Blockchain Tokens Create a New Way to Manage Carbon Footprints
Lately it seems like there's a new blockchain-based solution for everything, but until today there wasn't a token to quantify a company's carbon footprint.
At the Consensus blockchain conference in New York City this morning, IBM and environmental fintech company Veridium announced a collaboration to transform the carbon credit market. Veridium will use IBM Blockchain technology to create a new digital asset that can be exchanged and managed on the Stellar network. These blockchain-based carbon credits create a more accurate, fungible way to measure emissions for carbon accounting and exchange tokens to offset carbon footprints.
IBM is already using blockchain technology for everything from tracking the global food supply chain to helping reduce carbon emissions in China, but this marks the first time the tech giant has been involved in a public token issuance.
"Tokenization can enable new business models. It's very much in keeping with our vision of how we expect blockchain to change the world," said Jared Klee, IBM's Blockchain Offering Manager for Token Initiatives. "Specifically looking at the existing carbon credit market, it's very difficult and expensive to account for your carbon footprint and then to offset it."
IBM is helping Veridium issue the carbon credit tokens on Stellar's public, permissioned blockchain network. The companies chose Stellar because the blockchain-based financial platform has a highly functioning market with a distributed exchange, and also has much higher throughput than the Bitcoin or Ethereum networks: it can clear more than 4,000 transactions in 3-5 seconds. Klee said the token will be released on Stellar sometime in the second half of this year.
The core idea behind the token, Klee said, is to give enterprises a digital asset representing carbon credits that can be bought, sold, and traded among network participants. The goal is to make the carbon accounting and offsetting process cheaper and easier, so that companies can more accurately manage their environmental impacts.
Veridium CEO and co-founder Todd Lemons (who also runs Veridium's parent corporation EnVision) explained that Infinite Earth, another EnVision company, created the first carbon accounting methodology a decade ago for how to measure carbon emissions from deforestation. He said more than 500 companies including Allianz, Microsoft, and PWC use Infinite Earth's REDD+ carbon credits to measure and reduce emissions. He hopes Veridium's blockchain-based carbon credits can form the basis of a new conservation model for that ecosystem.
"We're digitizing the underlying asset so it's more fungible. Then the token creates a completely new approach for measuring emissions, choosing from a wide variety of standards, managing that portfolio across their supply chain, and applying those offsets," said Lemons. "We expect this to lead to significantly more adoptability that will have very real, qualitative, and positive social and environmental impacts."
IBM hopes this proof-of-concept digital asset token will appeal to its broader enterprise blockchain ecosystem spanning industries from oil and gas to food supply chains and global shipping. As consumers, investors, and governments around the world demand reductions in transparency in companies' carbon footprints, blockchain could be the right solution on which to build that new conservation model.
"What we're doing could not be done without blockchain. As we finish building up the technology, [the companies in our ecosystem] are all waiting and interested," said Klee.
This article originally appeared on PCMag.com.