![How blockchain tech and dMRV can help carbon trading markets How blockchain tech and dMRV can help carbon trading markets](https://i0.wp.com/images.cointelegraph.com/images/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjMtMDgvYjBjYjdjNDgtZThiZS00ZDJjLWE2N2YtNDJiYTY0ZTVmODI2LmpwZw==.jpg?fit=%2C&ssl=1)
There is global consensus that greenhouse gas (GHG) emissions are warming the planet, but efforts to accurately measure, report, and verify these emissions remain challenging for researchers, nonprofits, businesses, and governments.
This is especially true for “nature-based” projects aimed at reducing CO2 levels, such as planting trees or restoring mangroves.
This hinders the development of a voluntary carbon market (VCM) for the trading of carbon offset credits. These “offsets” are sometimes seen as a permit to pollute, but overall, VCMs are considered good for the planet because they help quantify the environmental impact of industrial and consumer activities and at least indirectly incentivize companies to curb emissions.
However, VCM has recently come under strong criticism.The British “Guardian” and other organizations conducted a nine-month investigation set up More than 90 percent of “rainforest offset credits” approved by leading certification company Verra “are likely ‘false credits’ and do not represent real carbon reductions.”
This finding shocked the carbon trading industry, but also inspired some new thinking about how to measure, report or verify the effectiveness of carbon emission reduction projects. For example, digital monitoring, reporting and verification (dMRV) has largely automated this process using new technologies such as remote sensing, satellite imagery and machine learning. DMRV also uses blockchain technology for traceability, security, transparency and more.
All this is still new, but many believe dMRV can revive the carbon market in the wake of the Villa scandal. It could also fill the global shortage of human auditors and inspectors available to assess greenhouse gas projects, especially the more problematic “nature-based” ones. In addition, it can collect a wider range of data and potentially make it available in real time. Importantly, it will allow for the first time global comparisons of projects.
“huge difference”
“DMRV will have a huge impact here because it will move the quantitative comparison of various nature-based interventions into a global domain where they can be compared with each other – which is not possible in the current system because projects will be They’re self-reporting self-reporting,” Anil Madhavapeddy, professor at the University of Cambridge and director of the Cambridge Center for Carbon Credits, told Cointelegraph.
Some even go a step further. “Digital measurement, reporting and verification (dMRV) technology has the potential to revolutionize how voluntary carbon markets (VCMs) work,” Announce dClimate, a decentralized infrastructure network for climate data, in a March blog post.
Still, the problem remains: Maybe it’s too little, too late to avoid climate change? If it’s not too late, will progress stall if better methods aren’t developed, such as quantifying the reduction in global carbon emissions that Brazil’s rainforests have? Does this process require a blockchain? If so, why? Could dMRV really ‘revolutionize’ the voluntary carbon market? Or is this just over exaggeration?
“It’s not too late,” Miles Austin, CEO of climate technology firm Hyphen Global AG, told Cointelegraph. “We find ourselves at a critical moment.” The Villa scandal and ongoing allegations of corporate “greenwashing” have made more companies skeptical about backing carbon-reduction projects.
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“Perceptions of the trust and viability of nature-based assets have been adversely affected in both the public and private sectors,” Austin noted. But he added that at this juncture:
“DMRV could have a major impact, not only improving these markets, but saving them.”
It may be helpful to compare dMRVs to traditional MRVs, which are designed to help demonstrate that an activity, such as planting trees or cleaning up smokestack emissions, actually took place. This is a prerequisite for assigning a monetary value to activities and for carbon markets to function.
Climate Collective CEO Anna Lerner Nesbitt told Cointelegraph that MRV has been “underpinning” sustainability reporting for years. However, “it has a number of weaknesses”, including a high reliance on subjective data, high costs, lengthy timelines and reliance on “international experts” (i.e. consultants).
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According to the Cambridge Center’s Madhavapeddy, the inherent difficulty in quantifying nature-based projects “is that the traditional mechanisms for doing so over the past few decades have been very manual and difficult to compare between projects.”
The quantitative mechanisms used for these assessments are far from standardized. They include assessing “additionality” (i.e. what is the project’s net difference in terms of climate?), persistence (how long will its impact last?) and leakage (will negative externalities, such as deforestation, be transferred elsewhere?) .
Nesbitt said DMRV is relying on emerging technologies and more granular data to enable a “fully digital MRV protocol that not only collects digital data through the Internet of Things, sensors, and digital technology, but also sorts it on a fully digital and decentralized blockchain.” Data is processed and stored on the account.”
