Is the carbon offset good enough?

When global leaders discussed at the COP26 summit in Glasgow, Scotland, what measures need to be taken to address the issues surrounding climate change, companies all over the world are seeking to achieve carbon neutrality. Environmental impact has always been a hot topic in the field of encryption, and it has been renamed as a top priority.

Earlier this year, electric car manufacturers Tesla started accepting Bitcoin (BTC) paid and invested 1.5 billion US dollars in cryptocurrencies, only for Abandon BTC payment A few months later, people worried that “the use of fossil fuels in Bitcoin mining and trading is rapidly increasing, especially coal.”

Since then, the crypto space has become more environmentally friendly, partly taking into account Tesla CEO Elon Musk’s statement that the electric car manufacturer BTC payment will be accepted again When “miners confirm that the future trend is good and reasonable (about 50%) clean energy use”.

As part of these efforts, the cryptocurrency exchange BitMEX became one of the first trading platforms in the industry to declare a carbon neutral status, and vowed to offset the emissions of all bitcoin transactions that enter and exit the platform.

BitMEX revealed it Purchased 7,110 metric tons of CO2 credit, Valued at approximately US$100,000, in cooperation with AI carbon data tracking company Pachama. A carbon credit is an approval certificate granted by an official legislative body that allows a company to use one ton of carbon dioxide in a way that promotes accountability and data traceability.

BitMEX’s move will ensure that the platform maintains its operations in the upcoming calendar year while offsetting all emissions related to bitcoin transactions between its servers. For the exchange, the “overall effort” needs to include both research on environmental impact and basic education on the “possibility of unlocking encryption technology”.

In an interview with Cointelegraph, Alex Salnikov, co-founder and product leader of NFT Market Rarible, said that part of the reason why the cryptocurrency industry conducts such strict scrutiny of its carbon footprint is its “transparent design”, not necessarily its environmental impact. .

Sarnikov added, “The extra pressure is a good thing, because the space is accelerating energy efficiency through proof-of-stake blockchains.” For Salnikov, the ultimate goal is to ensure that most (if not all) of the Web 3.0 Tool “has a minimum or zero carbon footprint”.

Sarnikov said that carbon offset is “absolutely important as a stepping stone.” However, not everyone agrees, and some believe that these offsets may do more harm than good.

Carbon offset has been washed green?

In early October, Greenpeace Executive Director Jennifer Morgan spoke at the Reuters Impact Conference on the growing trend of carbon offsets and hinted that the company is evading responsibility through carbon credits.

At the meeting, Morgan debate “There is no time for compensation” because we are in a “climate emergency” and therefore need to phase out fossil fuels. She added that “the offset plan is pure’greenwashing’” and it allows companies to “do what they have been doing and make a profit”.

Martha Reyes, head of research at the cryptocurrency exchange Bequant, seemed to agree with Morgan in an interview with Cointelegraph, saying that carbon credits are “not an ideal solution to reduce carbon emissions.” She added that investors and regulators are “correctly aware of the phenomenon of green drift, which is a problem in traditional markets.”

As for what measures cryptocurrency companies can take to reduce their impact, Reyes believes that a more sustainable way to mine Bitcoin is to use more renewable energy. China’s crypto mining ban This means that miners using carbon-based energy are forced to leave the country and migrate.

For Morgan, carbon offsets allow companies to continue to pollute without reducing emissions because they are only buying credits from projects that reduce or avoid carbon dioxide emissions, such as solar power plants.

In April of this year, Reuters reported that an organization that studies the completeness of carbon offsets stated that it analyzed 29% of forest carbon offsets in a $2 billion plan. Overestimated The offset emissions total about 30 million tons of carbon dioxide.

The issues surrounding carbon offsets are obvious, but if cryptocurrency industry participants do not participate in mining, whether they have other ways to make a difference is debatable.

ESG crypto assets

Faced with climate emergencies, Greenpeace has increasingly opposed polluting entities. In May 2021, the organization stated that its facilities are Accept Bitcoin donations “No longer standable.” The organization began accepting BTC donations as early as 2014 and cited a clearer view of the energy required to run Bitcoin as the reason for this move.

In an interview with Cointelegraph, Eric Berman, the senior US financial legal editor of Thomson Reuters Practical Law, said that he believes that Bitcoin or any other cryptocurrency is not inherently “dirty.” Berman added that, like other commercial enterprises, BTC uses energy, so sustainability is “in the eyes of miners.”

