News & Media

New Normal, Digital Transformation, Industry 4.0

Trust | Transparency | Traceability

Value Creator Carbon Credit, ESG and Blockchain

14 December 2021  |  Blockchain | Traceability

More significant valuer than ₿ Bitcoin, Yes, you heard it correct. Something is getting bigger than everything, and it is real and precious. 

Welcome to the world of Carbon Credit. Now oil companies control five per cent of global wealth. By 2030, the Carbon market will take over the oil market, creating significant global wealth.  

Climate change is a big concern in our daily lives, notably in the last few years, as we are witnessing extreme weather conditions such as heavy rain, floods, and heatwaves on a global scale.

NOW the move is to limit global warming; many countries, companies, and world leaders are committed to achieving net-zero carbon dioxide emissions by 2050. The goal is of limiting temperature rise to 1.5 degrees Centigrade. It is a known fact that Greenhouse gas emissions stimulate climate change. 

Tackling climate change requires a reduction in atmospheric carbon dioxide. Among other measures, Sustainable Agriculture practices, Afforestation, Changing the energy consumption pattern helps in reducing GHGs.Farming practices can sequester Carbon from Atomosphear and improve soil health simultaneously. Crop rotations, Reduced tillage, Green manure, and Agroforestry increase carbon sequestration in the soil and perennial vegetation. Longer-term, they also increase farm revenue. However, smallholders have not yet widely adopted such practices. One primary reason is their need for an immediate return on investment. Therefore, the challenge is to bridge the gap until farmers benefit financially. Payments for ecosystem services can encourage them to adopt more sustainable practices.

To avoid the devastating effects of climate change, companies have started committing to net-zero carbon pledges and leveraging the private sector’s financing, technology, and innovation. Agriculture, often seen as a significant contributor to climate change, is a critical and under-leveraged part of the climate solution. Farmers should be with tools, know-how, and methodology to improve their operations’ economic and environmental resiliency crop production. This comes through building demand for verified agricultural carbon credits, which also present a new revenue stream for farmers through innovative digital and microbial technologies.

The Business from Carbon has the potential to strengthen mitigation projects in the under-developed/developing countries incentivizing further private climate finance.” Initial estimates suggest the potential market size of international carbon credits could be between $100-400 billion per year by 2030. Developing counties will benefit from carbon offsets from the developed countries. 

Carbon offset registries have worked with scientists, companies, and environmental NGOs to create effective markets by developing detailed protocols. Under the rules, any project — such as an effort by a farmer to adopt no-till farming and then sell offsets — must abide by several principles, the prominent being. 

Additionality – the project must result in net GHG reductions that would not have occurred in the absence of the market. If a company, instead of reducing its emissions, buys offsets from a farmer who would have reduced their emissions regardless, they further contribute to climate change. Changing from Fluorescent Light to LED changing from one practice to another would have been financially beneficial without offset payments.

Permanence – offsets must arise from GHG reductions that are permanent. Projects that reduce emissions, such as methane emissions from manure or nitrous-oxide from fertilizer, are generally considered permanent. However, storing Carbon in soil or even trees is unlikely to be permanent. If a farmer stops practising no-till, switches crops, sells their land, or is subject to extreme weather that erodes their soil, for instance, the carbon removal can be reversed. 

McKinsey, in its reports, suggested that sources assume that the estimated demand for carbon credits could increase by a factor of 15 or more by 2030, and the overall market could be worth upward of $50 billion. In current global carbon markets, the price of one-carbon credit can vary from a few cents per metric ton of CO2 emissions to $15/mtCO2e or even $20/mtCO2e. For tech-based removal projects, afforestation or reforestation projects are $100 or even $300/mtCO2e. 

TURNING POINT 2021 will probably be remembered as the year of carbon credits as COP26 gives us a strong rule book for international cooperation and the  technology such as Blockchain and Tokenisation becoming more robust.

Offsetting process

After six years of complex and technical negotiations, the UN climate talks at COP26 in Glasgow finally gave us a robust Paris Agreement rulebook for international cooperation through carbon markets. They called on countries to take specific and urgent measures to address dangerous climate change.
“The agreed Article 6 rules, while not perfect, give countries the tools they need for environmental integrity, to avoid double counting and ultimately to clear a path to get private capital flowing to developing countries. The carbon market rules allow countries to focus on ambitious emission-cutting targets.
With emerging technology as Blockchain emerged as a talking point among a wide range of industries amidst various conclaves and summits. Blockchain has emerged with newer interests amongst various entities and ventures that evaluate the opportunities for meaningful applications in energy, carbon market & accountability.

The use of Blockchain ensures complete transparency in transactions. There have been concerns about double-counting, and double counting is when two countries in a transaction claim the same emission reduction to fulfil their national climate targets.

Global businesses and industrial companies are deeply amid a flurry of churning nerves and strategies to tackle the crisis at hand. Global corporates, including prominent tech companies, are racing to reduce their carbon footprint. Still, there are unreliable and inaccurate data, ESG Disclosure requirements from SECs, and non-compliances. 

The significant rise of ESG has renewed the participation in Carbon offsetting programs as a steppingstone making headway on sustainability targets. With this renewal, applications of Blockchain technology provide the single version of truth for offsetting practices and aiding in achieving progress on the path to net-zero.

The rise of ESG and Role of Carbon offset

It is now widely understood that non-financial factors can improve business performance. As a result, there is increasing recognition of ESG topics’ importance across the investment sector. For the financial year (2022-23), India has included Business Responsibility and Social reporting as mandatory disclosure for big corporates. Furthermore, reporting ESG data allows stakeholders and investors to gain insight into Business and maximize Business positive impact

  • Appeal to investors and attract capital
  • Stay ahead of regulatory requirements
  • Manage risks stemming from ESG issues
  • Obtain real value and better terms from the financial sector
  • Build reputation and trust amongst customers and business partners
  • Increase employee retention and motivation
  • Identify your strengths and weaknesses
  • Create a competitive advantage

TRST01 new initiative venturing into Climate Technology by expanding our Core Platform, linking it to all stakeholders in the ESG ecosystem. TRST01 ultimate target is to increase the horizon of the social impact and make it to the frontier of ESG accountability. 

Write to us journey@trst01.com

References

  • ESG Series – Carbon credits and carbon trading | asialaw. 
  • Carbon Credits to incentivize Sustainable Farming | Syngenta. 
  • COP26: Article 6 rulebook updated, but remains work in …. 
  • Carbon credits in food & agriculture: Dishing the dirt. Agfunder 
  • The Rise of ESG and the Role of Carbon … – ClimateCare. 

Share Blog on: