Victor Tay, Group CEO, Global Catalyst Advisory is passionate in promoting climate solutions, impact financing and a sustainable future.
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As I reflect on my recent engagement at COP28 in Dubai, the urgency of addressing climate change has never been more palpable. The conversations and commitments I witnessed at the conference underscored the need for innovative solutions to combat climate change.
Among the myriad strategies discussed, the convergence of carbon credits and Web3 technologies emerged as a promising frontier to catalyze climate action and drive sustainable change.
COP28: A Call To Action
While the outcome of COP28 is seen as a cup half-filled for avid environmentalists, the Dubai summit served as a stark reminder of the imperative for collective action. The latest IPCC report highlights the consequences of inaction and the narrowing window of opportunity to limit global warming to 1.5 degrees Celsius.
I think the outcomes of COP28 underscored a renewed commitment to ambitious climate targets and accelerated efforts. Key agreements and commitments to enhance Nationally Determined Contributions (NDCs) signaled a heightened sense of urgency and determination among nations to ramp up climate action.
Shifting Paradigms: Carbon Credits And Web3 Technologies
Amid the discussions at COP28, the role of carbon credits in incentivizing emissions reductions garnered attention. Carbon credits, a market-based mechanism established under the Kyoto Protocol, enable entities to offset their carbon emissions by investing in projects that reduce emissions elsewhere. However, challenges such as lack of transparency, standardization and traceability have hindered the efficacy of carbon credit markets.
With the quest for high-quality carbon credits, Web3 technologies seem to be reincarnated, joining a community offering blockchain technology, a transparent and immutable platform for recording transactions, potentially revolutionizing the way carbon credits are traded and managed.
This convergence could not only enhance transparency and traceability but offer a new glimmer of trust in carbon credit markets. Some believe blockchain-based carbon credits could “address current flaws in global carbon markets, including the lack of transparency around carbon offsets; the failure of markets to remove carbon emissions at the pace required; and the inability of millions of the world’s smallholder farmers and indigenous communities to benefit from carbon credit markets.”
A New Era Of Transparency And Traceability
The discussions at COP28 underscored the importance of transparency and traceability in driving sustainable climate solutions. Blockchain technology, inherent to Web3 platforms, ensures that every transaction is recorded transparently and cannot be tampered with. This level of transparency could not only instill confidence in carbon credit markets but enable stakeholders to trace the journey of each credit, from issuance to retirement, with precision.
The immutable nature of blockchain technology also helps ensure the integrity of carbon offset projects, safeguarding against fraud and greenwashing. This level of accountability is paramount in building trust among stakeholders and attracting investment toward credible carbon mitigation initiatives.
With this, a new era of technology-centric companies like ReSeed, Treejer, Avatree and Nori are able to use Web3 technologies to congregate green-conscious consumer financial contributions, matchmaking to sustainability projects, while fractionalizing carbon credits so that farmers and implementors can benefit.
Opportunities For Businesses
The momentum generated at COP28 has set the stage for a paradigm shift in the way many businesses approach climate action. As governments ramp up climate regulations and investors prioritize environmental, social and governance (ESG) criteria, I think the adoption of high-quality carbon credits backed by Web3 technologies is poised to become a trend for businesses worldwide.
The goal for many countries is to exceed $100 billion in supporting developing countries to mitigate and adapt to climate change, driven in part by increasing corporate commitments to net-zero emissions and the growing demand for high-quality carbon credits. Businesses that proactively embrace carbon credits and Web3 technologies stand to mitigate their environmental impact and also enhance their ESG credentials and secure a competitive advantage in an increasingly carbon-constrained world.
In my conversations with eager business leaders who were looking for direction, many asked, what are the incentives? Does it enhance their competitive edge? I noticed some CEOs found the integration into their supply chains reduced carbon emission across their operations. Web3 platforms can facilitate the tracking and verification of these credits, helping to ensure integrity and accountability throughout the supply chain. These high-quality carbon credits and business cases can be monetized.
I’ve noticed publicly listed companies often unravel a more impactful environmental, social and governance performance. For example, Nestlé leverages Web3 technologies to enhance transparency in its supply chains. Through blockchain-based traceability solutions, Nestlé can track the journey of ingredients from farm to factory, ensuring sustainable sourcing practices and empowering farmers in developing countries.
Despite the potential benefits of Web3 technologies and carbon credits, adoption may be hindered by inertia, skepticism or lack of awareness among stakeholders. Many businesses find it daunting that scalability remains a challenge for blockchain networks, particularly those built on public blockchains. As transaction volumes increase, congestion and latency issues may arise, impacting the efficiency and performance of Web3 applications.
As the regulatory landscape surrounding blockchain and Web3 technology is still evolving, businesses may encounter uncertainty regarding government regulations, compliance requirements, taxation and legal frameworks. In my view, this is not insurmountable if we commence in small projects rather than being ambitious to integrate into the entire organizational processes.
Embracing The Future
As we navigate the challenges posed by climate change, I think the convergence of carbon credits and Web3 technologies offers a beacon of hope. By embracing this new frontier, businesses can drive meaningful climate action, foster transparency and accountability, and pave the way toward a more sustainable future for generations to come.
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