Where does the carbon credit market go from here?
概要
Carbon credits, also known as carbon offsets, are licenses representing the removal of one ton of carbon dioxide from the atmosphere. They can be purchased by individuals or, more commonly, companies looking to offset carbon emissions from industrial production, transport, vehicles or travel .
Carbon credits serve as a transparent, measurable and outcome-based way to address carbon emissions through activities such as the protection and restoration of non-recoverable natural carbon sinks such as forest or marine ecosystems.
Although a relatively new concept, the idea of carbon offsetting has only really caught on in recent years. This is likely a result of European climate law, which legally supports the goals set in the European Green Deal to make Europe's economy and society climate neutral by 2050.
By 2020, more than 110 countries have committed to net zero emissions by 2050, with China the largest emitter by 2060. The UNFCCC Paris Agreement also committed 196 countries around the world to limit climate change to "well below 2°C," limiting warming to around 1.5°C.
While these are Important Steps in Curbing Global Carbon EMISSIONS and ENSURING that Governometry, Private Companies and Individuals Play a Role Fight Against C LIMATE Change, Improvements Need to be made to ensure the Longevity and Success of the Carbon Credit Market.
The current carbon credit market is inherently flawed
The market for carbon credits has the ability to reduce greenhouse gas emissions, thereby rapidly slowing the effects of global warming, allowing companies that would otherwise have done nothing to reduce emissions through positive impact. Yet even in all its glory , the industry, like many others, is fraught with flaws.
One such pitfall is double counting. Double counting occurs when more than one entity claims a carbon credit even though only 1 ton of CO2 (represented by that credit) has been removed from the atmosphere or avoided being released into the atmosphere.
Double counting can mislead the level of emission reductions and removals that have actually been achieved, making it difficult to track the true rate at which carbon offsets are occurring. This puts the environmental value of carbon credits at risk and casts a shadow of doubt on the entire carbon industry.
Carbon reductions are also difficult to predict accurately, as many carbon credit providers overestimate the number of carbon credits a project can generate.
One of the main challenges of the carbon offset market is to build a credible and transparent ecosystem that will participate in multiple projects and allow individuals and businesses to offset their carbon footprint and meet their climate change goals responsibly.
Tokenization as a solution for market growth
These general deficiencies currently in the carbon credit market lead to greater doubts about the true value that carbon offsets can provide. In January, the Guardian, Zeit and SourceMaterial conducted a nine-month investigation into leading certification body Verra and found that m more than 90 % of its rainforest offsets do not represent real carbon reductions. The incident led to more questions and questions about the legitimacy of the space.
As we look to accelerate the adoption of carbon credits, users will demand greater transparency within the industry - and one way to achieve this is through the integration of blockchain technology. One particular use case that can go a long way toward addressing outstanding issues in this space, such as double counting, overestimating the amount of carbon credits a project can generate, and not implementing proper retirement procedures, is asset tokenization.
Asset tokenization is the process by which issuers create digital tokens on a distributed ledger or blockchain, representing digital or physical assets. Tokenize carbon credits and distribute them to users in the form of NFT, so that these credits can be displayed in a decentralized ledger that users can track, thereby ensuring transparency and traceability.
The NFT technology in the carbon credit industry means that once the carbon credit is eliminated, the NFT will be destroyed and sent to an invalid address, eventually eliminating it from circulation. NFT burning takes place as a public, irreversible and permanent transaction on the blockchain ledger.
Since all transactions between platform participants are recorded on a distributed ledger, integrating blockchain technology into the carbon market will ensure that carbon credit transactions are nearly impossible to tamper with, which helps prevent fraud and double counting.
2023 forecast
Every emerging market is subject to regulation due to the unpredictability of business models that rely on emerging technologies. Carbon markets are no exception. In particular, the lack of an accepted and consistent approach to defining and accounting for carbon assets and Liabilities have led to a push for more advanced regulation in this area.
The European Union's recent Corporate Sustainability Reporting Directive (CSRD) will require nearly 50,000 companies to report sustainability information in greater detail than ever before and will require them to prepare for regular audits. Carbon markets are still in their infancy, so it's important to remember that , while useful, such regulation is only the first link in a long line of advances to come.
With stricter regulations come harsher penalties. The more tightly regulated the sector is, the more penalties companies will face for failing to meet carbon emissions targets. It is therefore increasingly important for companies to accurately measure and report their carbon emissions. Blockchain offers an opportunity to do this simply and responsibly.
The essence of carbon trading is the assessment, storage, trading and management of carbon emissions. Blockchain's decentralized database ensures this while providing ultimate transparency to deter and resist fraud.
Achieving net zero emissions will require fundamental changes – including eliminating emissions from key sectors and accelerating the removal of atmospheric emissions. The market for carbon credits offers the opportunity for businesses and individuals to make a difference without changing everyday life. If merged with existing processes, blockchain has unique value and has the potential to better reshape the carbon market.
Article source: Accesspath
