UN looks to blockchain, 'climate coin' to rouse sleepy carbon markets
11 June 2018. By Tsering Namgyal.
The United Nations is spearheading efforts to adopt blockchain technology to kickstart a somewhat moribund carbon credit market, amid a strong push from the private sector and some member states.
Blockchain could help build transparency, trust and consensus in climate change mitigation efforts, including green finance, according to Laura Altinger, a senior climate change adviser to the UN Economic and Social Commission for Asia and the Pacific.
More importantly, it could serve as an important tool to help a seamless trade in carbon credits across borders, just as it is powering efforts by global banks and regulators to digitize trade finance, Altinger said.
“Blockchain could be one of the main technologies that could drive this forward,” Altinger told MLex. “We can already see it facilitating trade, and why not carbon trade?”
The first step could see the UN investing in pilot projects that might include, among other things, a cryptocurrency that would help facilitate carbon credit trading through blockchain.
The UN has already thrown its support behind the Climate Chain Coalition, a group of private sector entities working to deploy blockchain, also known as distributed ledger technology, in climate action.
One of the key pain points in carbon trading is the lack of transparency in accounting for greenhouse gas emissions — known as monitoring, reporting and verification, or MRV.
“Blockchain could be a key instrument for MRV, which is so important to the outcome that would say that my ton of carbon is equal to your ton of carbon,” Altinger said.
A lack of consistency in data gathered hinders efforts to develop efficient markets for carbon trading, which is one of the key measures aimed at reducing greenhouse gas emissions, in addition to carbon taxes.
“MRV can be achieved with blockchain because it standardizes it," Altinger said. "You can’t cheat the blockchain."
For the Paris climate accord to succeed, it is critical to have consistent and transparent means by which to report and measure carbon emissions internationally.
“As long as you agree on the MRV behind it, it kind of gives it the transparency and the credibility and allows you to develop a mechanism based on the Paris Agreement for internationally transferrable mitigation outcomes and carbon trade across borders,” she said.
The UN has received many proposals from blockchain experts for creation of a “climate coin,” said Altinger, a former World Bank economist specializing in climate change.
Once consistency is achieved in MRV and recorded on blockchain, carbon can be traded across borders using a “climate coin,” she said.
The UN might have to take a leadership role in creating a coin that could be traded by all parties.
“We don’t want to have a proliferation of coins because they would each have a bilateral exchange rate,” she said. “We want to have one coin which would say my ton is equal to your ton of carbon.”
For that to become a reality, the United Nations Framework on Climate Change would have to work on ways in which carbon emissions measurement and reporting standards can be refined for blockchain technology, she said.
UNESCAP, which is headquartered in Bangkok, could provide a platform through which all parties could come together to pilot a blockchain for climate change project, Altinger said.
UNFCC is expected to discuss the use of blockchain during the Cop 24 summit to be held in Katowice, Poland, in December.
Several members of UNESCAP have also raised the issue of how blockchain can be used in carbon trading, Altinger said, calling blockchain adoption “promising.”