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How Blockchain-Powered Carbon Markets Combat Climate Change

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Races are meant to be won. And meeting the Paris Climate Accord goal of keeping global warming to 1.5 degrees Celsius or below is the must-win race of our lifetimes. This means reducing emissions, protecting the world’s natural carbon sinks and removing carbon from the atmosphere, now. 

That’s why close to 4,000 entities – including Ripple – have signed net-zero pledges. With more industries lining up behind climate change goals, a range of promising new technologies are putting the finish line increasingly within our reach. 

To truly attain net-zero, companies must start by reducing their own emissions as much as possible. This means taking advantage of clean energy purchasing programs, reducing emissions associated with physical offices and incentivizing employees to reduce their energy usage in their daily lives. For emissions that cannot yet be eliminated or reduced, many companies are turning to carbon credits—certificates that represent greenhouse emissions removed from the atmosphere or carbon sequestered in the soil.

Scaling Carbon Markets Through Blockchain

As global demand for carbon credits intensifies–and as new regulations demand more transparency from corporations–blockchain and crypto are uniquely positioned to help support market growth by solving persistent challenges associated with carbon markets. Such challenges include time to market, transparency, and traceability and verification, among others. Blockchain technology in particular provides a powerful pathway toward greatly reducing the potential for fraud and double counting in traditional carbon offset trading markets. 

Non-fungible tokens (NFTs) are increasingly being used for functional climate change use cases—for example, tokenizing carbon credits, or representing existing real-world carbon credits as digital tokens on a blockchain with the goal of securely trading or tracking the full lifecycle of a tonne of carbon. Minting, transacting and tracing these climate-themed NFTs on a sustainable, carbon-neutral blockchain like the XRP Ledger (XRPL) can help ensure even more significant impact.

Ultimately, blockchain and crypto can help create greater value for both carbon removers (suppliers) and buyers, bringing increased liquidity and scale to carbon offset markets while driving fairer prices and a greater share of revenue to suppliers—many of whom are located in emerging economies. For buyers, carbon can now be increasingly managed as a diversified asset class, whether for corporate net zero commitments, strategic ESG and/or financial ROI. New blockchain initiatives and partnerships are also helping make carbon offset markets more efficient, accessible and transparent.

Enabling Carbon Trading on the XRPL

The XRPL was the first major blockchain to become carbon neutral, and its use of consensus makes it much more energy-efficient than proof-of-work blockchains. Beyond its speed, cost and sustainability advantages, the XRPL is also custom-built for tokenizing assets of any kind, including carbon credits. 

To reinforce this, Ripple continuously supports new functionality and developer tools that help enable carbon credit tokenization as core NFTs on the XRP Ledger. Meanwhile, building on its sustainability efforts, Ripple earlier this year committed $100 million to help modernize and scale carbon markets through investments in innovative carbon removal companies and climate-focused fintechs. Since then, several sustainability projects have chosen to partner with Ripple and leverage the XRPL—citing its proven reliability, robustness, and the fact that it’s future-proofed and built to support various projects and use cases.  

Recently, Web3 climate startup Thallo announced that it is building a new marketplace for high-quality voluntary carbon credits on the XRPL. This helps solve the problem of liquidity and opacity in pricing data faced by traditional carbon markets, making it easier for buyers and sellers to find one another. By leveraging Ripple’s enterprise expertise and the carbon-neutral XRPL’s reliability at scale, Thallo is democratizing access to verified, high-quality carbon credits.

Similarly, Carbon Title is launching a decentralized platform that leverages the XRPL to bring “radical transparency” to decarbonization efforts within the real estate industry. This is vital as 38% of carbon dioxide emissions worldwide derive from construction, and these new tools will make it easy for industry participants to reduce carbon emissions. CarbonCure Technologies, whose technologies permanently store captured CO2 in concrete, is also tackling the construction industry’s sustainability challenge. It will issue carbon credits as tokens on the XRPL against this sustainable concrete, with more than 2,000 credits delivered last month alone.

Xange.com is a U.N.-backed, climate-focused fintech developing a carbon credit solution on the XRPL that will issue carbon credits from the African Great Green Wall Initiative as NFTs. By using the XRPL, Xange.com can eliminate fraud and establish a clear framework and audit trail for other carbon trading projects to replicate. 

Fighting Climate Change: Ripple at the Fore 

Many partners choose to work with Ripple because of our commitment to help modernize and scale carbon markets. This program will build an inventory of high-quality carbon credits, invest in carbon-removal technology companies and market makers, and support new functionality on the XRPL to facilitate carbon credit trading. What’s more, Ripple has expertise in delivering enterprise-grade, Know Your Customer (KYC)-compliant solutions globally utilized by hundreds of banks, fintechs and more.

Ripple is also a founding member of the Crypto Climate Accord and the World Economic Forum’s Crypto Impact and Sustainability Accelerator (CISA), and recently signed the Amazon Climate Pledge. Ripple regularly works alongside venerated climate players such as the Rocky Mountain Institute and the Alliance for Innovative Regulation—all with a goal to move the crypto industry and affiliated organizations towards 100% renewable energy use and net-zero emissions. 

Like any race, the fight to mitigate climate change and avoid potentially catastrophic effects is not an individual effort. Even the most gifted runners rely on the support and help of teammates, coaches and partners. It will take all of us – nations, nonprofits, innovators and more – working together to cross the finish line ahead of the 1.5-degree Celsius mark by 2050 or sooner. For more information on Ripple’s commitment to sustainability, visit Ripple Impact.

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