For Berman, large mining companies may be required to use clean energy, not because regulators force them to do so, but because the market collectively voted to decide whether this would happen through BTC that prefers to use renewable energy to mine. He told Cointelegraph:

“As far as I know, developers are currently designing methods to digitally tokenize Bitcoin or other cryptographic units to reflect that it has been sustainably mined, which may create a bifurcated market in each cryptocurrency, sustainable mining The version has greater value.”

He stated that tracking coins mined using renewable energy can make them available to investment vehicles that focus on the best environmental, social and governance (ESG) factors.

He added that who decides which coins receive the ESG label “may be very politicized” because even figuring out who will be the arbiter of the rating increase will create “a series of problems and may somehow threaten the cryptocurrency system.” This is contrary to the spirit of Bitcoin and cryptocurrency. “

Reyes of Bequant also pointed out that cryptocurrency miners are signing energy agreements with suppliers and are “utilizing the renewable energy market.” She said that considering energy sources and the disposal of obsolete mining equipment, green mining initiatives are increasing.

Participants in the cryptocurrency space are doing more than just buying carbon credits to reduce their environmental impact.pass through Encrypted Climate AgreementAn environmental initiative supported by more than 150 organizations in the industry, crypto companies are committed to making their operations more sustainable.

However, most companies do not subscribe as CCA signatories, and the bill requires a public statement of commitment to achieving net zero carbon emissions from power operations by 2030. However, experts believe that neither Bitcoin nor cryptocurrency should be the focus.

The role of cryptocurrency in the climate crisis

Although cryptocurrencies are often concerned about climate change, Saramansky, an assistant professor at George Mason University’s School of Business, said it is important to understand that “every commodity and every currency has a certain carbon footprint.” Mansky said in an interview with Cointelegraph:

“It stands to reason that US banknote printing consumes approximately 200 million kilowatt-hours of energy a year, including thousands of tons of ink, cotton, linen, and water. Our coins use hundreds of thousands of tons of metal.”

Mansky added that while some carbon offsets are greenish, many are not, which means that not all carbon offsets are equal, and some are more transparent than others. Kraken Intelligence manager Pete Humiston said in an interview with Cointelegraph that the development of the industry has been alleviating concerns about the industry’s “carbon intensity”.

Humiston added that China’s encryption ban has shifted mining power to North America, where the “energy structure is more inclined to renewable energy.” He paid particular attention to Texas, saying that the state is the preferred destination for many mining entities escaping from China, and that “a significant portion” of its energy comes from wind energy.

He added that large mining entities purposefully set up their operations near the local renewable energy plan to “use the surplus of cheap electricity, otherwise the electricity will be discharged as waste.”

For Humiston, the crypto asset sector has “made significant progress in achieving carbon neutrality” and will continue to do so. He concluded:

“This is especially true given that mining economics encourages miners to use cheap renewable energy to mine Bitcoin and other crypto assets.”

As early as October 2020, Cambridge University’s third global cryptoasset benchmark study showed that 76% of cryptocurrency miners Use electricity from renewable sources As part of their energy portfolio, 39% of people only consume renewable energy when mining Bitcoin, Ethereum and other proof-of-work cryptocurrencies (Ethereum) And Bitcoin Cash (Bitcoin cash).

The Bitcoin Mining Council (BMC) estimated in July 2021 that Bitcoin mining is Use 56% renewable energy Compared with global energy consumption, its energy mix uses “insignificant energy”. BMC’s estimate is based on a three-question survey of only 32% of miners on the Bitcoin network, which showed a sustainable power mix of 67% and was used as the basis for the 56% estimate.

In estimating the extent to which renewable energy is used to mine Bitcoin or other cryptocurrencies, Humiston believes that the industry is “going in the right direction.” Reyes claimed that a neglected but growing use of blockchain technology is “in conservation and reforestation work”, which benefits from the increased transparency and accountability of blockchain.

Among the major industry players with or without carbon offsets, one trend is to shift to more sustainable methods. The industry is striving to become more environmentally friendly because not every institution uses BTC due to its carbon footprint.

The US$9 trillion multinational investment giant BlackRock has been vigorously promoting its focus on ESG plans. Almost held $400 million worth of stocks As of August 2021, it has invested in two Bitcoin mining companies through its funds.

As the industry moves towards a greener future, the adoption of cryptocurrencies may increase, as some bystanders may no longer see environmental impact as concerns surrounding their participation in the industry. Whether other industries will join the green ambitions of cryptocurrency, only time will tell.