The Case for a Carbon Credit Cryptocurrency

So, what is the solution? Carbon Credits.

  1. Transparency — Carbon credits are very susceptible to fraud. Companies have been selling “carbon credit certificates” on the internet for 20+ years with no evidence that any carbon was actually captured or offset.
  2. Inefficiency/Lack of Consistency — It’s currently far from profitable for farmers to plant cover crops because it’s hard to determine what the fair value of a carbon credit is. It’s also very difficult to gain global consensus on the definition of a carbon credit.
  3. Limited Access/Centralized Control — The farming industry already struggles from monopolies and limited control over their operations. Also, who would control the market? Do we trust each country to govern its own carbon compliance markets fairly? Is there a chance some governments might fake the numbers to save money and not actually help solve the climate crisis?

Why a Cryptocurrency?

  1. Transparency — How do you prevent fraud? Blockchains provide complete transparency as all transactions can be viewed and they can’t be erased or changed. This means when a bank in New York buys a carbon credit cryptocurrency token they can view the previous transactions of that token and trace it to the source. A farmer may have received that carbon credit token as a result of planting cover crops on 100 acres of land. 3rd party groups, known as oracles, can prove the farmer planted those crops by using outside information feeds like IoT devices that sit in the field and measure carbon levels in the soil or daily satellite images of the fields which show the growth of the cover crop. This level of transparency is critical if we are to reach the necessary climate goals.
  2. Inefficiency/Lack of Consistency — What is a carbon credit worth? Blockchains allow for open and free markets. Farmers can hold on to their credit carbon tokens for as long as they would like and as demand for carbon credits goes up banks or other organizations who need to offset their carbon will drive the price up. This open and free market will determine a fair price for carbon credits.
  3. Limited Access/Centralized Control — Who should manage the selling and buying of carbon credits? Blockchains allow us to create a decentralized system with no single government or organization in control. This decentralization means many governments and organizations can all be stakeholders and vote on decisions that would be best for the goal of the overall project without the risk of introducing corruption into the system.

What’s next?

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Charles T. Patterson

Charles T. Patterson

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I help banking and insurance companies use cloud to re-imagine their business with 7+ years of Cloud experience and 10 Cloud certifications.