Raphaël Haupt and James Farrell got to talking about how to use the growing popularity of blockchain and cryptocurrencies to help combat climate change.
While companies and individuals need to reduce how many carbon emissions they produce, in the short-term at least there will always be a certain amount they won’t be able to get rid of straight away.
“This is an unregulated market and it’s a global market,” says John Hoopes, also known as John X in the crypto community, who is in charge of Toucan’s strategy.
Toucan’s first carbon pool is called BCT, or Base Carbon Tonne, and it represents a basket of credits of various types – such as those coming from tree-planting or pollution-reduction — to offset one tonne of carbon emissions.
By having the system on one single registry, Toucan aims to stop projects or companies double-reporting credits.
“Corporates are looking to align offsetting activities with their brand.
As just one example, the group is set to launch a new Nature Carbon Tonne pool – where all credits have to come from nature-based projects such as tree-planting rather than more dubious sources of emissions reductions.
It has bridged some 18.3m tonnes of carbon credits onto the blockchain, and reports previously reaching a market cap, calculated by timesing a cryptocurrency or tokens’ supply by its price, of $100m .
According to the Bitcoin Energy Consumption Index, created by Vrije Universiteit Amsterdam PhD researcher Alex De Vries, at current rates the bitcoin market alone has a carbon footprint of 97.14 megatonnes of CO2, similar to the entire annual carbon footprint of Kuwait.
“You have a guessing machine that is just putting out 200 quintillion guesses every second of the day non stop, trying to guess the winning number which will allow that lucky person who gets it right to create the next block for the blockchain and get the reward associated with that,” says De Vries.
By centralizing the blockchain carbon market on one infrastructure and working with credits already on physical registries, another proposed benefit for Toucan then is that it’s bringing a little order to this infamously unregulated and potentially even scam-filled world.
What that means in practice right now is something the project is a little less certain on.
One of the largest, Veera, recently issued several statements criticizing the movement and even suggesting that the anonymity provided by blockchain could lead to projects being used to launder money.
A type of “super greenhouse gas”, it is often deliberately overproduced by emitters to make money from the ensuing slew of carbon credits they receive for reducing their output to the level they would have had in the first place.
The downside to their approach is that the group aren’t creating any new carbon credits themselves – they only convert existing credits on traditional registries into blockchain entries.
For Toucan the argument is that even just harnessing blockchain and decentralized finance to get more investment in the space will increase the value of climate tokens and in turn increase the supply at the other end, as the supply on the market adjusts to meet that chance for profit.
“Most offset credits don’t actually represent real emissions reductions, in part because offset programmes chronically pay project developers to build projects they would have built anyway,” explains Barbara Haya, who directs the Berkeley Carbon Trading Project at UC Berkeley.
One 2016 study from the German Öko-Institut found that as much as 85 per cent of just UN-sponsored carbon offset projects were unlikely to be something that wouldn’t have been done anyway.
“What I found in my research is that for the majority of these forest projects the methods for estimating emissions reductions are overestimating their impact by between 50 and over 80 per cent… the vast majority of the credits don’t represent real emissions reductions.
While that can look good on a company’s annual report, especially one trying to claim to be achieving net zero, the persisting dubious quality of many carbon projects means their impact is minimal, and in fact could make those burning fossil fuels focus less on reducing the amount they’re emitting.
In this series, in partnership with the Rolex Perpetual Planet initiative, WIRED highlights individuals and communities working to solve some of our most pressing environmental challenges.