Are CO2 offsets good enough?


As world leaders discuss what needs to be done to address climate change concerns at the COP26 Summit in Glasgow, Scotland, companies around the world are trying to achieve carbon neutrality. The environmental impact is a hot topic in the crypto sector, renaming it is a top priority.

Earlier this year, electric car maker Tesla began accepting Bitcoin (BTC) payments and invested $ 1.5 billion in the cryptocurrency, only to close the BTC payments several months later due to concerns about the “rapidly increasing use of fossil fuels for.” Bitcoin mining and transactions, in particular., Discontinue coal. “

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Since then, efforts to make the crypto space greener grew, in part taking into account Tesla CEO Elon Musk’s statement that the electric car maker would withdraw BTC payments if there was “confirmation of reasonable (~ 50%) clean energy use by miners.” with “gives a positive future trend.”

As part of these efforts, the cryptocurrency exchange BitMEX announced a carbon neutral status as one of the industry’s first trading platforms and promised to offset the emissions of all Bitcoin transactions to and from the platform.

BitMEX announced that it has partnered with AI carbon data tracking company Pachama to purchase 7,110 tons of carbon credits worth around $ 100,000. Carbon credits are certificates of approval issued by official legislative bodies that allow companies to use one tonne of carbon dioxide in an approach that promotes accountability and data traceability.

BitMEX’s move will ensure that the platform will continue to operate for the coming calendar year while offsetting any emissions related to Bitcoin transactions to and from its servers. For the exchange, a “holistic effort” must include research into environmental impacts as well as basic information about the “possibilities of cryptotechnology”.

Speaking to Cointelegraph, Alex Salnikov, co-founder and product director of NFT marketplace Rarible, said that part of the reason the cryptocurrency industry is being scrutinized so closely for its carbon footprint is and not “the transparent design” it has necessarily care about its environmental impact.

Salnikov added that the “extra pressure is a good thing as the room accelerates its pressure to become energy efficient with proof-of-stake blockchains”. For Salnikov, the ultimate goal is to ensure that most, if not all, of the Web 3.0 tools “have minimal or no carbon footprint.”

The carbon offset, said Salnikov, is “definitely important as a stepping stone”. However, not everyone agrees with some arguments that these offsets can do more harm than good.

Are CO2 offsets greenwashed?

At the beginning of October, Jennifer Morgan, Executive Director of Greenpeace, spoke at the Reuters Impact Conference about the growing trend towards carbon offsetting, suggesting that companies are evading their responsibilities through emissions certificates.

At the conference, Morgan argued that there is “no time to pay compensation” as we are in a “climate emergency” and therefore need to run out of fossil fuels. She added that “offsetting programs are pure ‘greenwash” that allow companies to “do what they have done and make a profit”.

Speaking to Cointelegraph, Martha Reyes, head of research at Bequant cryptocurrency exchange, apparently agreed with Morgan, saying that carbon credits are “not an ideal solution to reducing carbon emissions.” She added that both investors and regulators “are right to wake up to the greenwashing that is an issue in traditional markets”.

In terms of what cryptocurrency companies can do to reduce their impact, Reyes argued that a more sustainable approach to bitcoin mining is to use more renewable energy. China’s ban on crypto mining meant miners using carbon-based energy sources were forced to leave the country and migrate.

For Morgan, carbon offsetting enables companies to maintain pollution without reducing their emissions by simply buying loans from projects that reduce or avoid the release of carbon, such as: B. Solar power plants.

In April, Reuters, a group researching the integrity of carbon offsets, said that 29% of the carbon offsets from forests, which it analyzed in a $ 2 billion program, totaled around around $ 2 billion in carbon offsets Overestimated 30 million tons of CO2.

The issues surrounding carbon offsetting are obvious, but whether there are other ways for cryptocurrency industry players to make a difference when not involved in mining is up for debate.

ESG crypto assets

In light of a climate emergency, Greenpeace is increasingly taking action against polluting companies. In May 2021, the organization said its facility for accepting Bitcoin donations was “no longer tenable”. The organization already accepted BTC donations in 2014 and cited the reason for the move to have a clearer view of the amount of energy required to operate Bitcoin.

Speaking to Cointelegraph, Eric Berman, Senior Legal Editor of U.S. Finance at Thomson Reuters Practical Law, he does not see anything “dirty” in Bitcoin or any other cryptocurrency. Berman added that like other trading companies, BTC consumes energy and, as such, sustainability is “in the miner’s eye”.

