As tech giants like
Google and Facebook announce plans to become carbon-neutral businesses
by 2030, smaller companies are doing the same. The only difference is
that innovative startups are taking clever approaches that seek to be
more effective than those implemented by large, centralized companies.

For
example, Ripple — a fintech company that allows banks, payment
providers and digital asset exchanges to send money using blockchain —
has committed to becoming carbon net-zero by 2030. In order to meet this
goal, Ripple has unveiled a set of initiatives driven largely by
blockchain technology.

Ken Weber, head of social impact at Ripple,
told Cointelegraph that Ripple focuses on reducing its carbon emissions
by making sustainable choices, purchasing carbon offsets and investing
in carbon-removal technologies. One of the first initiatives that Ripple
has committed to is a partnership with the Energy Web Foundation, a
nonprofit organization using blockchain to accelerate low-carbon
electricity systems. The Energy Web Foundation and Ripple have created
“Energy Web Zero,” a new open-source tool designed to enable any
blockchain network to decarbonize by purchasing “tokenized” renewable
energy.

Tokenizing energy attribute certificates

According
to Weber, Energy Web Zero will enable Ripple to purchase renewable
energy within the United States, the United Kingdom and the Philippines.
This will be done via tokenized energy attribute certificates, or EACs,
which serve as the company’s proof of purchase for its renewable energy
procurement.

Jesse Morris, the Energy Web Foundation’s chief
commercial officer, told Cointelegraph that the Energy Web Zero
application establishes digital identities for real-world assets such as
large-scale wind and solar facilities around the world. Once these
assets are tied to a digital identity, that data is anchored to the
Energy Web blockchain, which powers the Energy Web Zero application.
Digital energy attribute certificates are then produced from this data
to represent renewable energy.

Morris shared that Ripple and the
XRP Ledger Foundation, an independent nonprofit entity, will be the
first organizations to use Energy Web Zero to ensure offsets are
purchased for consumption on the XRP Ledger. “We are using a blockchain
to solve its own problems in a sense,” said Morris.

Benefits of blockchain in achieving carbon neutrality

Interestingly
enough, blockchain being used to achieve carbon neutrality makes a lot
of sense due to the transparency inherently baked into the technology.
Companies like Google can claim
to be eliminating their carbon footprints by purchasing high-quality
offsets, yet they are not revealing what, and for what amount, those
offsets are.

A public blockchain network will always have proof
of the transactions taking place. According to Morris, the Energy Web
chain is an open-source architecture, meaning anyone can download a
client and start interacting with it or looking up transactions: “Open
source platforms are critical for transparency and trust, which is the
big difference here.”

Moreover, an open-source framework allows
for the entire blockchain ecosystem to take advantage of the Energy Web
Zero application for decarbonization. Morris noted that this is a goal,
as the application is meant to encourage other blockchain ecosystems to
start decarbonizing:

“Companies like Google and Facebook
have impressive sustainability targets and can make decisions on how to
achieve their goals, but given the decentralized nature of blockchain
communities, we can’t do that. Therefore, using tokenized EACs across a
blockchain network is a powerful way to get a decentralized ecosystem to
purchase renewables to offset energy consumption.”

Tokenization and blockchain effectiveness?

Although the concept makes sense — and has even been implemented by companies outside the blockchain space
— tokenizing energy attribute certificates and putting them on a
blockchain network may be challenging due to unclear regulations and a
lack of industry standards.

Cameron Prell, a climate markets
lawyer and vice chair of the Sustainability Business Working Group of
the InterWork Alliance — a nonprofit group aimed at creating global standards around tokenized ecosystems
— told Cointelegraph that understanding whether or not tokenization is
effective depends on whether or not the assets tie back to actual,
credible, standardized carbon credits. Additionally, Prell mentioned
that these tokenized credits should also provide better liquidity and
price discovery than standard carbon credit instruments.

According
to Prell, companies that want to manage their transition to net-zero
climate commitments must treat their tokenized, environmental data as an
asset with a market-defined value proposition: “The establishment and
transactability of such value will require standardization, asset
classification systems, and generally-acceptable climate accounting
principles.” He further added:

“Tokenization thereafter
empowers companies an ability to price, track and transact in their net
zero performance, both to achieve their objectives in a credible manner,
but also the ability to collateralize and secure forward any number of
financial instruments to help scale and finance those efforts.”

While
this may be the case, Weber said that the company is purchasing
tokenized energy attribute certificates and holding them until they are
retired. “We are not looking to trade or exchange them on a market in
any way,” he said.

Echoing Weber, Paul Gambill, CEO of Nori — a
climate-change startup that leverages blockchain — thinks it’s important
to separate carbon credits from the method of payment or trading
mechanism. Gambill told Cointelegraph that Nori allows anyone to
purchase carbon certificates in the form of “Nori Carbon Removal Tonnes”
— nonfungible tokens that are retired immediately by the buyers. The
platform’s NORI token separately serves as the method of payment or
trading mechanism. According to Gambill, this helps avoid
double-counting carbon certificates that often trade hands many times
over in legacy carbon registries.

source link : https://cointelegraph.com/news/xrp-ledger-blockchain-energizes-decarbonization-but-tokenization-a-challenge