With scientists calling for a concerted global effort to reduce global warming, blockchain technology is slated to play an important role in helping businesses reduce greenhouse gas emissions.
With 196 countries making a commitment to sustainability since 2015 under the Paris Agreement, the fight against global warming has been gathering pace, with countries advancing climate action through the use of greener fuels.
However, even though energy consumption accounts for more than 75% of greenhouse gas emissions, more than 40% of it is contributed by electricity consumption by businesses and consumers alike in office and residential spaces, according to analysis done by Climate Watch using raw data from the International Energy Agency (IEA).
This has brought into focus the need to adopt more efficient technology solutions, whether in the field of business processing, industrial processes or even managing energy consumption in building spaces.
One such enabler is Blockchain technology, which, according to TraceX Technologies, can play an important role in helping organizations across the world achieve net-zero carbon emissions and remains vital to the goal of reducing the average global carbon footprint from 4 tons to 2 tons by 2050.
The carbon footprint and its principal contributors
Defined as the quantity of greenhouse gas emissions produced by an individual, group, or organization, the carbon footprint is commonly expressed in the equivalent of carbon dioxide and is generally higher in developed economies, where industrial activity and consumption are higher than in developing nations.
Increasing economic activity translates into higher per-capita CO2 emissions, and the negative impact of these emissions on the environment makes it imperative for the world to adopt transformative changes at the earliest.
While transportation is responsible for 12.6% of total emissions, human activities in both residential and commercial buildings account for 18% of all greenhouse gas emissions, according to the World Resources Institute (WRI), making these key focus areas in developing efficient solutions.
In fact, improving energy efficiency is absolutely critical to combating climate change and requires more than just increasing the use of renewable energy to achieve the same, according to WRI.
How Blockchain technology is improving efficiency
A form of distributed ledger technology (DLT), blockchain technology underpins most start-ups that are building the Web3 ecosystem as we know it today.
Apart from its most popular use case in cryptocurrencies, this revolutionary technology is introducing a new collaborative approach to processing transactions of every kind in an increasingly connected world.
Be it banking, logistics, Internet of Things (IoT), healthcare and even governmental functioning, blockchain technology has the potential to reduce the number of elements involved in traditional systems, thereby bringing down the need for human capital and eventually reducing the amount of energy needed to facilitate various operations.
Although blockchain technology-enabled platforms like the Bitcoin Network are notorious for the vast amounts of electricity consumed in performing Proof-of-Work (PoW) consensus computations, it is important to note, says Vitalik Buterin, Founder of the Ethereum blockchain, that they themselves are transitioning to the Proof-of-Stake (PoS) model, which is far more energy efficient.
What’s more, these blockchain protocols are helping people around the world transact with each other at a fraction of the time and cost involved in traditional banking, Buterin adds, thereby more than compensating for the energy consumed in maintaining these decentralised web-based protocols.
Additionally, with decentralised finance (DeFi) platforms such as BlockFi, Paxos, Ripple and the like proving that banks can go entirely digital, the resultant energy savings from eliminating the need for physical office spaces are proving vital in reducing carbon emissions.
Potential to replace energy-intensive processes
Apart from cryptocurrency, DeFi and Web3-focused applications, blockchain technology is helping organisations calculate their carbon footprint using IoT-compatible smart sensors and identifying areas that need urgent attention.
With super-fast and reliable data processing now made possible by blockchain technology, energy companies are able to deliver electricity across vast areas with a significant reduction in transmission losses due to better allocation. And they are now offering peer-to-peer energy trading that slashes the cost of maintaining the energy-intensive infrastructure needed to transmit electricity, says blockchain technology company ConsenSys.
At an organisational level, too, blockchain technology is proving its worth in streamlining operations and eliminating intermediaries to reduce material, energy, and transportation costs that have been weighing them down.
Companies such as Oracle Corporation, Microsoft Corporation, SAP SE, Accenture Plc, and many more are building future-proof enterprise solutions that will help millions of individuals and businesses across the globe in the effective management of their supply chain.
From increasing the traceability of materials involved in the business to improving compliance, blockchain technology has the potential to transform how businesses operate and drastically reduce their carbon footprint in the years ahead.
As more firms work on refining this revolutionary technology and more organisations incorporate blockchain into their processes, the journey toward halving global carbon emissions should undoubtedly get a firm push.