A new carbon credit marketplace is being developed by KlimaDAO Japan that leverages emerging blockchain technology for transactions.
And if a demonstration run of the system is successful, it could help to legitimize the market, used by companies to offset the pollution they generate by funding cleaner work elsewhere, according to a story on Medium and a report by the United Nations.
A blockchain is a digital system used to track and record assets and transactions of nearly all kinds, creating so-called tokens, or certificates. The transactions are linked together.
"These blocks form a chain of data as an asset moves from place to place or ownership changes hands. The blocks confirm the exact time and sequence of transactions, and the blocks link securely together to prevent any block from being altered," all according to IBM.
The tech company said the system reduces risk and costs, as all members see a "single view of the truth."
Carbon credits, or offsets, are tradable certificates that allow businesses to invest in planet-friendly work instead of lowering their own pollution, as described by the Massachusetts Institute of Technology. Meta's investment in solar farms to offset the power it uses for its massive data centers is an example, though the company has also drawn criticism for opening new natural gas power operations as well. For its part, Meta already claims to match its power use with 100% renewable energy sources.
While the carbon credit market is promising, the U.N. cited clear concerns, including double-counting, human rights abuses, and greenwashing, which happens when a company makes a clean promise but fails to live up to it.
"It is very difficult to coordinate globally and align incentives," KlimaDAO's website stated. "The absence of trust in carbon markets leads to coordination failure."
KlimaDAO's system is geared to help provide more transparency in the market, which was worth more than $331 billion globally in 2022, according to Statista. KlimaDAO has about a dozen companies signed up for the demonstration period, which ends in February, per Medium.
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MIT reported that carbon credits can be helpful for businesses making upfront pricey investments in cleaner technology to help get returns on investment even faster than the energy savings will eventually provide. By selling earned credits, the company can fund the planet-friendly upgrades. Or, by funding renewable energy projects or reforestation, as examples, a business can offset its own dirty operations. The system requires accurate vetting of the amount of air pollution actually being offset, per MIT.
The best way to slow, stop, and reverse the overheating of the planet is to replace dirty fuel usage with energy from new renewable projects that rely on solar, wind, and wave power. But many see the credits as nonetheless important work in the effort to avoid worst-case scenarios from our planet's overheating, including increased extreme weather risks, MIT and NASA experts added in separate reports.
While most consumers may not be active participants in the offset market, we can play a pivotal role in its success. By staying educated about businesses that are sincerely environmentally conscious, you can support them with your buying power, offering economic rewards for cleaner operations.
KlimaDAO has a "wide range" of companies expected to trade during the trial run. It's part of the company's vision for a much-expanded marketplace, per Medium.
"KlimaDAO … aims to promote the democratization of carbon credits by making the platform available for buying and selling not only for corporations, but also for individuals," per the report.
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