A startup from Spain wants to use a cryptocoin to democratise emissions trading and give consumers the opportunity to offset their CO2 emissions.
There’s a lot of talk flying around at the moment about the revolutionary power of the blockchain: its potential to increase transparency in supply chains, allow for decentralised energy production and remove the need for trust in the sharing economy. And now, a startup believes it might have a role in the fight against climate change. Developed by a team in Spain, the Climatecoin aims to democratise the emissions trading market. This should make it easier for investors, but also for consumers, to acquire emission certificates.
But is blockchain really the right way to make this kind of project work?
Up until now, emissions certificates could only be obtained from state institutions or at stock exchanges. In 2008, the UN introduced emission certificates as a way to encourage investors to operate more efficiently, thereby reducing greenhouse emissions. Initially, the price of one tonne of CO2 was calculated at 20 USD, but it fell below 5 USD in 2012, leading to a crisis in the emissions trading market.
The inventors of Climatecoin want to revive the idea of the emissions trading market. Just like the UN certificates, a Climatecoin represents the equivalent of a ton of emitted CO2. The idea is that investors can buy a Climatecoin in exchange for cryptocurrencies such as Bitcoin or Ether, or also fiat money. These can then be redeemed on the Carbon Credit Exchange, in order to acquire emission certificates.
Cryptocurrencies: Not the Most Sustainable Form of Finance
Consumers can already opt into CO2 neutral options, for example when booking plane tickets. With Climatecoin, this process could be integrated into many other areas of life. That means that not only large companies would be able to green their emissions, but consumers too. However, the concept has a few drawbacks.
First off, there’s the emissions caused by cryptocurrencies themselves. In order to mine coins, supercomputers have to solve highly complex computational tasks, which translates into huge amounts of electricity. And that does not always come from renewable energy sources.
According to a study by crypto analyst Alex de Vries, the Ethereum network, which Climatecoin is based on, consumes more electricity in one year than the entire country of Myanmar. And even if Climatecoin makes up only a fraction of it – “environmentally friendly” is definitely not the right term to use here. That’s why the people behind Climatecoin have acquired an emission certificate for the mining of the Climatecoin. The pollutants released into the atmosphere in order to generate the Climatecoin, are therefore offset by the certificate. And the money is invested in renewable projects, for example in growing a forest. So far so good.
But what happens to the money that investors pay to receive climatecoins? The Climatecoin whitepaper was supposed to provide that insight. Blockchain startups usually explain their intentions, including high-tech details for accurate implementation but when talking about Climatecoin, one searches in vain for a precise concept for the technical implementation – instead, it is noted how many millions of the investment the founders want to put into their own pockets. How serious the whole thing is, it’s hard to say.
However, the original idea of integrating emissions trading into our everyday consumption routine with the help of a blockchain definitely has potential. We have already presented several initiatives at RESET using the technology for sustainable purposes, e.g. Provenance, a blockchain for transparent supply chains, or SolarCoin, a digital bonus programme for solar power.
