Saving the planet won’t be easy, says Luis Felipe Adime, but we can speed things up by using blockchain technology.
Humanity is facing its greatest existential challenge: climate change. Ever since we appeared on the planet, the risk of extinction (and in a very short period of time) has never been higher. We are emitting more than twice as many greenhouse gases as in 2008. If we continue at this rate, scientists say the average global temperature is expected to increase by 2.5 to 3 degrees Celsius by 2070 (fifty years from now).
It sounds a bit, but it would be catastrophic: an increase of this magnitude implies that: (a) all coastal areas, such as Rio de Janeiro and New York, would be under water; (b) the tropical region of the world, which includes Brazil, Africa and Southeast Asia, would be uninhabited because it would be 65 degrees in shadow; and (c) the world’s food production would fall by 50% or more, the poorest half of the global population, or 5 billion people would die of hunger.
tech to the rescue
There is an ideology, of which Moss is part, that believes that technological changes (such as moving electric vehicles instead of combustion engine cars) will result in emissions reductions, but unfortunately not at the pace we need.
We have to add agility through trading carbon credits. These are digital certificates that prove that a company or environmental project has forfeited or avoided emissions of one metric ton of carbon.
Carbon emissions are a negative externality of an economy based on fossil fuels (an unexpected “side effect”). So they don’t have a price in the system other than trading carbon credits. An oil company emits millions of tons of carbon a year, but unless that company is in the carbon market, buying carbon credits, it doesn’t pay for that pollution. Instead, the rest of us humans pay in our stead: the unavoidable costs of poor air quality and climate change are spread across the roughly 8 billion people on Earth.
The carbon market has expanded significantly over the past 3 years. This is because climate change has become more apparent to the world. Millennials – people born after 1980 – have replaced Baby Boomers as the world’s most important demographic. Millennials began demanding that companies compensate for their carbon emissions.
We recognize that much disruption is underway through the use of technology to accelerate the growth of the carbon market.
Saving the Planet: Carbon Credits
There is a lot of talk about the “transparency” and “security” brought about by the use of blockchain in various fields. But what does this really mean in practice?
Historically, the carbon credit sector has faced legality issues due to some (very rare) instances of fraud. Because a carbon credit is a digital, intangible certificate, some projects sold the same asset multiple times. Or they sold credits from Brazil saying they were from Indonesia. They may have sold the 2012 credits and claimed they were 2015 credits. Or they “canceled” the credit after clearing, and did not record it in global credit registries. Or they sold ten credits that should be “canceled” or retired, and only one to be cancelled. Unfortunately, it has given the industry a bad name.
Even today, on the websites of clearing companies that do not use blockchain, the credibility of the clearing is not high. And, the process is easily spoofed (not saying it’s cheating, but it can be). The user calculates the carbon footprint, purchases credit, is credited to the credit card and receives a confirmation of the transaction in a PDF file or by email.
But what is the guarantee that the credit was actually sold, and not just charged and did nothing? Or that he retired that credit? Or even that the transaction was effectively recorded in the Global Credit Registry so that there was no “double counting”?
Saving the Planet: Blockchain Solutions
The use of blockchain solves all the above doubts. Once a transaction is completed, it is forever available on the crypto network, in a public and easily accessible manner, in a 100% secure manner.
Blockchain transactions also avoid “double counting” or “double spending”. A transaction recorded on the blockchain does not allow another record of the same transaction. The data is audited in real time along with global credit records so that there is no fraud.
We can manage technological disruption and bring greater efficiency to the global environmental sector. Carbon offsetting needs to move away from being done by hand. It needs to go through APIs and software (SaaS) and digitized and recorded data on the blockchain. If this happens, the chances of us surviving a catastrophic climate scenario will increase dramatically. It is (still) in our hands to work together so that this planet remains habitable for generations to come.
About the Author
louis edme is the co-founder and CEO of Moss, Lewis served as Portfolio Manager and Partner for LATAM Equities Long-Only Funds at Newfoundland Capital Management from 2012 to 2019. Prior to this, he was managing director of York Capital Management, working as portfolio manager for the firm’s investments in Latin America. Prior to York, Luis was a participant in a Brazilian hedge fund, BRZ, working as a commodity analyst and portfolio manager for both their value and long/short funds. Luis began working at Credit Suisse as a Latin American financial institution research associate and later moved to the bank’s ownership desk in So Paulo. Lewis has done B.Sc. in Management Science and Engineering with a minor in Economics from Stanford University and graduated from Phillips Academy, Andover. He is a native of Brazil and is fluent in English, Portuguese and Spanish.
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