that is what it takes for blockchain to be a verified solution – a little more time, money and proof.
Written by: Cai May
Edited by: Arief