• Sat. May 21st, 2022

Climate scientists worry about the link between cryptocurrencies and carbon emissions

ByHazel R. Lang

Apr 17, 2022

Environmental experts fear that the recent increase in the digitization of carbon offsets could undermine efforts to prevent climate change. Cryptocurrency aficionados are racing to bring the green revolution to blockchain.

The flurry of activity coincided with a substantial increase in the price of the underlying offsets, which are meant to reflect a ton of carbon avoided or removed from the atmosphere. Between June 2021 and April this year, so-called “nature-based” offsets, such as those from tree-planting programs, rose from $4.65 a ton to more than $14 a ton, according to S&P Global. Platts.

Nearly 20 million carbon credits – which companies use to offset greenhouse gas emissions – have been turned into digital tokens since October. The token can be exchanged for Clima, a new cryptocurrency, or used to offset emissions.

Crypto traders have scoured the carbon market to acquire and tokenize older, cheaper offsets, taking advantage of rising costs and popular calls for a global transition to clean economies – bringing together the two unregulated markets of digital assets and carbon offsets.

Yet they suddenly became popular in late 2021, as crypto communities built on online messaging forums began a buying frenzy.

Carbon analysts say “junk” credit bought wholesale by crypto traders in recent months was lower than in previous years. Potential buyers have been stunned by concerns that these older credits, which originated before 2010, may not actually represent the carbon savings they were promised.

Carbon analysts say “junk” credit bought wholesale by crypto traders in recent months was lower than in previous years. Potential buyers have been stunned by concerns that these older credits, which originated before 2010, may not actually represent the carbon savings they were promised.

Yet they suddenly became popular in late 2021, as crypto communities built on online messaging forums began a buying frenzy.

How Climate-Crypto Works Clima tokens are created in exchange – at a rate set by the organization behind the cryptocurrency, ClimaDao – when token compensation is deposited into the Clima “Treasury”.

Mining cryptocurrencies like bitcoin is often very energy intensive. Clima says it runs on the Polygon blockchain, which uses a less energy-intensive “proof of stake” system to mint coins than a “proof of work” system, which requires solving complex puzzles. For this, the computer must use high power. Web discussions reveal that merchants’ motivations for buying new digital assets vary. “I hope I can get rich from climate change,” one member wrote on a climate-themed thread on the Discord chat app.

Elsewhere, YouTube presenter JCrypto explained to her 8,000 subscribers that “carbon credits have suddenly become very important” because companies that pollute are “outraged”. The token offsets were “extremely cheap” and “will make millionaires,” he said, “just remember I’m a capitalist. . . I’m not like an environmental giant. Concerns have also been raised about the anonymity of Clima’s founders, who use pseudonyms such as “Archimedes” and “Dionysus”. Confidentiality “allows us to focus on delivering a good product,” Archimedes said, declining to disclose his identity.

Archimedes said the group was not “really” concerned about traders’ understanding of the underlying market. “People get involved and ask questions later regardless of their understanding,” he said. Carbon market experts have struggled to understand the impact the token could have on the offset market and its role in limiting global warming.

Some fear that the focus is on crypto first, climate second, and indicates the energy intensity of certain parts of the crypto universe. “All of this shines a light on the blockchain-heavy climate,” said Eli Mitchell-Larsen, researcher at Oxford Net Zero. The complexity of the system, he said, “could obscure the important question.” : Have you obviously removed or subtracted a ton of carbon? »

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