Daniel Voyce, chief technology officer at sustainability-focused solutions provider Tymlez, said the DMRV could also potentially reduce the workload of auditors and inspectors who verify emissions reduction projects. wrote:
“With manual MRV records, each auditor or inspector may only be able to verify 150 items per year because they need to track the required data and have to collate it all.”
He estimates that digitizing processes can reduce time and costs by 75%.
Can Blockchain Help With “Complicated” Processes?
What role (if any) does blockchain play in all of this? “I think, if we’re being honest, voluntary carbon markets — and regulated carbon markets — need blockchain for asset issuance and traceability,” says Open Forest Protocol (an open platform for scaling nature-based) Michael Kelly, co-founder and chief product officer of Solutions – told Cointelegraph.
He said the current MRV process is “complicated” with “no visibility into issuance schedules, no traceability, fairly frequent double spending, etc.” As a result, “people are hesitant to access carbon credits.”
DMRV combined with blockchain could change everything. “Once they can see everything about the project (a project), even upload every tree in a sample plot over a 20-year period, we’ll see new players enter the space.”
Nesbitt noted that some incremental improvements to MRV (such as digitizing submission forms) don’t actually require blockchain technology, but with “features like smart contracts allowing for more inclusive or just asset pricing, baked in at a reasonable price,” This situation may soon change. Compensate local communities for participating in carbon credit projects. ”
However, the ability of blockchain technology to solve problems alone may be limited. Hyphen’s Austin said blockchain could “enable transparency, security, automation and immutable records of data flows in an auditable manner,” but that might not be enough, adding:
“A DMRV is only as good as the data and methodology used. If you take a flawed methodology and digitize it with a blockchain, you now have an immutable and clearly flawed dMRV.”
Austin believes that improving the method is crucial. “Activity-based approaches work well in internal combustion engines or industrial processes where you can measure exactly and multiply by a factor,” he told Cointelegraph.
But these don’t really apply to “nature-based solutions”. For example, depending on a number of variables including drought, rainfall and humidity, forests in Brazil may absorb more carbon dioxide than similarly sized forests in Indonesia.
“Nature is a breathing, living asset; therefore, methodologies need to measure actual amounts of CO2/CO2e (carbon dioxide/carbon dioxide equivalent) as sinks or sources, rather than calculating best guesses,” Austin said.
Work is being done on that front, especially in the wake of the Villa controversy. “Researchers in this field are showing how to improve the quality of ‘avoided deforestation’ carbon credits,” Julia Jones, professor of conservation science at Bangor University, told Cointelegraph. “However, there is of course some lag between new research and entry into policy and practice.”
The Cambridge Carbon Crediting Center actually built A research prototype last year showing what a market for carbon credits on the Tezos blockchain would look like. “Our first observation is that blockchain really isn’t the bottleneck here — all the infrastructure is working well and has a solid technology roadmap for scaling,” Madhavapeddy told Cointelegraph. The obstacles lie elsewhere.
“The barrier to any meaningful deployment comes from the lack of a supply of credible projects, because the quantification mechanisms”—namely, additionality, persistence, and leakage—”are only just maturing as satellite infrastructure and associated algorithms are peer-reviewed and deployed .”
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Kelly also pointed to a shortage of “quality carbon development projects and available credit,” particularly in the nature-based assets subsector, as a significant hurdle for VCMs.
Projects such as reforestation, afforestation, mangrove restoration and biodiversity conservation are currently underfunded. The shortage of the program led to a shortage of credit, which became a kind of chicken-and-egg problem.
“As a result of this system, carbon credits remain a relatively illiquid, complex and difficult to scale system that prevents stakeholders from financing, purchasing and trading assets to participate in the market,” Kelly said.
“The biggest hurdle right now is the collective credibility of the voluntary market, and we hope our work on digitization, system design and analytical publication can help bridge this gap,” Madhavapeddy said.
A “perfect storm”?
What about the claim that dMRV technology has the potential to revolutionize the way voluntary carbon markets work, as quoted above? Is it too much?
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“DMRV is at the heart of strengthening data integrity, which in turn improves process integrity,” Nesbitt said. “So, yes, I think dMRV will be critical to the success of establishing a voluntary carbon market. But given that many dMRV improvements and applications are already being implemented, it might be a bit too much to say it will revolutionize the market.”
Kelly sees two promising trends after Guardian exposed. Traditional players such as Verra and Gold Standard are now more focused on digitizing processes and “becoming more transparent and trustworthy,” he said, while “stakeholders are more willing to try new solutions or service providers, especially if they have Higher standards of trust, visibility and quality.”
The result could be “the perfect storm to catalyze an on-chain liquid voluntary carbon market,” he added.
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