Below is a guest post by Fly Air Inc CEO Stuart Bullard.
With ESG in the spotlight, executives at large companies are starting to take sustainability seriously. Businesses understand that they need to efficiently measure, report and manage their emissions. Some companies have set net-zero commitments, creating many challenges to overcome.
Carbon offsets or carbon credits are permitted. Owners can emit a certain amount of carbon dioxide or other greenhouse gases. bank of america estimates that companies need a 30- to 50-fold increase in carbon offsets to ensure they meet these sustainability commitments. Some believe that the true number is closer to 300 times he.
Not cheap.microsoft have Annual emissions are about 16 million tons. Based on current carbon offset costs ($2 to $20), it could cost Microsoft tens or hundreds of millions to comply.
Capital allocation and regulation
Needless to say, businesses face significant challenges both in meeting these disclosure requirements and managing exposure to these issues. Blockchain could help him in two general categories: capital allocation and regulation.
Many who invest in the energy industry want to move from fossil fuels to cleantech. The fossil fuel sector has a legacy of detailed and well-known parameters such as credit exposure, risk types and capital allocation. Banks, financial institutions, and investors expose risk decades ahead in spreadsheets.
The cleantech industry has neither its history nor its comparable model. On the one hand, it is advantageous for companies with no real revenue stream, as they receive capital from governments that do not consider their credit exposure. They are most interested in capital allocated to their priority industries, products, and services. Private companies, on the other hand, do not touch these companies because they are not profitable.
Blockchain can help private capital enter the sustainability market, especially when it comes to pricing. Europe is now working on pricing standards, allowing private capital to examine the model and decide how to allocate capital. Blockchain’s ability to control the source of carbon emissions (where they are emitted, whether they can be resold, who is the governing body, etc.) will help with the associated risks related to legal title, etc. Carbon emissions have different pricing and the market is constantly changing. Blockchain is traceable.
Many companies around the world are now faced with the requirement to report their emissions. They are asked to take measurements along the entire hydrocarbon value chain in order to obtain the figures required for disclosure. (For example, UNICEF Proposed tracking and traceability along the entire value chain for a given industry)
Blockchain is a good candidate because it can track pieces of data when it changes origin and is immutable, which energy companies like. ESG can apply the same methodology to unlock the potential for greater transparency along the value chain and improve ESG reporting. This also makes the job of regulators easier.
Logical application of blockchain
Energy industry players have been around for a long time. And their systems and processes have been around for 30-40 years. As companies adopt new carbon offsets and credit permits in the trading world, you will be working in a technological environment that dates back to the 70’s.
Consider how you get the price of a commodity, such as CO2 emissions. It works like a traditional commodity market, creating bearer documents that can be exchanged for commodities. Blockchain can improve the industry with smart contracts, smart billing, pricing clarity, verification, and more.
It can also improve efficiency, make business processes faster and smarter, lead to adoption, enable sustainability, and improve. By automating smart contracts on a secure and immutable blockchain, entities along the supply chain can be incentivized to contribute to sustainability goals.
There is no time to be late. Currently, you can buy credits from Saskatchewan’s farmer’s fields and Brazilian rainforests. Blockchain promotes the overall stability of the system while providing an accessible and testable protocol. Blockchain can standardize global markets and create a transparent and immutable carbon credit system.