In the upcoming 2021 United Nations Climate Change Conference (COP), world leaders are expected to renew their commitments to reach environmental goals. If this is taken seriously by lawmakers across the world, will the crypto industry need to step up its game?
Should Crypto Coins Consider Their Corporate Enviromental Responsibility Rating?
Crypto projects should consider meeting the standards of Corporate Environmental Responsibility (CER): a term that refers to a firm’s obligation to refrain from damaging the environment.
CER requires companies to reduce environmentally adverse behaviors, and instead, participate and promote activities that are beneficial to the environment. The idea of CER is that it benefits a company by enhancing its reputation, making the company a more suitable choice for investors; after all, companies that are able to stay ahead of regulators will not have to pay out as much as those that don’t to adapt to new rules and regulations.
Multidisciplinary Digital Publishing Institute (MDPI), which publishes open access scientific journals, has outlined the benefits of CER:
“CER can not only improve the natural environment and form positive externalities to benefit enterprises but also provide better access to external financing, improving corporate financial transparency to some extent and reducing the abuse of corporate free cash flow.”
A number of crypto companies have taken steps into applying CER. For instance, in late June, crypto exchange Gemini purchased $4 million in carbon credits to offset the environmental impact of its Bitcoin holdings. The exchange also announced it would aim to offset its entire carbon footprint.
Crypto May Need to Go Green
In mid-May, Tesla CEO Elon Musk suspended vehicle purchases using Bitcoin, citing environmental concerns. A few days later, for this same reason, China’s State Council signaled a crackdown on crypto mining. Back then, Chinese authorities claimed that crypto mining, which is an energy-intensive process, was hurting global environmental goals.
Now, as the world seemingly strives to make a big leap forward at the UN Cop26 climate summit and world leaders further commit themselves to reach environmental goals, crypto projects could be left with no other choice than to go green.
John Kerry, special envoy for the climate to Joe Biden, has recently asserted that he expects “surprising announcements” from key countries during Cop26, which is poised to begin in Glasgow by the month-end.
“The measure of success at Glasgow is we will have the largest, most significant increase in ambition [on cutting emissions] by more countries than everyone ever imagined possible. A much larger group of people are stepping up. I know certain countries are working hard right now on what they can achieve.”
Kerry acknowledged that while the progress he envisioned was not “signed, sealed, and delivered,” he said Cop26 could set the scene for further progress. “There is not a wall that comes down after Glasgow. It is the starting line for the rest of the decade,” Kerry said.
Previously, under the 2015 Paris agreement, 197 countries agreed to hold global temperature rises down 2C, while “pursuing efforts” to stay within 1.5C. However, the commitments made have failed as the temperatures would rise by over 3C above pre-industrial levels.
Some Crypto Projects Are Pushing For Greener Models Already
On April 23, approximately 40 companies across the globe from the crypto, finance, technology, NGO, and energy sectors formed the Crypto Climate Accord. The accord, which boasts industry giant members like the World Economic Forum, ConsenSys, Crypto.com, Ripple, and FTX, aims to make all blockchains be powered by 100% renewable energy by 2025.
Moreover, Ripple and Nelnet have recently announced a $44 million clean energy fund that will contribute to the reduction of over 1.5 million tons of US carbon emissions. The $44 million will be invested into one of Nelnet’s solar energy investment funds that will support the transition to a cleaner and more stable energy future.
It is worth noting that crypto miners, who are mostly criticized for using non-renewable energies, are swiftly shifting to greener alternatives, such as the news that micro nuclear reactors are being developed for this purpose, as well as El Salvador mining Bitcoin using power from a volcano.
Alex de Vries, a data scientist, claims using excess energy to mine crypto makes it more sustainable. He said:
“Bitcoin uses a lot of energy, but if it’s a use of energy that would otherwise be going to waste then it’s not really a problem. And that’s a lot of the so-called stranded assets. But in a lot of cases those assets happen to be fossil fuel. China recently banned Bitcoin mining because these Bitcoin miners were ultimately responsible for the revival of coal mines. We are seeing similar examples in the US and New York, where a gas plant was revived from mining Bitcoin.
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About the author
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions.