The Industrial Age has given us much that we as a society can be proud of – widespread literacy, unprecedented interconnectivity, highest income per capita to date, railroads, electricity, modern mobility, air travel, and so much more. The Fourth Industrial Revolution has continued to accelerate global innovation in the ‘physical, digital and biological spheres.’ It has given us blockchain, machine learning and AI, virtual reality, and, of course, the internet.
But, as with its predecessors, this era of progress is not without side effects. This age of innovation is marked by a 50% increase in greenhouse gases and carbon dioxide levels in our atmosphere since 1990 . We’ve seen a rise in the global surface temperature of approximately 1-degree Celsius above pre-industrial levels . With an ever-increasing population of global consumers, elevated rates of production have resulted in dangerous amounts of air pollution, , , the depletion of natural habitats, overflowing levels of waste, and a drastic decline in biodiversity.
The most recent assessment report by the Intergovernmental Panel on Climate Change warns of the potential consequences if our temperatures increase to 1.5 – 2 degrees Celsius – and not just to the planet itself. Moody’s Analytics estimates that climate change could inflict $69 trillion in damage to the world’s economy by the year 2100 if we hit the 2 degree Celsius mark. Specifically, it highlights the potential harm done to “human health, labor productivity, crop yields and tourism,” as well as property and infrastructure.
The investment community is also starting to take note. Hedge fund manager, Robert Gibbins with $5.5 Billion under management ha s put climate at the forefront of his investment strategy – from trading carbon futures, to shorting REITs, to betting against the currencies of oil-addicted countries.
As the discussion about climate change from both the private and public sector continues, one thing is certain – the ramifications of climate change on the environmental, social, and economic spheres will continue to pile up without coordinated action in mitigation and adaptation.
Climate Change and Technology
The information technology sector is one of the largest consumers of global energy and contributors to greenhouse emissions. Today, data centers alone consume 3% of the global electricity supply and account for about 2% of total GHG emissions , or the equivalent to the GHG emissions of the entire airline industry. And these stats are growing. The total number of internet users is expected to increase from 3 billion in 2015 to 4.1 billion by 2020, with global networks supporting up to 26 billion new devices and connections by 2020 .
With Bitcoin consuming 0.25% of the world’s electricity, many have pointed the finger at blockchain as the culprit for increased emissions. Notably, one Bitcoin transaction can use the same amount of electricity as it takes to power one American household for one day.
But while the blockchain industry could become one of the greatest consumers of resources, it also has the potential to become one of the greatest tools to heal our planet and protect it for future generations.
In a somewhat double-edged sword, there lies a unique opportunity in harnessing the technologies born out of the Fourth Industrial Revolution in the management of our resources and environment in the years to come.
Blockchains for a Better Planet
The biggest question arising from increased awareness of a looming climate shift is – ‘how do we solve it?’
One of the greatest benefits of blockchain is that it empowers communities to create its own solutions and incentivization systems, rather than looking toward a higher centralized power. If harnessed in the right way, blockchain can unlock ‘natural capital’ in communities, particularly in the context of the environment, where the problem of global commons is most prevalent. By creating transparency and reward-based systems, new technology can create widespread change, perhaps bypassing the challenge of converting climate skeptics.
Incentivization and tokenization types of projects are really important because they are encouraging people to shift their mindset and account for the externalities created by their own behavior,” says Sheila Warren, Head of Blockchain and Distributed Ledger Technology at World Economic Forum.
In “Blockchain for a Better Planet”, a report published in the fall of 2018 , the World Economic Forum identified 65 existing and emerging blockchain use cases which better the environment, in particular, solutions for climate change, natural disasters, biodiversity loss, ocean-health deterioration, air pollution, and water scarcity . Throughout the report, the authors emphasize that the ” potential for blockchain lies in its architectural ability to shift, and potentially upend, traditional economic systems – potentially transferring value from shareholders to stakeholders as distributed solutions increasingly take hold.”
The World Economic Forum provides a framework of potential solutions that could be born from blockchain technology. Below are just some of the highlights and examples of live projects in each category.
Blockchain allows for the recording of transactional data throughout the supply chain, offering an immutable record of origin and full traceability of products from their sources to the final consumer. This type of supply chain management allows not only for optimization, but also trusted sustainable production. Imagine a world where you can trace you water, fish, meat and coffee all on one chain.
2. Sustainable Resource Management: 3. New Sources of Sustainable Finance:
Blockchain can provide for sustainable resource management by removing the current asymmetry of information in most market places. This could include ‘peer-to-peer transactions, dynamic pricing, and optimal demand-supply balancing.’ That means removing price arbitrage of previous resources and utilities, an issue that will increase in prevalence as the wealth divide continues to grow.
The UN estimates that up to $7 trillion in capital is required to close the Sustainable Development Goals funding gap.
Blockchain-powered fundraising solutions can create new access to capital and unlock opportunities for conscious investors. This shift from ‘shareholder to stakeholder value’ may include more investment platforms for environmentally friendly assets, blockchain-powered digital green bonds, digital ETFs, as well as existing crypto exchanges and mining conglomerates allocating a portion of profits to sustainability.
Blockchain could fundamentally change the way in which natural resources are valued (and traded), incentivizing participants to unlock value from items that have traditionally been treated as economically worthless.
5. Transforming environmental markets:
One such application could take place in the waste-to-energy sector, where circular economies are created to incentivize inhabitants of an area to sort and provide their waste to a third party in exchange for tokens.
Since its inception, carbon trading has been the recipient of significant criticism due to lack of transparency , varying standards across jurisdictions, and its inability to reliably mitigate double counting. Blockchain platforms could be used to optimize efficiency in carbon trading and energy efficiency credit transactions.
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One of the greatest barriers we’re faced with when dealing with climate change is inciting collective and co-ordinated action. Although information on the effects of climate change and sustainability solutions is readily available, many of those in a position to make meaningful changes feel paralized by the catastrophic notion of the impending ‘climate crisis’. It has become all too clear that we cannot simply recycle our way out of this and alternative mechanisms need to be put in place. Some of this will be handled by the private sector, as renewable energy and sustainable fresh water, food and agriculture investments become more profitable that the status quo. Blockchain technology will amplify these new efforts by engaging the community at large and encouraging people to participate in the innovation of new solutions in ways we’ve never seen before.
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