Despite futuristic forecasts, there are not so many applications in the real world of blockchain technology, especially on a global scale. But the green capital market, where the blockchain has already been tested and proven its applicability, is no coincidence. Technology opens up green markets for businesses, allowing emissions to be exchanged. In this publication, we explain how it happens.
Before moving on to a specific case, we will cut the aforementioned emissions trading and clarify the essence of this phenomenon.
The case concerns CO2 emissions in the atmosphere, whose main issuers are companies that produce energy using fossil fuels. To reduce the harmful effects on the environment and the prevention of climate change, the Kyoto Protocol came into force in 2005, providing for emissions trading.
Carbon emission quotas, quotas and credits (responsible emission reductions) are measured by carbon units equivalent to one tonne of carbon dioxide emitted into the atmosphere. As emissions of higher shares are limited and subject to a fine, carbon credits are required and available for purchase on the stock exchange. This practice is called cap and trade. Other market models are also developed and implemented such as credit, taxes, trade or transactions.
The carbon unit exchange point is not just to make countries understand the problems, but also to mitigate, compensate for the most cost-effective environmental damage, stimulate them to reduce harmful emissions, and effectively develop their economy and attract investments.
However, if the theory sounds good, things are somewhat more complicated in practice. Markets suffer from excessive regulation, over-centralization and disintegration, unpredictability, fraud and non-transparency, as well as high transaction costs.
This is where the blockchain comes into play
The first worldwide transaction of carbon units with this technology took place in the spring of 2017, in the DAO IPCI blockchain ecosystem. The system built on the Robonomics digital platform of Airalab, combines verification, registration and market of environmental raw materials. It allows users to allocate and manage environmental assets and liabilities through the distributed registers stored in the blockchain.
The DAO IPCI concept is based on peer-to-peer market interaction of different parties, including those responsible for environmental damage, those suffering damage and mitigating (compensating) instrument suppliers.
The technology ensures transparency and reliability of carbon credit verification procedures, transactions, the possibility of global interactions between fragmented carbon pricing initiatives, with carbon market institutions, primarily eliminating middleman and of carbon.
The pilot transaction was carried out in DAO IPCI in the Blockchain Climate Standard between Aera Group (France) and Russian Carbon Fund with the solar carbon credits of Mauritius origin in March 2017.
For now, 53 jurisdictions and numerous voluntary carbon market solutions are the target audience of the project, not to mention the market mechanism of international aviation pilots, while the carbon market is expected to reach 10 trillion dollars in the perspective in the medium term, according to IPCI DAO.
The case described above only describes one of the implementations of the Robonomics network. It opens a green capital market and investment opportunities not only for countries but also for so-called smart buildings that improve efficiency and sustainability. A 40-story office building, which consumes a lot of energy for heating, air conditioning and the maintenance of its systems, can also calculate its carbon footprint and acquire units across the platform, says Sergey Lonshakov, visionary leader of Airalab, Robot economics architect.
After attracting over $ 1 million in investments through the first round of ICO held in 2017, his team is now preparing for the further Robomics token distribution and establishing a bounty program for miners.
The solutions based on Blockchain allow:
- create incentives for companies to modernize their production and to make buildings more energy efficient,
- record climate commitments and mitigation tools,
- create and develop the market for environmental assets and liabilities, including the green bond market.