According to Berman, large mining companies can be required to use clean energy sources, not because regulators force them to do so, but because the market collectively votes on it by favoring BTC, which is mined with renewable energy. He told Cointelegraph:

“As I understand it, developers are currently developing ways to digitally mark a Bitcoin or other crypto unit to reflect that it has been mined sustainably, which could create two-part markets within each cryptocurrency, with the sustainably mined version having the greater value Has.”

He said tracking coins mined using renewable energy could make them accessible to investment vehicles that focus on optimal environmental, social and governance (ESG) factors.

Who decides which coins to receive an ESG tag is “probably quite political”, since even the question of who would be the arbiter of the rating increases “raises a whole spectrum of questions and would in some way institutionalize crypto”. that is in contrast to the spirit of bitcoin and crypto. “

Bequant’s Reyes also pointed out that cryptocurrency miners are entering into energy contracts with suppliers and “taking advantage of the renewable energy market.” Green mining initiatives are on the rise, she said, considering both their energy source and the disposal of obsolete mining equipment.

Cryptocurrency players have done more than just buy carbon credits to reduce their environmental footprint. Through the Crypto Climate Accord, an environmental initiative supported by over 150 organizations from the industry, crypto companies have committed to making their operations more sustainable.

Most companies, however, have not signed up to become CCA signatories, a law that requires a public commitment to achieve net-zero carbon emissions from electricity operations by 2030. Still, experts argue that neither Bitcoin nor the cryptocurrency space should be in the spotlight.

The role of crypto in the climate crisis

While cryptocurrencies are often in the limelight in climate change, Sarah Manski, assistant professor at George Mason University’s School of Business, said it was important to understand that “every commodity and currency has a certain carbon footprint.” Speaking to Cointelegraph, Manski said:

“It would be reasonable to say that printing US banknotes in one year equates to about 200,000,000 kilowatt hours of energy consumption, including thousands of tons of ink, cotton, linen, and water. Our coins use hundreds of thousands of tons of metal. “

Manski added that some carbon offsets are greenwashing but many are not, which means that not all carbon offsets are created equal and some are more transparent than others. Speaking to Cointelegraph, Pete Humiston, manager at Kraken Intelligence, said that developments in the industry have allayed concerns about the “carbon intensity” of the industry.

Humiston added that China’s crypto ban shifted mining of hash power to North America, where the “energy mix is ​​much more focused on renewable energies.” Focusing specifically on the state of Texas, he said it was a preferred destination for many of the mining companies that have fled China and that it gets “a significant portion” of its energy from wind power.

Large mining companies, he added, purposely built their operations close to local renewable initiatives to “use cheap excess electricity that would otherwise be disposed of as waste”.

For Humiston, the crypto asset space has made “significant strides toward carbon neutrality” and will continue to do so. He concluded:

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

As early as October 2020, the University of Cambridge’s 3rd Global Cryptoasset Benchmarking Study showed that 76% of cryptocurrency miners use electricity from renewable energy sources as part of their energy mix, with 39% only using renewable energy when mining work records, cryptos like Bitcoin , Ether (ETH) and Bitcoin Cash (BCH).

The Bitcoin Mining Council (BMC) estimated in July 2021 that the Bitcoin mining industry uses 56% renewable energy in its electricity mix, while consuming a “negligible amount of energy” compared to global energy consumption. BMC’s estimate was based on a three-question survey of only 32% of miners on the Bitcoin network, which found a sustainable electricity mix of 67% and was used as the basis for the 56% estimate.

In estimating the extent to which renewable energies will be used to mine Bitcoin or other cryptocurrencies, Humiston argued that the industry is “going in the right direction”. Reyes claimed that there is an overlooked but growing use of blockchain technology “in conservation and reforestation efforts” that benefit from the added transparency and accountability of a blockchain.

A trend towards a more sustainable approach can be seen among the most important players in the sector, with or without CO2 compensation. The industry’s efforts to become more environmentally friendly are showing as not every institution runs before BTC because of their carbon footprint.

$ 9 trillion multinational investment giant BlackRock, which was vocal about its focus on ESG initiatives, held nearly $ 400 million worth of shares in two Bitcoin mining companies through its funds in August 2021.

As the industry moves into a greener future, cryptocurrency adoption could increase as some of those on the sidelines may no longer view the environmental impact as a concern related to their involvement in the industry. Time will tell whether other sectors will join crypto’s green ambitions.