Economic activity in the world is gaining momentum again. To reduce the impact of production on the environment, states are using carbon credit trading systems. And due to blockchain, this market can become more secure and accessible.
Global warming continues due to increasing CO2 emissions. Every year the world emits about 40-50 billion metric tons of carbon dioxide, which means the temperature will rise by
2 degrees by 2040. Even though many countries are trying to decrease emissions, sectors such as shipping, aviation and manufacturing continue to be highly polluting.
The
World Meteorological Organization (WMO) at the UN stated that the industrial recession due to the coronavirus pandemic did not lead to a significant decrease in greenhouse gases in the atmosphere. Annual emissions reductions in 2020 are estimated to have ranged from 4.2% to 7.5%. However, scientists believe this will not lead to a reduction in CO2 in the atmosphere on a global scale. Researchers warn of a presumable rise in CO2 emissions in 2021. Therefore, they urge governments to pay more attention to the transition to green energy and the fight against climate change when making plans for economic recovery after the pandemic.
States and companies assess and compensate for the harm they cause to nature by carbon emissions. The carbon neutrality course goes in two directions. The priority is to decrease emissions in production and transportation processes, as well as transition to renewable energy sources. It means full abandonment of coal, conversion to alternative fuels, decarbonization of industrial production, and improvement of energy efficiency. Another way is investing in carbon-negative projects to compensate for emissions that cannot be removed.
There are a lot of carbon control projects. There are both support for natural processes and assistance to other companies and the non-profit sector in reducing CO2 emissions.
The Greenhouse Gas Trading System or Emissions Trading System is one of the most well-known market tools used to reduce CO2 emissions. It operates on the principle of cap-and-trade. The government sets an upper limit on total emissions in one or more sectors of the economy. Companies in these sectors must have a permit for every unit of emissions they carry out. They can obtain emission permits - CO2 offsets - for free or buy them from the state, as well as trade them with other companies.
Last year, carbon emissions credits
rose by 30%. The recent decision of the European Union to reduce greenhouse gas emissions
by at least 55% compared to 1990 levels led to the price increase. To implement this program, the EU will need to tighten regulation on the use of fossil fuels.
To be environmentally effective, companies are required to monitor and report their emissions. These reports must be certified by an independent party. There are also fines to ensure compliance with the rules.
There must be a market surveillance mechanism to ensure accuracy and prevent fraud or manipulation of the cost of licenses. Companies, public and private projects
prefer to use blockchain platforms to track emissions trading automatically. Carbon credits can be purchased or sold, but it is a time-consuming process that slows down the market.
Blockchain technology here is perfect for creating a more usable and transparent market. At the same time, the blockchain architecture can track individual transactions from the source of greenhouse gas emissions in a way to offset carbon emissions.
Smart contracts automatically calculate the number of carbon credits to offset the production of a particular product. These technologies also automate the control of transactions between companies.
Blockchain technology can be an efficient tool for expanding the offset market and making it more accessible through the ease of transparent credit assessment and tracking. The carbon emissions management control system on blockchain uses a transparent distributed ledger to connect small companies and help them offset their environmental impact. With the help of blockchain, any scaled companies and even individuals can access a market that has previously been difficult to access.
Europe's emissions trading system, the largest in the world, is valued
at more than € 51.4 billion per year. The automatic control of this growing market and transparency must be assured by technology.
