How Blockchain Can Help Tackle Climate Change
The most important foundation for developing strong climate action programmes and policies is to ensure that climate data is correctly and transparently attributed
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Blockchain is an emerging technology that has been increasingly gaining popularity over the last few years with businesses across a multitude of industries embracing it. Blockchain essentially is a digital decentralized database that enables a seamless flow of data in a secure manner. Given its inherent security feature, blockchain technology is often associated with the financial sector but the technology has several use cases for other sectors as well that are yet to be leveraged to its full potential. One such space is environmental derivatives where blockchain and its capability can be used to revolutionize the sector.
Blockchain Supporting Climate Action
The most important foundation for developing strong climate action programmes and policies is to ensure that climate data is correctly and transparently attributed. This is where blockchain can help. Its ability to securely track and share data indicates that it has the potential to significantly influence the way climate change is addressed.
Climate Ledger Initiative (CLI) conducted a survey among its members to identify sectors offering the greatest potential for the application of blockchain for climate action. Respondents to this survey identified renewables, clean energy and supply chain management as the largest untapped focus areas. Land use, forestry, agriculture, and food were also listed.
Among the many ways that blockchain can ensure better climate governance, one significant use is its capability to boost global cooperation. As the data stored on a blockchain is tamper-proof and immutable, it can help in ensuring a secure platform as the source for any and every information on it. Let's explore how blockchain can be used to tackle climate change.
Improving Supply Chain Transparency
The society at large and consumers today have evolved over the years to become climate conscious about their purchases across utilities ranging from FMCG to beauty products to food essentials, with an increasing focus on product details like the ingredient list, ingredient sourcing details, animal testing, etc., among others.
Consumers now prefer sustainable products over other alternates. According to a research by Accenture, since the onset of the pandemic, purchases of 60 per cent of consumers have now become environment friendly. The research reports that 9 out of 10 of these conscientious consumers are likely to continue their sustainable purchase habits in the future as well.
Supply chain traceability of requisite information has therefore become crucial to garner consumer trust for brands. Blockchain-based tracking systems serve as a valuable tool to track the entire life cycle of a product, from farm to shelf.
This increasing need for transparency in the supply chain of products has resulted in a thrush on climate positive best practices amongst brands, enabling climate action consequently.
Incentivising Sustainable Practices
Though governments around the world have announced incentives for adopting sustainable practices, the ground reality is very different and actual incentives are not encouraging. Blockchain has the potential to change this. It can help develop a structured incentive program that governments can adopt to incentivize businesses which contribute towards climate initiatives like waste reduction, recycling programs, etc. Blockchain's ability to track metrics like energy consumption, amongst others, and subsequently tokenize it can help businesses to earn rewards for their climate actions. This will motivate businesses to increasingly adopt climate practices and contribute to global climate goals.
Encouraging Green Financing While Ensuring Authenticity
Green financing is witnessing a sharp increase in its use. This form of funding encourages businesses and individuals to shift to more sustainable business processes. While this is a laudable approach, it is challenging to confirm the authenticity of the sustainability metrics and the funds are being used to support sustainability. Blockchain's ability to immutably store this data and tokenize assets can help solve this problem.
In addition, there are various other ways blockchain can help us tackle climate change. Smart contracts in blockchain can be used to encourage countries globally to make their climate commitments with a deposit. This will ensure greater enforcement and minimize the chances of fake commitments. If a country fails to meet its carbon offset limits, its deposit could be held or given to those who have upheld theirs.
While the implementation of sustainability programs is critical in securing a more equitable future; managing these efforts has proven to be a challenge. More and more data is being created globally and it becomes increasingly difficult to track and trace that data. This is predominantly where blockchain will play a great role in enabling climate action. As technology advances, new use cases will emerge that will further enhance its usage and benefits.