The world is heading towards an increase in greenhouse-gas (GHG) emissions of 7% by 2030, instead of the required reduction of 43% in GHG emissions to prevent global warming of 1.5 °C above preindustrial levels by 2050.

However, creating an ecosystem wherein the environment-friendly efforts of value chain stakeholders can be verified can ignite a green transition.

Without trust, the required Decade of Action to transition to a low-carbon global economy will instead be a decade of greenwashing, emphasised proof-of-stake blockchain development company Concordium environmental, social and governance and sustainability lead Maria Eisner Pelch.

There is a need to build an ecosystem in which companies can prove their efforts in reducing emissions in their supply chains and to build trust in the offsetting market, as a trusted offsetting market will be crucial to enable direct reinvestments into environmental and conservation efforts, she added.

"Global warming is a challenge that the whole world faces. Because it is not owned by a single company or country, a blockchain-based ecosystem is well suited to combat some of the challenges of verifying emission reduction actions."

Blockchain-based solutions can help to ignite the green transition by providing immutable data that can be verified, unlocking voluntary carbon markets and providing verifiable green certificates.

More than one-third of the world's largest companies have set net-zero targets and are looking to reduce emissions as much as possible. However, some deep decarbonisation technologies required to decarbonise their operations, such as green fuels, are not yet mature and companies will use voluntary carbon markets to buy and sell carbon credits.

The voluntary carbon market is estimated to be valued at about $2-billion, having grown four-fold during the past year, and is expected to be valued at between $10-billion and $40-billion by 2030.

The challenge comes in with transparency and veracity of what a carbon credit issuer is selling and what a buyer is buying, said Pelch.

The youth, consumers and regulators are driving companies to become more sustainable and lower their impacts on the environment, but much of the voluntary carbon market remains opaque, she said.

"Do the issuers have the rights to issue carbon credits from a project or conserved land? How much of the money goes back for biodiversity, conservation and the local communities? Is the price right for the credit?" she questioned.

Without traceability, voluntary carbon markets could present a reputational and regulatory risk to companies looking to offset their hard-to-abate carbon emissions.

"Blockchain can help to provide the proof and trust, as well as enable better access to transparent carbon markets, to enable more investment to flow to carbon offset initiatives. Currently, however, we are still far behind the required level of proof."

Concordium has developed a blockchain-based ecosystem for carbon credits company Carbobanix. This company uses light detection and ranging (lidar) survey methods to map out the extent of its conservation lands. It also has an agreement with the local community wherein the community directly receives 50% of the revenue and 20% of revenue is dedicated to biodiversity initiatives within the conservation area, Pelch said.

"In our solution for Carbobanix, all the data is attached to the token. This means that auditors can see who did the verification and this helps to bring transparency and the trust needed in carbon credits."

Further, Concordium developed a solution for carbon offset company ClimaFi. ClimaFi aims to enable companies to offset their carbon emissions by investing in regenerative projects near their areas of operations.

"This can help companies to do more for local communities [by investing in such local carbon offset projects] in the areas in which they operate," she noted.

Additionally, because identification is built into the protocol layer of the solution, it is also able to offer smart contracts that can account for whether a buyer is allowed to buy a specific carbon credit; for example, allowing Scottish companies on the platform only to buy credits from Scotland-based carbon offset projects.

Such an ecosystem, in which identification is built-in, dramatically helps to reduce what could otherwise be an immense amount of due diligence work by companies to verify the authenticity of the carbon credits and the stakeholders involved, Pelch added.

"In Denmark, we have a national body that provides green certificates. However, even with this body, there is no transparency and no way of knowing for sure.

"This challenge is well suited to being solved using blockchain. A Danish company Energinet, using a Concordium solution, stamps, on an hourly frequency, all its green energy produced.

This means it can provide proof of the green energy it produced and these production stamps are then matched to carbon credits sold. These credits, therefore, also cannot be duplicated nor resold, thereby providing actual trusted transparency in the issuance of their green certificates, Pelch said.

"The green transition is 100% inevitable. Even in South Africa, companies that cannot reduce or offset their emissions pay carbon tax. Trusted carbon markets are key to unlocking greater flows of finance to projects that help companies to reduce their emissions and the associated taxes," she said.