Using Bitcoin technology to combat climate change

Environmental action groups could use the technology’s transparent, openly accessible and irrefutable nature to hold their governments to account on emissions levels. DLTs could also be used to develop and transfer technology to help developing economies decarbonise. A digital token could be introduced to commercially motivate and finance a global switch to a decarbonised economy; and ensure that polluters, rather than taxpayers, fund the US$100 billion committed in the Paris Agreement to climate change mitigation.

Bitcoin is a digital currency that can be used for payment transfers as well as to buy goods and services similarly to regular money. Instead of relying on a credit card transaction, Bitcoin uses a type of DLT known as ‘blockchain’. This records all Bitcoin transactions on a digital public ledger rather than on a traditional centralised ledger that is subject to accounting error, fraud and security risks.

No central body administers or stores the data. Instead, transactions depend upon peer-to-peer verification that provides open and irrefutable records transparently, proving how they were verified. This removes the need to trust a third party or government to verify or store transactions. DLTs can be used for trading digital currencies; recording, sharing and validating information and events; and completing transactions or tasks in a more efficient, economical and reliable fashion. Their open access designs allow users to contribute and share data publicly and privately.

Innovative financing and technological solutions for climate change mitigation are promoted within the Paris Agreement. The feasibility of such technology-driven solutions will be discussed on September 28 at an event of the 73rd UN General Assembly in New York by the Leading Group on Innovative Financing for Development, following publication of the UN’s White Paper on distributed ledgers and the future of sustainable development.²  

Possible financial technology solutions will be proposed days later, on October 2, by experts at a financial technology round-table discussion organised by Qatar University’s Centre for Law and Development.

DLTs can provide several promising solutions for achieving the Paris Agreement objectives and climate change targets.

Accountability and community-led reporting

The beauty of the Paris Agreement, and the reason it was endorsed by world governments, is in its design. It would have been an impossible democratic task for the United Nations to impose punishment on countries failing to lower their emissions. The agreement, instead, merely requires nations to report and account for their emissions and their progress toward implementation. It will be embarrassing, rather than punitive, for a country to break its climate promises. 

Article 6 of the Paris Agreement urges nations to “apply robust accounting” methods to ensure transparency in their emissions mitigation efforts. The public, decentralised and immutable nature of DLTs may be the key to ensuring accurate emissions reporting. More accurate and verifiable results can be recorded by enabling climate data to be input and shared on a blockchain; not only by government sources, but also by NGOs, local communities and businesses. 

"Blockchain would facilitate localised reporting of climate data to help hold nations to account on their mitigation results, regardless of political obstacles."

When the Trump administration announced plans to withdraw from the Paris Agreement, individual states and local communities looked for alternative ways to maintain American involvement. Blockchain would facilitate localised reporting of climate data to help hold nations to account on their mitigation results, regardless of political obstacles.

Transparent verification would also improve the credibility of results, removing the need to trust government climate data. It could relieve the burden on any government struggling to report accurate climate data; a task that is not always easy for countries in crisis. 

The UN’s Blockchain Commission for Sustainable Development has proposed adopting blockchain solutions to achieve sustainable development goals. Indeed, the United Nations Development Programme already uses blockchain to authenticate land records in India to prevent disputes, while the World Food Programme adopted blockchain in Pakistan and Jordan to eliminate risks involved in making cash payments.

Technology development

The Paris Agreement committed nations to use the best available science and technology to reduce global emissions, and to share this knowledge for the common good. 

As an open access platform, DLTs can enable technology developers to share and synchronise test results from different locations. This would help develop and improve climate technology and science, making it possible to measure the impact of technologies in different environments. The ability of developing countries to access this information would enable them to test and develop such technologies to implement climate change mitigation measures.

Finance and cryptocurrency solutions

In Bangkok, residents use blockchain to sell their surplus electricity or the electricity they generate using renewable energy technologies. This creates energy consciousness, valuing of energy consumption, and a socially entrepreneurial solution for energy conservation.  

Governments have experimented with various forms of climate finance, adaptation finance, and carbon trading with degrees of success. The European Union’s Emissions Trading Scheme requires industry polluters to hold sufficient carbon credits to cover the quantity of carbon they emit. The carbon credits are auctioned, but until recently the auction price of the credits has been so low that there has been little motivation for polluters to switch to a cleaner method of production to avoid the costs of their environmental impact.

Several benefits would arise through the alternative of a tradable digital token akin to Bitcoin. If one digital token amounts to a right to pollute up to a defined limit, but is tradable for money, then industry polluters would not be the only parties seeking to buy them. Private traders, environmental action groups and speculators may themselves decide to buy and hold such tokens to prevent pollution or profit from selling tokens to polluters. Ultimately, this would raise the price to pollute and encourage switching to lower emission technologies. Renewable energy producers and carbon offsetting projects could be rewarded with such tokens. Emission levels would be monitored using blockchain reporting, and holders would trade tokens for money through blockchain. This would essentially charge polluters to fund climate change protection.

The token could also be used as an incentive to invest in low carbon industries in developing countries. This could happen by creating value in the token and awarding additional tokens to renewable energy producers, low carbon industries and carbon mitigation projects in developing countries. The US$100 billion committed in the Paris Agreement could thus be directly transferred through the market from polluters’ payments for the right to pollute to those mitigating climate change.

Russian non-profit technology group Decentralized Autonomous Organization³  is presenting social finance solutions to the World Bank. The group envisions that the United Nations Framework Convention on Climate Change could use blockchain to monitor emissions via a transaction log, utilise ‘mitigation tokens’ to allocate polluting rights, and invest in carbon mitigation projects. The group believes it is sensible to avoid exclusive reliance on central government for climate action. 

Switzerland-based ClimateCoin⁴ , led by an international team of bankers, IT experts and social entrepreneurs, is another project enabling businesses and private individuals to offset their emissions through cryptocurrency trading. 

These tools can be used to finance developing countries’ climate change projects and to create a market for renewables and carbon offset projects in places currently reliant on non-renewable energy.

The concepts of entrepreneurial blockchain-driven solutions for climate change are emerging in a way the Paris Agreement aspired to, but could not immediately envision. As these solutions are developed, it is vital that the type of blockchain adopted is itself not environmentally harmful. Some blockchain designs, including Bitcoin’s, depend upon unsustainable consumption of electricity; but this can be avoided by using low carbon versions.⁵ 

In the tech-savvy Middle East, policymakers have the opportunity to meet their climate change commitments whilst promoting a burgeoning industry that could provide the economic diversification and sustainability they need. Indeed, the importance of the Paris Agreement to the Middle East cannot be underestimated. A 2015 study by MIT published in Nature Climate Change warned that climate change, if not significantly mitigated, could severely impact human habitability in parts of the Arabian Gulf in the future.⁶  Middle Eastern environmental policymakers should seize upon and engage with the opportunities offered by blockchain technologies. 

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