Blockchain technology will help eco businesses and consumers to transform financial markets.
Headlines sounding the death knell of fossil fuels and the internal combustion engine do not quite add up to the birth of a global green economy. For that, we need green money as much as we need clean technology.
Far too often, buying green still means paying more. Policies and subsidies have helped lower consumer premiums for renewable technology over the past decade, but the political appetite for using taxpayers’ money to buy down the cost of green products and services is waning. Meanwhile, businesses not only have to foot the upgrade bills and pay for certification, they also risk losing market share if they get too far ahead of the competition.
Green cryptocurrencies will rise in 2018 – and with them, a new form of financing that is as transformative as common stock issues were in their day. This will come from a marriage of technologies such as blockchain and smart contracts with better environmental data and growing corporate interests in raising finance for green-frontier investments. In turn, these cryptocurrencies will incentivise innovation and leadership, reward cleaner purchases and help tackle some of the thorniest policy issues.
With blockchains, supply-chain information from different economic sectors can be pooled into a global, trusted dataset that is fully interoperable. This level of specificity (and transparency) will make it possible to quantify specific environmental benefits – whether that’s clean jet fuels, green proteins or renewable power – and turn them into market commodities.
Such data will be included in the “smart contracts” already supported by Ethereum, for instance, which provides a mechanism for exchange, not only of payments but also the life-cycle implications of production processes. That the Enterprise Ethereum Alliance, an open-source blockchain alliance, has attracted companies such as BP, Microsoft and UBS also signals its readiness for widespread adoption.
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Big corporates are already using blockchains to optimise their complex supply chains. The same technology can also track and manage environmental performances and embed the information – whether carbon avoided or waters saved – in financial and other transactions. On the other end of the supply chain, this will give consumers greater confidence in buying green.
Workplaces will become more like nature. Amazon’s new headquarters in Seattle will feature temperature- and humidity-controlled biospheres, filled with rare plants, and flexible-working spaces for employees.
If the true power of green cryptocurrency lies in changing the nature of money itself, so far the early movers have failed to capture wider attention. They include GENERcoin, a cryptocoin which can be redeemed for a specific solid biofuel, or traded like bitcoins. The EnergyCoin works more like a local or community currency. Producers can earn SolarCoins, a bitcoin with a twist, by presenting their solar renewable-energy certificates.
In 2018, we will see the emergence of new green cryptocurrencies built on the back of blockchain-enabled global datasets of environment-related life-cycle data. Armed with precise data, energy companies could be the first movers in 2018. Pilots abound for peer-to-peer energy transactions and trading platforms – especially where “prosumers” enter the market with rooftop solar power. The entry of these big players will change the markets, though it remains unclear who will win long-term.
These green cryptocurrencies will also provide a novel way of tackling the so-called “rebound effect”: when environmental benefits get cancelled out by changes in behaviour. It happens when, having cut our electricity bills through efficiency, we turn up the air conditioning or, more indirectly, when spare cash from less food waste at home goes into an extra holiday or more taxis.
Rebound effects could be countered by offering consumers units of green cryptocurrencies as reward for efficiency savings, for example, which could be redeemed as payments for green electricity or other blockchain-verified environmental services – be it organic detergent, charging for electric vehicles or household insulation. Airlines could offer these same cryptocurrencies in place of more traditional offsets.
The past few years saw great hype around distributive-ledger technologies. The signs are that 2018 will be the year that a revolution in green finance begins.
Written by: Bernice Lee, 18th December 2017