There is a growing acceptance that business has a role to play in combatting climate change. The desire to accelerate a transition to a low-carbon economy is real and is shaping transformation across many sectors. Digitisation and sustainability are firmly at the centre of change in the financial services sector. The global value of assets where investment decisions are driven by environmental, social and governance data reached $40 trillion in 2020, having almost doubled over four years. Up until now, companies focussed on whether climate change was going to impact on the business, now the important question is if the company is going to impact on climate change.
The idea of blockchain facilitating environmental improvements might seem fanciful, even outlandish; however the following are 3 key ways how smart solutions can create sustainable change.
- Regenerative agriculture
One of the most important ways in which smart contracts can bring everyday people into the fight against climate change is by enabling regenerative agriculture programmes. These include efforts to incentivize communities around the world to reduce their carbon footprints through more sustainable land-use practices, usually a combination of planting trees and conservation.
Smart contracts that can interact with real-world data make it possible to automatically issue rewards to people who steward these important tracts of land. For example, the Green World Campaign, in collaboration with Cornell University’s Initiative for Cryptocurrencies and Contracts (IC3), is building smart contracts that use satellite data to automatically dispense rewards to people who successfully regenerate bodies of land by increasing tree cover, improving soil, and more. Payouts happen when oracles pull data from satellite images to trigger smart contracts built on a blockchain, guaranteeing that people on the ground earn rewards fairly and transparently.
- Conscious consumption
Smart contracts can also empower environmentally conscious individuals and organizations. For example, if an individual successfully triggered a reforestation smart contract, they could be paid in a form of tokenized carbon credit, which could in turn be sold to charitable organizations, crowdfunding campaigns, or even companies seeking to prove they have made a green impact. Because these tokenized carbon credits can only be created if satellites or IoT devices report meaningful reforestation to a smart contract, these organizations can verify that their funds have actually made a real impact.
Smart contracts can also give environmentally conscious consumers more options in terms of their energy consumption. Decentralized energy grids like the Brooklyn Microgrid Project are using smart contracts to give consumers the ability to produce and trade solar electricity with their neighbours through an exchange that uses a blockchain as a coordination mechanism. The ability to buy and sell solar energy credits between neighbours can reduce energy transportation costs as well as greenhouse gas emissions.
While many consumers are already changing their consumption habits on their own, a wider societal shift in behaviour will likely require aligning financial incentives with more sustainable consumer decisions. Through the use of smart contracts connected to real-world data, consumers can automatically receive payments or penalties based on the impact of their consumption habits, creating behavioural changes that simply would not have occurred through education alone. A project called NetObjex is installing IoT devices in select hotels to keep track of a guest’s water and energy consumption over the course of their visit. Through oracles, smart contracts can interact with the resulting data about a hotel visit, and automatically calculate and reward guests based on their consumption metrics.
- Hedging risk with crop insurance
Climate change is already shifting weather patterns worldwide. Farmers across the globe, the vast majority of whom are entirely uninsured, are especially vulnerable to these changes in weather patterns, be it rainfall, drought, wind, and more. Despite the fact that 75% of agricultural risks remain uninsured, traditional insurance companies have to-date failed to provide adequate coverage to small-time farmers in developing countries. As a result, most live very unstable lives. Bad weather conditions can destroy farmers’ financial well-being, resulting in the uprooting of families and the destruction and abandonment of farmland. Should the impacts of climate change continue to accelerate, there’s no doubt that the resulting instability will disproportionately affect farmers.
Fortunately, smart contracts that can take into account these changing weather conditions via oracles can offer a solution, or at the very least a way for a person with little means to hedge against significant risk. For example, insurance projects like Arbol and Etherisc offer smart contract-powered crop insurance to farmers across the world. Using smart contracts, farmers can take out a policy on their small crop of land, set predefined conditions for contract execution (such as a certain amount of rainfall), and then rely on oracles to monitor weather patterns. If the oracle network reports a certain metric has been met, the farmer automatically gets a payout. Through smart contracts that can speak to data about the weather through oracles, a farmer can now protect their financial future with nothing more than a smartphone.
Open Earth Foundation seeks to complement the GST by empowering concerned citizens to tackle an old problem via a new technological medium – NFTs. Thus, wealthy art collectors and celebrities can get skin in the game of the hot new art NFT craze while also contributing to carbon reduction and climate transparency. Needless to say, self-awareness is critical to understanding the day-to-day actions that give rise to climate change. To this end, an upcoming month-long awareness campaign will incentivize NFT and crypto stakeholders to neutralize their climate impact in any way they can. The Open Earth Foundation will participate in the #carbondrop campaign which culminates, fittingly, on April 22 – Earth Day.